As we’ve covered pretty extensively in this space in the past, Americans are currently engrained in a bit of a retirement conundrum. Studies indicate that about one out of every four Americans has no retirement savings. These studies also indicate that a majority of Americans that do have a retirement nest egg aren’t confident that it will be enough when they’re ready to call it a career.
There are various reasons why Americans are in the situation that they are today, such as not saving for retirement early enough in their careers, not properly diversifying their portfolios or not taking advantage of benefits like company matches. But there’s one reason why Americans may not have enough retirement savings tucked away that we’ve yet to cover in this space. That is, from a behavioral standpoint, many Americans just don’t make decisions with the future in mind.
And economists are hoping that this changes – as savings are dictated by more than just the money we make, but how we think about the money we make.
Then vs. Now
A young professional in their 20s is likely 40 years away from retirement. Someone in their 30s is likely 30 years from retirement. With the average age of retirement being 64 years old, it’s easy to put off saving for the future for what you could have now. It’s the old “Do you want $10 now or $20 later” conundrum. You can see how a young professional might opt for the former, especially if they’re interested in buying a home or a vehicle, or just traveling while they’re still young and without numerous commitments. In other words, with retirement so far away, why bother planning for it now?
Putting it Off
While employer 401K plans are nice to have and easy to take advantage of, IRAs and other accounts take a lot more legwork on your part. You have to understand the contribution terms, decide what you’re going to start with and then, arguably most difficult of all, head to your local bank or credit union to actually open the account. The bottom line is that many people opt to put it off until a time that’s more convenient for them. Waiting a day can turn into a week. This week could turn into a month. This month can turn into a year. And you’re the only one that’s losing in the long run. The more money you have invested and the more time it’s in the market, the harder it works for you.
The bottom line is that when it comes to retirement, there’s a path to success that economists and financial advisors universally agree on. But it’s up to all of us as Americans to get in the right mindset about retirement. What we do now can set us up for success in the long run. We just need to wrap our brains around it.