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PLANNING FINANCIAL STABILITY

THE BALTIMORE SUN

When it comes to money and what to do with it, Kelly Smith swims against the youthful tide.

She began saving at 16. She opened an individual retirement account last summer with money earned from her internship at Baltimore's T. Rowe Price investment firm. And she factored in retirement benefits when choosing her first full-time employer, a Big Four accounting firm.

Smith, 21, of Baltimore, who graduated May 21 from the University of Maryland, College Park with a Bachelor of Science degree in business finance, knows she differs from most college students.

"I don't think they consider the importance" of saving for retirement, she said. "They'll buy the new car. They want what they want."

As companies continue to freeze -- or end -- traditional pension plans, workers must take far more responsibility for their retirement. Yet most young workers don't know much about planning for retirement or don't seem too concerned about it, given how far away it is. Lessons about saving for retirement are taught at some colleges, but the classes aren't well-attended. To compensate, companies are starting to provide guidance to workers on the benefit of saving early in their career.

A 2005 study of 86,000 global workers by the professional services firm Towers Perrin shows retirement benefits don't begin to factor into the employment decisions of 18- to 29-year-olds. Only at age 30 do employees begin to realize, "I'm not going to work forever," said Julie Gebauer, leader of the firm's work force effectiveness consulting practice in New York.

Waiting until age 30 to begin saving for retirement can be costly, said Stuart Ritter, a certified financial planner with T. Rowe Price. Young people who want to maintain their current lifestyles post-retirement should start saving 10 percent of their paychecks at age 25. They will need to save 14 percent -- a 40 percent increase -- of their pay if they begin saving at 30, according to T. Rowe Price.

"Everything else in life has another way to pay for it," said Ritter, who taught personal financial planning at Howard Community College during the spring semester. "Retirement doesn't."

Retirement savings have yet to break into the trifecta of salary, health care and vacation that graduates look at when deciding where to work.

"Students don't really know a lot about benefits and benefit packages," said Phil Gardner, director of the Collegiate Employment Research Institute at Michigan State University.

Locally, interest is mixed. Ritter taught career search strategies at the University of Maryland, College Park for three semesters and incorporated retirement planning in the curriculum. But since he left, the course no longer addresses that issue, a spokeswoman said.

The Johns Hopkins University offers a personal investment course once a year to its M.B.A. students, but the class only attracts about 15, said Ken Yook, chairman of the finance department. And while the number of students seeking information on retirement benefits from the university's career center is increasing, "it's not a make-or-break reason they take their first job," said Mark J. Presnell, the center's director.

The University of Baltimore, however, has seen interest rise in the compensation course offered by its Merrick School of Business. About two-thirds of those enrolled in the elective course are business majors, said Susan Zacur, a member of the school's human resource management faculty.

Why the popularity? Students at the University of Baltimore are older, she said. They've had some work experience; many have experienced downsizing or have seen their parents struggle with retirement issues. "They have an awareness and a concern that we feel we need to address," Zacur said.

Should colleges and universities be doing more to educate graduating students about retirement planning? Perhaps, experts say. And many are moving in that direction: "I think universities are looking at how to give students more acumen in the career world they're going to face," Zacur said.

Twenty to 30 years ago, defined-benefit pension plans -- plans that guaranteed employees a set amount throughout retirement -- were king. The company did the heavy investment lifting, and the employee who served long and loyally reaped the benefits.

But in the 1980s, companies began shifting responsibility for retirement savings to employees by introducing 401(k) and other types of savings programs loosely grouped under the umbrella of defined-contribution plans. Employers allocated a set amount of money periodically to employees who were responsible for managing its growth.

Suddenly, workers had to decide how much to save for retirement, which account to put their savings into and how to invest the money. The shift was so complete that "if I didn't do anything, nothing happened," Ritter said.

Nothing happened a lot. So today, employers of all sizes are beginning to introduce autopilot plans, said Cheryl Tillman, senior vice president of Aon Consulting's Baltimore retirement practice. Workers are automatically enrolled in 401(k) and other types of defined-contribution plans and automatically have their contributions put into certain types of investments.

Some companies even schedule automatic contribution increases, all of which can be changed by employees. The point is, those workers aren't solely responsible for every retirement decision.

Yet despite such efforts, companies still struggle with persuading young workers to fully embrace their retirement savings programs.

"There are competing priorities," said Kathleen Strukoff, senior vice president of Aon Consulting's Baltimore health and benefits practice and a member of the Society for Human Resource Management's total rewards panel. "For that person, retirement seems so far off."

Indeed, it often takes a crisis to hammer home the importance of saving.

Robin Dahlka thinks most young graduates figure they have years to save. She couldn't disagree more. When her marriage ended after 10 years and two children, she suddenly realized her future was her responsibility.

"You never know what tomorrow could bring," said Dahlka, 38, who graduated in January from the University of Baltimore and works as the human resource manager for Vision Technology Services in Timonium. "Planning all along would really have helped matters. Having to start over was not enjoyable."

So what does that mean? Should graduates weigh retirement benefits when looking for a job? Not solely, experts say. Salary is still important. But investment programs should be factored into the mix.

Don Larkin, a 26-year-old University of Maryland graduate living in Pennsylvania, recently compared 401(k) programs when weighing new job offers. He ended up joining a company that offered a lower salary, but had a 401(k) program he could participate in after 60 days' employment, versus having to wait a full year.

"Certainly, even more so now, 401(k)s have become one of the factors that help me make a decision to take an offer," Larkin said. "I want to have comfortable golden years."

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