Why Aren’t You Saving for Retirement?

credit: freedigitalphotos.net by Stuart Miles

credit: freedigitalphotos.net by Stuart Miles

Aren’t you excited that this week is National Save for Retirement Week? I know I am! Actually, I had no idea that it was this week. As a matter of fact, I didn’t even know there was such a thing as National Save for Retirement Week. Well there is such a thing, and this year it is held during this week from October 20 to October 26.

National Save for Retirement Week is a national effort to raise public awareness about the importance of saving for retirement. The week provides an opportunity for employees to reflect on their personal retirement goals and determine if they are on target to reach those goals. I started in 2006, when Senators Gordon Smith (R-OR) and Kent Conrad (D-ND) introduced the first resolution establishing National Save for Retirement Week. Their goals were to elevate public knowledge about retirement savings and to encourage employees to save and participate in their employer-sponsored retirement plans.

So why do we need a resolution to be passed holding a week to encourage people to save for retirement? It probably is due to the low savings rate in this country and low participation rates in retirement plans. The biggest reason people cite for not saving for retirement is that they cannot afford to save for retirement. I think the opposite is true. You cannot afford not to save for retirement. If you do not have enough money to save, you have to change your mindset, live within your means and cut some expenses.

A similar excuse I’ve heard for not saving for retirement is that they don’t have enough to invest in their retirement plan. But even a small amount will start the ball rolling. As a matter of fact, the theme of this years National Save for Retirement Week is “Small Steps Big Change.” Many employer-sponsored plans allow you to contribute a mere 1% of your income, or if you prefer, you can just pick a fixed amount that you are comfortable with. Remember, your contribution is pre-tax, so even if you invest $25 a paycheck, the impact to your paycheck will be less. Check out this calculator to see how much the impact will be. If you do not have access to an employer-sponsored plan, you can open an IRA which generally have a $1,000 minimum to open and you can make contributions to it at a minimum of $50 to $100.

When I first graduated from college and started working, many of the excuses my co-workers gave for not participating in the retirement plan was that they were young and felt they had time. Time is on your side when you’re young. You’ve heard about the miracle of compounding right? Well, it needs time to work its magic. You are better off investing early, even a little bit will make a big difference in the end.

Check out Brad’s post from Richmond Savers which shows you the magic of compounding.
Another great post to read that might inspire you to invest early is by Joe from Retire 40 entitled, Is Saving a Sprint or a Marathon?

Another reason for not investing that I often hear is that investing is too complicated or that they need to do some research first. But as I mentioned in a previous post of mine, I explained that investing doesn’t have to be complicated. Also, most retirement plan administrators as well as investment institutions will give you some suggestions if you are unsure as to what you want to do. Plus, there are plenty of all-in-one funds or target retirement funds that you can start off with while you do your research. (Just make sure you choose low cost funds!)

Finally, I know a lot of people are not saving for retirement because they are paying off debt. I understand if you have high interest debt, but for people with student loan or mortgage debt, I am in the camp that believes that you should still invest even when you have debt. If you wait until you are out of debt to invest, then you have wasted valuable compounding time. See above for the importance of that compounding.

Enjoy National Save for Retirement Week! Make sure you start saving for retirement and don’t forget to encourage your friends, co-workers, and family members to start saving for retirement.

So why haven’t you started to save for retirement? If you have, are you on target with your retirement goals?

63 thoughts on “Why Aren’t You Saving for Retirement?

    1. livingrichcheaply@gmail.com Post author

      Yes, I think that is the biggest reason, but even a small amount adds up. “Small Steps Big Change”

  1. C. the Romanian

    Here in Romania we don’t have the traditional way of saving for retirement, like IRAs and playing the stock market game is still a mystery for most of us (plus the Romanian Stock Market is just as good as dead). I am saving for retirement as most of the civilized people did in the 50s, which is a bank account but I can’t expect any real growth. I am trying to find other ways to invest my money, but the numbers are low and options pretty limited. However, I am really considering buying a small unit to rent to get some cash flow.
    C. the Romanian recently posted…How to Get the Best Price When Selling Your HouseMy Profile

    1. livingrichcheaply@gmail.com Post author

      Interesting…can you invest in other country’s stock market? It sounds hard to have real growth in a bank account. Rental property sounds like a good idea. Does Romania have a retirement plan for its citizens?

    1. livingrichcheaply@gmail.com Post author

      It’s okay…retirement saving is a long road, and it’s great that you’re saving. Emergencies and hiccups happen to everyone, and you’re right, it’s life…I’m sure you’ll be able to get back on track.

  2. Matt Becker

    Huh, I hadn’t heard of Save for Retirement Week either. I guess that doesn’t bode well for the effectiveness of the campaign. This post actually ties in really well to the subject of my post for tomorrow, which has to do with not being afraid to start. I think some people are hesitant because they don’t want to mess up and lose all of their money, but the reality is that your return those first few years is pretty meaningless. The important thing is that you start contributing so that later on your returns can actually matter.
    Matt Becker recently posted…What is Net Worth and Why is it Important?My Profile

    1. livingrichcheaply@gmail.com Post author

      I know, it must not be in the budget to promote Save for Retirement Week! I wouldn’t have known if I didn’t get a newsletter from my deferred compensation administrator. Can’t wait to read your post tomorrow. I do think a lot of people are afraid to start…but they really should.

  3. Jamie V

    I was not aware that saving for retirement had its own week. How awesome is that?! I am trying to start early (I’m 26) by contributing to my company’s 401K up to the match (started this in late 2011 when I got hired), and then putting $50/month into a ROTH IRA. I’m still paying off student debt and came up with a financial plan to really buckle down next year and get all 3 loans paid off by the end of the year, or the following year, to start pumping up the amount I’m saving. I also want to be financially independent sooner rather than later, so I’m still really struggling at figuring out the balance between retirement savings and regular taxable-account savings to get to FI while not skimping on retirement. I’m sure I’ll figure it out.

    Matt Becker has a good point – the return (for the most part, I’m sure others have awesome success at the start) is poor in those first few years, and I think that people see this and their motivation deflates; heck, that was/is me. At $50/month, I was NOT impressed with what was going on. In reality (and when I’m not being stubborn, and instead thinking smartly) it is not even worth looking at ones account more than a couple times for the first few months or years, whereas I sometimes tend to check more than once or twice a week. I do it to myself, what can I say?

    1. livingrichcheaply@gmail.com Post author

      Hi Jamie, thanks for your comment. Yes, it does have its own week…only wish more people knew about it! You should be have a good plan in place for retirement saving and for attacking those student loans. Paying them off by the end of the year is a great accomplishment. I do have a good amount of student loans as well but the interest rates are very low so I’m saving more rather than rushing to pay them off. You’re right about the first few years being tough and that it doesn’t help motivate you to save. I put about $100 a month in my IRA in my early years. It wasn’t until about year 10 that I started thinking…wow…this is a good amount! Good idea about not continuing to check your account…it probably does more harm than good!

    1. livingrichcheaply@gmail.com Post author

      Good for you and definitely think everyone should just DO IT! Sounds like a Nike ad =)

  4. Brad @ RichmondSavers.com

    I had no idea it was National Save for Retirement Week either! If people like us don’t know about it, who does?

    I love the concept of “Small Steps Big Change”, as that’s what it’s all about to me. A series of little changes really can add up to a huge difference over a financial lifetime. Saving and compounding together is a powerful force!

    Thanks a lot for linking to my article on compounding; I particularly enjoyed writing that one as the numbers just astounded me! I’m in the process of writing a new one about car buying habits and the compounding difference it can make if you hold onto your car for 15 years.
    Brad @ RichmondSavers.com recently posted…Take Your Family to Disney World For Free: Step-by-Step InstructionsMy Profile

    1. livingrichcheaply@gmail.com Post author

      You’re right…if financial bloggers haven’t heard of it, they are doing a horrible job of promoting it! I also like that concept because many people assume you need to have a lot of money to make a difference, but a small amount and a good time span (coupled with the magic of compounding) works. Looking forward to your article about car buying habits. I definitely like the concept of holding on to cars for a while…had my last one for 10 years. Not sure it could have made it to 15 years though as it was a used car already when I got it! And now with my long commute, I’m putting a lot miles on the car, so I’m not sure about this one either.

    1. livingrichcheaply@gmail.com Post author

      Where do you live? That’s too bad that you don’t have many investment options. Does the country you live in offer a retirement plan?

  5. E.M.

    My company doesn’t offer a 401k, but I had been saving in my bank account. I was waiting to see how the markets would turn out before opening an IRA (with the government shutdown and all), but I guess in the end it really doesn’t make a difference. I’ve seen the compounding posts and it really does drive home the point of taking action now, when we’re young and able to reap the most benefits. While the returns aren’t exciting in the first few years, looking ahead is motivating.
    E.M. recently posted…Financial Observations About ColleaguesMy Profile

    1. livingrichcheaply@gmail.com Post author

      That’s too bad your company doesn’t offer a 401K, but you can definitely open an IRA. You’re right that the returns are nothing to write home about in the beginning, but trust me…give it some time and you’ll reap the benefits.

    1. livingrichcheaply@gmail.com Post author

      Exactly…saving and investing in your retirement should be a priority. Playing catch-up is not a good plan.

  6. Kyle | Rather-Be-Shopping.com

    I was kinda “forced” into saving for retirement about 8 years ago when the tax man came knocking at my door when my business had its first successful year. It was either pay 25k to the IRS or fund my SEP IRA with 40k. I funded the SEP and it was the best move I ever made even though it was hard to tie that money up at the time. I now add to my SEP yearly and it has paved the way to hopefully an early retirement.
    Kyle | Rather-Be-Shopping.com recently posted…Price-Match Policies: Which Retailers Make the Grade?My Profile

    1. livingrichcheaply@gmail.com Post author

      Good choice…definitely rather put money into my own IRA rather than pay the IRS! Good luck with early retirement…I’m hoping to get to retirement earlier rather than later!

    1. livingrichcheaply@gmail.com Post author

      Exactly! You can’t afford not to save for retirement…it needs to be a priority.

  7. Done by Forty

    What a cool concept! I’d never heard of a week like this, but it coincides with the time of year that a lot of people have open enrollment in HR benefit choices (like 401k, but also health insurance, etc.). So the timing’s good.

    I am a bit skeptical that individuals will take advantage of this reminder to make changes on a wide scale though. I hope they will but would rather that Congress put some heavier ‘nudges’ in place (e.g. – making the default 401k option for new employees to be a 10% contribution to 401k, with a 1% increase each year up until 15%…with the option to ‘opt out’ if the employee chooses to).
    Done by Forty recently posted…The Cherokee Land Lottery: What Happens When You Randomize WealthMy Profile

    1. livingrichcheaply@gmail.com Post author

      That makes sense it coincides with open enrollment. I think it’s a good idea to make the default option 10% or some other percentage contribution with yearly increases. Often times, people will just leave the default option. When the default option is no contribution, it makes it easier for people to just put it off.

  8. DC @ Young Adult Money

    Just getting started is probably the biggest hurdle when it comes to saving for retirement. Once the auto-deductions go into your 401k or IRA, you start to get used to them (at least I did) and you hardly miss that money. It’s also nice to kind of “forget” about saving for retirement with the auto-deductions and then a few years later you can look at your account balance and be happy that you’ve been having automatic deductions into your retirement account.
    DC @ Young Adult Money recently posted…Why I’m Flying First Class TomorrowMy Profile

    1. livingrichcheaply@gmail.com Post author

      I agree, getting started is often the biggest hurdle. It would be better if the default setting was to have contributions and require the employee to opt out. I like automated savings and do the same with my IRA.

    1. livingrichcheaply@gmail.com Post author

      Thanks Laurie. Getting rid of debt is absolutely a very important part of retirement planning. Once you get rid of debt, you can save even more into your retirement funds.

    1. livingrichcheaply@gmail.com Post author

      Thanks Demaish. Glad to hear that you will be enrolling into your employer’s retirement plan. 403b right? Definitely look into opening an IRA as well. I think it is a good idea to have both an IRA and the employer retirement plan.

  9. Tara @ Streets Ahead Living

    I don’t have the knowledge or the skills to manage my finances so I stuck with a targeted retirement fund with Vanguard for my IRA and while I’m not contributing a ton to this plan, I am at least contributing monthly. I plan to increase next year but at least I wanted to get in the habit of doing some, even if it’s not a whole lot. Some is better than nothing.
    Tara @ Streets Ahead Living recently posted…Are Outlets Really a Bargain?My Profile

    1. livingrichcheaply@gmail.com Post author

      You can’t really go from with Vanguard. I’m a big fan and also have most of my IRA in a target retirement fund. It’s okay that you’re not contributing a lot right now, you can always increase later on. At least you started investing, that’s the biggest step. Saving each month is a good habit to get into.

  10. MMD @ My Money Design

    I have never heard of National Save for Retirement Week before. It’s a good effort, but saving for retirement should be just as normal as the fact that you need diet and exercise to lead a healthy life. It’s too bad more people don’t get started early. As you pointed out with compound interest – it could really make things so much simpler!
    MMD @ My Money Design recently posted…Great Recent Scary Movies to Watch This Halloween – 2013 EditionMy Profile

    1. livingrichcheaply@gmail.com Post author

      That’s true…saving for retirement should be something people just do without encouragement. Though actually people need encouragement to diet and exercise too! =) I hope more people start saving for retirement early…it is so important.

    1. livingrichcheaply@gmail.com Post author

      Yes, there are a lot of benefits for saving for retirement…and one big one is the tax benefits. People definitely need to take advantage of them.

  11. Hayley @ A Disease Called Debt

    I have to say I never really understood compounding but I need to look more into this! I’m one of those people busy paying debts off but I get the importance of saving for retirement. I have a weak plan in place at the moment. Thanks for highlighting this about compounding, I will be looking into it more seriously!
    Hayley @ A Disease Called Debt recently posted…Running out of time!My Profile

    1. livingrichcheaply@gmail.com Post author

      Paying off debts is very important, but it’s definitely worthwhile to work on saving for retirement. Compounding is pretty amazing!

    1. livingrichcheaply@gmail.com Post author

      Buying an investment property sounds like a good plan. I would save more in my retirement plans but I’m looking into buying a co-op so we’ve been building up the downpayment.

  12. Daisy @ Prairie Eco Thrifter

    I started saving for retirement a few years ago, when I was still in college. I’m glad I did, because I have a lot of time on my side so I won’t have to go broke in my older years saving (or, not retire!). Many of my peers haven’t started saving, though, which is too bad.
    Daisy @ Prairie Eco Thrifter recently posted…Should You Buy a House Now?My Profile

    1. livingrichcheaply@gmail.com Post author

      Wow, you started saving for retirement while in college. That is pretty awesome and you definitely got a head start.

    1. livingrichcheaply@gmail.com Post author

      While I think there are some in dire financial circumstances where it is difficult to save for retirement, I agree that many just spend too much which doesn’t leave much to save. Financial discipline is very important.

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    1. livingrichcheaply@gmail.com Post author

      You’re right. I think people put whatever is left over, which is often not much. Rather they should pay themselves first and make retirement a priority.

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    1. livingrichcheaply@gmail.com Post author

      10 years ago is about when I got out of college! =) I saved a little bit during college…but it wasn’t much. Saving right out of college is pretty good!

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    1. livingrichcheaply@gmail.com Post author

      Hey AJ, good for you for thinking about saving for retirement right after graduation. I can’t really tell you what a safe amount is. You have to make out a budget and see what you are comfortable with. Obviously the more you can save, the better. At a minimum, you should probably put at least the amount your employer matches in your 401k if that’s an option. The article you linked to does also mention investing in 401k or IRA. Investing in your 401k and/or IRA is a good idea because of the tax benefits. Check out this other article: http://livingrichcheaply.com/2013/11/06/tax-shelters-for-you-and-me/. You should also check out Vanguard if you are interested in opening an account…they have low fees and a good reputation.

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