A common theme among retirement surveys over the years is that Americans largely feel underprepared for retirement. Specifically, they don’t feel they’ll have enough saved to comfortably transition into life after work.
Finder’s Consumer Confidence Index found that only 29% of Americans are confident they’ll have enough saved for retirement. That means 71% of Americans are insecure about the progress of their retirement savings and uncertain that they’ll have enough saved to stop working. That’s discouraging.
And it begs the question: why is it so difficult to confidently prepare for retirement?
Balancing Retirement Savings With Today’s Priorities
Prioritizing retirement savings over current needs is no simple task. When you’re young, retirement is so far into the future that it’s easy to sideline — there’s plenty of time, right? If you’re older and haven’t started saving or feel you’re too far behind, it’s easy to throw your hands up in defeat. Change is hard. It’s easier to do nothing.
Perhaps hyperbolic discounting — the tendency to choose immediate rewards over bigger, higher-value rewards later — partly plays a role. Do you need that new phone? Probably not, but you want it.
Plus, it’s way more exciting than putting that money into some boring savings account. And heck, you should be able to spend your money for enjoyment today without guilt. You must find a balance, though.
But that reward is not always a new toy.
For many, the immediate reward is food on the table, gas in the car or your kid’s college education. One in three workers agrees that saving for retirement is secondary to their family’s current needs, according to the Employee Benefit Research Institute’s 2022 Spending in Retirement Survey.
Of those surveyed, 40% say that saving for or paying off a child’s education leaves little to save for retirement, while nearly 50% say debt is a major blocker.
How do you find a balance, then, between what’s important today and what’s important in the future?
You Need To Prioritize Your Financial Goals
Everyone’s circumstances are different. Some have it easier than others, while some need to overcome unthinkable challenges just to get by. And of course it’s easier to say “buck up and deal with it” than it is to actually buck up and deal with it, whatever “it” may be.
In this case, “it” is retirement savings, and bucking up and dealing means giving your retirement savings the attention it deserves, despite the challenges and even when it may not feel like a priority.
Because the truth is, if you want a nest egg for retirement, whatever the amount, you need to do what’s necessary to build it. No one else is saving for your retirement. Even the future state of Social Security is questionable, with funds expected to run out just a decade from now.
I was terrible with money until I decided not to be. I spent money I didn’t have, racked up debt and didn’t save. Though I’m no longer “bad with money,” I’m still playing catch-up to get to where I think I should be at my age — to where I can feel, like those in Finder’s survey, confident that I’ll have enough saved to retire comfortably.
It’s the situation I’m in, and I’ve accepted it. But the financial moves I make now, as insignificant as they may be to some, will at least put me in a position to have something in retirement. Any amount is better than nothing. But you can’t build savings with inaction.
Don’t bury your head in the sand when it comes to saving for retirement or prioritizing your financial goals — it won’t help, and it’ll make a mess.
Whatever your circumstances, whatever your age, if you want savings to draw from in retirement, you simply need to start today. Even a dollar compounds over time. Know what doesn’t? Zero.
Saving for retirement is a balancing act. Balancing your needs today with your needs later in life. It takes discipline, but most importantly, it requires action. Even the smallest of actions can compound into big results.
You rarely see the best golfers leave putts short. Why? Because a short putt never has a chance to go in the hole.
If you don’t start saving today, you’re depriving your future self — the future self that hopes to one day step away from the workforce and enjoy the fruits of their labor.
Start with any amount. Just start. Give yourself a chance.
Prioritize your financial goals.
8 Tips To Help You Save For Retirement
For all the young folks out there, you’ve got time on your side. And the sooner you start saving for retirement, the better. The older you get, the more challenging it becomes. You have less time to save. But don’t throw your hands up in defeat. That won’t make your situation better.
Again, just start saving.
Here are some tips to boost your retirement savings.
- Take ownership of your finances by building and sticking to a budget. Know exactly how much money you’re bringing in and spending each month. This lets you identify areas of overspending and the spending habits that are holding you back. From there, you can make cuts to free up money to put toward retirement. You simply cannot hit your money goals if you don’t know what you’re working with.
- If you have a 401(k) that includes a company match, contribute at least enough to get the match. If you don’t, you’re turning your back on free money.
- Robinhood offers a 1% match on contributions to a Robinhood IRA. That’s up to $65 of free money in 2023 (the contribution limit for IRAs in 2023 is $6,500, or $7,500 if you’re older than 50). That may not seem like a lot. But year after year, it can grow into something significant.
- Avoid fees when investing. The best brokerage accounts keep fees low so you can keep more of your money to invest.
- Save your raise, bonus or tax refund — don’t spend it.
- Invest in dividend stocks or income-generating real estate investment trusts (REITs).
- Ditch that brick-and-mortar bank for the cash portion of your retirement savings. These banks pay an embarrassingly low interest rate on savings, and it does nothing to help your money grow. High-yield savings accounts are the way to go. Wouldn’t you rather earn 4.5% on your savings versus the 0.39% national average for traditional banks? It’s a no-brainer.
- Continue to save and invest during down markets when high-quality stocks and exchange-traded funds (ETFs) are trading at a discount.