3 Reasons Workers Don’t Save for Retirement
Most workers haven’t set aside nearly enough money for their retirement years. This is a worrying sign, for several reasons which we’ll look at. If you’re one of those people who makes excuses about saving, read on and see why that’s a very bad idea.
1. “I don’t have anything left to save”
The longer you put off saving, the quicker your time runs out. It takes many years to put enough together for retirement, so it’s important to begin saving as early as possible so that you have enough time. As an example, if you begin saving earlier, you’ll only need to set aside a few hundred dollars a month. If you leave it too late, you’ll need to save a few thousand each month to try to catch up. This is impossible for most people.
Most of us are just trying to make ends meet, and don’t see how it’s possible to also save. However, rather save a small amount than nothing at all. Even setting aside $100 a month will give you over $100 000 in 30 years time. Of course, that’s not enough, but it’s certainly better than nothing. Always pay yourself first when your paycheck comes in, before making any purchases. If you wait until the end of the month to save there will almost always be nothing left.
2. “I have too many bills to pay”
If you are just getting by from month to month and you’re struggling to pay all your bills on time, you probably aren’t even thinking about retirement. Look carefully though, and you may have more spare money than you think. While approximately 60% of people in the US say that they live from paycheck to paycheck, most households waste up to $500 on unnecessary expenses. If this money was saved, it would go a long way towards a good retirement.
The first step is to track your spending for a month or two so that you can see what’s happening with your money. Then you can draw up a budget. Separate your tracked spending into different categories such as “groceries”, “school fees”, “unnecessary purchases”. The amount in “unnecessary” can be saved. This category usually includes coffee to go, take outs and impulse purchases. Think about where you can save on items such as magazines, movie tickets, and fast food.
3. “I don’t think I need any retirement savings”
This is probably the most surprising reason that many people don’t save towards retirement. People often just expect to work for as long as they can and not retire at all. Others think they’ll be able to rely on Social Security benefits when they retire. These are not good reasons for not saving for retirement.
There comes a point where people can no longer work, despite their best intentions. They may be laid off or have health issues. People are living longer than ever before after they stop working, so even if you only retire at 70, you may easily live to 90. In fact, the Social Security Administration tells us that as many as 33% of 65-year-olds today are expected to live past 90. It’s just not realistic to expect to be still working at the age of 90, no matter how good your health.
Of course, when you do retire, you’ll need some form of income. Social Security benefits aren’t enough to cover most retired people’s costs. They only make up about 40% of their income. It’s therefore vital to have some income saved to make up that other 60%.