Why aren’t we saving more money for retirement? According to a recent poll, nearly 35% of American workers have nothing saved for their golden years. The national savings rate is up, but why aren’t workers applying those savings to retirement plans? Here are some of the excuses we typically offer up to explain why we don’t save more for post-work life — and some rebuffs.
“I live paycheck to paycheck and can’t afford to put anything away.” While it’s a sympathetic excuse, plenty of us are living paycheck to paycheck precisely because we’re not managing our money right — we’re either wasting our cash on purchases we don’t need and/or borrowing on credit which we have to pay back later, money that eats away at our monthly income. But if you have any money at all, you have some money to save. Start by getting in the habit of paying yourself first to ensure you always take a portion of your paycheck for long-term savings and force yourself to work with the remaining funds in a more responsible manner.
“I’m going to save — but not now. I’ll do it later, when I’m making a little more money.” OK, but what if that day never comes? You don’t know what’s coming between now and when you plan to retire. There could be another Great Recession — or worse — that makes saving difficult, if not impossible. You may have to take a pay cut or lose your job. And you’re sure to encounter other major expenses such as a child’s college education, a wedding, or unexpected medical issues. While “later” may sound ideal, life happens and that means expenses happen. The longer you wait, the less “later” there’s going to be.
“I’m already putting money away in a 401(k) or an IRA, so I don’t need to save more?” Maybe you are savings, but are you saving enough? Research shows many workers are contributing just enough to their 401(k) plan to get a company match and then hoping it all adds up to something worth retiring on. Instead, calculate what you’ll need to put into savings in order to generate whatever amount of monthly income you’d like to have at retirement. Review your contribution limits and diversification, or choose a service that does these important things automatically for you. Above all, understand you’ll need to be patient with yourself and your investments.
“I’ll never retire, and it’s too late for me to save for it to really matter.” Remember it’s never too late. Even if you’re about to hit your 65th birthday and it’s certain you’re going to be on a limited income because you haven’t saved, you might be better off working a little longer — even at a part-time job — and putting off retirement and saving what you can rather than just giving up. If you’re several years away from retirement and you’ve thinking about giving up, think again. If you’re in your 40s or 50s and haven’t begun saving, you can still put away enough to make a difference in your retirement years. At the very least, if your company offers a 401(k) plan, put in at least as much as your employer will match.
“I want to spend money on the things I deserve right now.” Consumer marketing is very focused on this idea and it is a very powerful motivator. But you’re going to be no less deserving of finer things later in life. By saving now, you can get even nicer things down the road.