For all the talk of beating the market, avoiding fees, and optimal asset allocations, the most important thing that people can do to get ready for retirement (or any other major life expense) is to start saving early. Compounding takes time to work its magic, even if you get all the other details right. But according to an American Century Investments survey of defined contribution plan participants titled Reflections in the Mirror most people currently working don’t feel like they’ve done enough.

“Plan participants acknowledge the importance of saving along with the potential consequences of not doing so. However, they also recognize their own tendencies and habits. Daily life gets in the way of saving for the future,” says the study.

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People know they don’t save enough for retirement, but are still optimistic

The survey divided participants into two groups: people aged 25 – 54, and non-retirees aged 55- 65, and while you might expect people nearing retirement to have stronger feelings about the importance of saving, there was actually broad agreement between the two age groups. For example both groups said that the biggest problem was not saving enough money during the first five years of their career. Saving early on can be tough because money is relatively tight, and because it seems like there’s plenty of time to save later on, but any money that can be squirreled away has the most time to accumulate value.

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The reasons why people weren’t able to save enough are easy to guess: not enough pay, debts and unexpected expenses top the list followed by a preference for enjoying today instead of saving more tomorrow (more on that below).

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Even though most people wish they had saved more, the survey respondents were fairly optimistic about their prospects, with a solid majority expecting their quality of life to stay the same or get better,

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Respondents may have been giving the ‘right’ answers

Anytime a survey relies on self-reporting there is a danger of people trying to give the ‘right’ answer instead of telling how they really feel, and at least one chart in the American Century Investments survey hints that this was the case.

Asked to weight the danger of saving too little or saving too much (and not enjoying your earnings throughout your lifetime), plan participants overwhelmingly said that saving too-little was worse. That might be true, but considering how many people don’t save enough this smacks of posturing for the interviewer especially since it contradicts other responses in the survey.

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