Do It for the Future You – Retirement

For some strange reason, I think about retirement a lot. Am I the only one? It reminds me of George Costanza from Seinfeld, the episode of “The Old Man”:

 

Ben: I’m not afraid of dyin’. I never think about it.

George: You don’t? Boy, I think about it a lot. I think about it at my

age. Imagine how much I’ll be thinkin’ about it at your age. All

I’ll do is keep thinkin’ about it until it drives me insane…

 

 

Maybe it’s a blessing and a curse. I need to cut back in terms of thinking about it so often, but at the same time there are many out there who need to start thinking about it a lot more. We may think that earning a paycheck is a reward for a job well done at work. What about when we’re not receiving that paycheck anymore in our retirement age? How about a job well done for all those years we continued to work? Shouldn’t we pay our future selves a bit: “if only there were a way to actually see yourself as a 73-year-old retiree who wishes your younger self had saved more.” This article also talks about the human behavior in wanting a reward right away rather than waiting.

 

 

 

Retirement Saving – You’re Responsible

 

Back in the day retirement was easy, pensions were more common as people could retire and move to their dream community. Nowadays, most people overestimate how much they’ll receive from social security and underestimate how long they will live. And chances are people won’t want to give up their standard of living during retirement either; actually we’ll want to enhance it. Conservative planners may want to use 100 percent of their income for retirement. In terms of dollars needed, $1.2 was an average presented in the book Crash Course on Money Smarts: 15 Laws of Managing Money and Creating Wealth (Crash Course Series).

 

 

But guess what? Despite all the burden falling onto us, companies are still trying to make it easy to save for retirement. Thanks for automatic enrollment, “according to a 401(k) benchmarking survey issued by Deloitte Consulting LLP, 42 percent of 436 companies examined use the automatic enrollment feature in their company retirement plans.” This is a great feature because when you’re hired you are automatically enrolled. You have the option of leaving the program if you don’t want it. Most people, however just stay in it which is great because it’s automatically investing for them. Even though this automatic feature is available, we still have to do more like pick the right investments/funds, try to increase by a little each year if we can, and speak with a professional every now and them to make sure our retirement fund is on track. If not make adjustments accordingly.

 

Retirement Saving – What’s The Excuse?

70% of all the people in the U.S. who have the option of opening a 401k at work totally ignore the option according to Dr. Koenig. People want to enjoy life now, live in the present, tomorrow is not promised to anyone, we can get hit by a bus (seriously I’ve never heard in the news someone actually being hit by a bus – could still happen though). Bu it’s not all on the employees either, many employers don’t offer a retirement plan at all and this makes it even easier for employees to either ignore or find a reason not to have a plan in place. Per CBS News, small employers are concerned about the fiduciary liability they accept under the Employee Retirement Income Security Act….and don’t the resources to evaluate retirement offerings and navigate requirements.” The article concludes that it’s ultimately up to the employees whose employers don’t have retirement plans set up to research, shop, and select plans. Their employer or the government is not going to help, at least for now. The truth is for most people, there are always unexpected expenses that come up. Retirement, however is expected an inevitability, so it makes sense to save consistently for an event you know will happen in the future.

 

 

How to Start Retirement Savings Today

 

If you don’t have a retirement plan at work,

Then go to your bank and open and Individual Retirement Account (IRA).

If your bank doesn’t offer an IRA,

Then open an account at another bank (I know Bank of America) has one. On a side note and a hack for people, I went there to speak to someone about retirement about a year ago. I already had a retirement account, but wanted to just get some free advice from a retirement professional.

If you can’t contribute a lot,

Then sit down and calculate all your income and expenses and see how much you can (even if it’s $20, $25, $50) a month.

If you don’t know what to invest in,

Then consider a target fund based on when you think you want to retire (you can change your options later if you decide to do so because these types of funds do tend to have higher fees than ETFs and Index Funds).

If you’re afraid of the stock market and that you may lose money that you invest,

Then buy into a fund that is diversified will minimize this risk. Yes you may lose a little bit every now and then, but over the long-term you’ll be better off invested in a retirement account rather than sitting on cash (and it tempting you to buy something for now instead of the FUTURE you).

 

 

So if you’re not saving for retirement, now there are really no good excuses. Start now for the FUTURE you. And (just for kicks) if you still don’t see yourself that far down the road, check out this AgingBooth app where you can take a picture of yourself to see what you’ll look like in the future (hopefully with less wrinkles because you saved and are not financially stressed 🙂

 

 

 

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I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!

 

 

Simple Money Man (SMM)

12 Comments

  1. Hubbys former employer didn’t have a safe harbor plan so we had more of our income taxed because the other employees didn’t contribute enough to their 401K. It was so frustratingggg. I mean what control did we have over their spending to punish the individual?

    I would recommend an IRA with Vanguard or eTrade. Bank of A is kinda evil 😉

    • That’s a bummer with the tax. Did his employer at least match funds to get some free $$$? You’re right I think Vanguard is better and probably has much lower fees most likely. I just saw a sign for IRAs at BOA when I stopped by my branch a couple weeks ago.

  2. I think that most companies have made it as easy as possible to save for retirement and that automatic enrollment is a huge step forward. I also think you’re right-if you’re someone that is uncertain about investing, just throw everything in a target fund and set up automatic contributions-it’s a gazillion times better than not contributing at all.

    • Yup. I got a target fund thru work and recently made changed it to 2060 I believe to make it a bit more aggressive in nature. The fees are a bit higher, but you’re paying for the fund of funds allocating your investments and rebalancing for you. So I see it as a cost of doing business with them.

  3. I use to think about retirement all the time as well. Now that I’m getting closer I don’t think about it as much. It seems like I’m thinking about all the things that I want to do in retirement now. Definitely a fun switch of my mindset 🙂

    • That’s a good way to transition your thought process. There are so many active people in retirement that part of me is excited about the future and I need that part to take over more 🙂

  4. Great post, I was just reading an article in Money Magazine this weekend about saving for retirement. I forgot the exact statistics, but it said something like 65% of people are more likely to start saving for retirement now if they see their self 50 years from now. So that aging app you mentioned at the end of the article really does work.
    I also completely agree with the points you made in the post. I feel like most millennials have the mindset of “spend now, save later”. The problem with that mindset is that each year that goes by, the harder it is to make up the lost savings for that year. The earlier you start saving for retirement the better off you will be in the long run!

    • Very true. So many people want to live in the moment and I’m not against that at all. But I do believe there should be a balance where we are responsible for our future selves by way of saving and preparing for the future. It’s totally cool to spend now, but at the same time save some for the future too, we can do both and…..that makes a win win. I’m nervous to try the app on myself btw 🙂

  5. My full-time work is with a temp agency and they have messed up my W2 for the past two years. Their 401K option is terrible and I never know how long I’ll be with a particular agency. This is why I do an IRA instead. No worries about needing to roll-over.

    • IRAs are really easy to manage yourself too. Most providers offer a portal to check up on statements, contribute online and select investments. Does your company offer a match though?

  6. Many colleagues of mine, who make well into a six figure income, don’t give much thought to retirement. Which is really sad since there are very few options for income when you decide (or are forced) to stop working. Even a 1% increase in your 401k per year can make a huge impact.

    • That’s the key, to make these baby steps (e.g., 1% increase and so forth). This way it won’t seem like such an uphill battle to save and prepare for retirement. And once they automate the process, they still won’t have to think as much because compounding will start to do its job. Thanks for stopping by!

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