By: Jeremy Skoglund, VP Trust Officer
My first job was delivering newspapers. I was about 12 years old and averaged less than $5 an hour at a job where my customers expected to have their paper before 6:30 every morning. I had no days off and no benefits; if you don’t count all the Christmas goodies my customers left me. It was great having the roughly $35 a week, but it would have been even better if there had been some other benefits, and I had learned how to save some of that money early on. It wasn’t until my first real 8-to-5 job when I began to learn about all these benefits that employers offer, such as a 401(k). I also learned that you can’t always participate in the benefits immediately. I had to wait a year before I could start contributing to the 401(k).
If you are young and new to the working world and working for an employer that offers a 401(k) plan, you may be wondering why they don’t allow you to start contributing right away. You may think that because the minimum age limit for most jobs in the United States is 14, you should be able to receive all the benefits of employment. Side note – delivering newspapers is not considered a real job under the US government’s regulations, so there is no age limit for that. I don’t want any of you thinking my first employer was breaking any laws hiring me at 12. Anyways, 14 is technically the age that you could begin making contributions to a 401(k) plan. However, the employer has some say in this, and they are not required to include employees in their 401(k) programs unless they are 21 years old. On top of this, as I found out with my first real job, some employers will require that an employee works for them for a year before they can participate in the 401(k). These employers want to make sure that you are committed to them before they go through the costs and hassle of setting you up in their 401(k) plan.
While many employers will require that you are 21 years old before participating, some set that age limit at 18. If you find that you will have to wait because of your age, but you want to get started saving now, there are options. One of those options is to open an IRA. Most employers will allow you to automatically have some of your paychecks go directly to an IRA. If they don’t, the financial institution where you open the IRA can set it up to automatically withdraw funds from your checking account. If you want to learn more about IRAs, check out our Roth vs. Traditional IRA Trust Tuesday blog or give us a call at 701.857.7150.