June is the season of graduation parties. Whether they're leaving high school or college, young minds depart the classroom full of vigor, ambition, and missing the one thing that's most important to them. Yes, we teach them to look to the next level. We provide them with so much self-esteem that they come out brimming with confidence and high expectations. They're ready and willing to tackle new jobs, higher education, and a world they've been told is waiting for them with open arms.

Alas, amidst this unbridled enthusiasm sits an easily attainable goal, all alone in a dimly lit corner. Aside from cobwebs and dust, its only covering is a faded sticky note with the words “open later – we have time” scrawled on it. This is the goal we like to call “comfortable retirement.”

We humans are a resilient species. We can accomplish almost anything given enough time, resources, and hard work. Unfortunately, we are also a species that likes to eat, drink, and be merry. We often put off to tomorrow things that we can (and should) do today. We quickly learn to prioritize goals not by some overarching strategy, but by the tick-tock of impending deadlines.

Among the many gifts we offer graduates, we miss the opportunity to help them focus on that which endures for a lifetime. We give cars, but they last but a handful of years. We can give a wad of cash, but chances are that will end up buying a car. We can give a good and meaningful book, but unless it can be read on a tiny screen, its greatest purpose may well be to serve as a foundation to prop up some cheap furniture.

Enterprising parents and family members are now beginning to feel the best gift is to help reduce the graduate's loan burden. While that may be both helpful and practical, there is a greater gift, one more practical, one immensely helpful. This is the gift of the IRA.

Technically, you can't “give” an IRA. You can, however, give the cash necessary to start an IRA. Actually, the better way to do it is to bring the paperwork to the graduate so that you can be there when it's signed, then take it back and deposit your cash gift right into the new IRA account. By the time one graduates, one usually has (or will soon have) enough earned income to cover the maximum allowable annual IRA contribution (currently $5,500).

Let's say you offer to give this gift not just on graduation day, but for the first few years after graduation. In doing so, you help the graduate develop a habit for retirement saving. When that graduate retires at age 70, those little annual IRA contributions will have grown to more than $3 million dollars (assuming an annual return of 8 percent). Not too bad — and way better than some car.

Instant Insights /

A $3 million dollar graduation gift

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