Have you ever wondered why you don’t save more for retirement? Or why others who you know don’t? If saving for retirement is so important, why don’t we do more of it, or even do it at all?
I’ve come up with a handful of reasons, and all have to do with either personal attitude and preferences, or with life circumstances. Sometimes we just have to overcome ourselves, and other times we face circumstances that limit our efforts.
1. It’s not a goal.
Have you ever known someone who has weak career aspirations? What about those who refuse to take care of their health, no matter how bad the report is from the doctor? The fact is, people have all sorts of desires, preferences, and taboos in their lives. For many people who do not save for retirement, it simply isn’t a goal in their lives.
It may not be a strategic miscalculation either. People simply have different objectives in life. Take for example a person who is so deep into the work they do that they pay little attention to anything else. It might be a self-employed person completely obsessed with building the world’s best mousetrap. It isn’t lack of money, but rather the result of an all-consuming focus in a different direction.
A person can have such a dim view of the future that they fully expect that the world will end sometime in the future. They can also be so pessimistic about the state of their health as to have no expectation of living long enough to retire. A person with such a depressing outlook on either the world or themselves can easily adopt a what’s-the-use attitude. They believe there is no point in preparing for something (retirement) that will never happen.
Less dramatic, but equally damaging, are those who have very little saved or don’t begin saving until late in life. They may either minimize their effort, or even abandon it altogether, feeling that it will just be too little, too late.
Less obvious – but still very fatalistic – are those who feel that they need to enjoy life now since they have no guarantee of the future. They may even earn a lot of money, but spend it all on living in the moment instead of saving for the future.
3. Excessive optimism.
Excessive optimism is at the opposite end of the spectrum, but it can do equal damage. A person could fail to save adequately for retirement (or even to save at all) with expectation that something great will happen in their lives that will eliminate the need to prepare for retirement.
Here are some examples:
- I’m going to be rich, I don’t need to prepare for retirement.
- I can earn 20% to 30% in the stock market – and don’t need much time or much money to prepare for retirement.
- I’m going to inherit money so I don’t need to prepare for retirement.
- I’ll sell my house (business, coin collection, farmland, etc) and that will take care of my retirement.
- I plan to marry money/my spouse is rich.
In a person’s mind, each of these assumptions could eliminate the need to prepare for retirement. The problem is that each relies on little more than a hope, a promise, or a future event that cannot be guaranteed.
Still another example are people in their 20s and early 30s. Because they have so much time before retirement, they may not save for it, thinking they’ll have plenty of time to make it up later. The problem with this thinking is that life tends to get more complicated as you get older. The delayed retirement planning may never happen as hoped.
So far we’ve talked about the lack of retirement savings resulting from personal choices and preferences. Let’s take a look at a couple of reasons that have nothing to do with preference.
4. Lack of sufficient income or job stability.
It’s one thing to steadily save for retirement when you have a stable career that includes a lifetime of employment in jobs that pay a solid living wage (or better) and offer complete benefits. However not all people are employed in such careers.
Millions of people are employed in fields that are low wage and do not offer benefits. Think of the people who work in the retail and hospitality industries. It’s tough enough to live on what you earn, let alone setting money aside for the future.
Millions more are employed in cyclical businesses, such as the real estate business or the building trades. Those are boom-or-bust industries, where workers are often forced to live during the busts on the money they saved during the booms. It can make for erratic and inadequate retirement savings.
The self-employed can also be challenged when it comes to retirement savings. Though many people who run their own businesses are extremely prosperous, there are many who are in businesses that are subject to wild swings in income. Like those in cyclical industries, what they accumulate during prosperous times can disappear during slowdowns.
5. Life gets in the way.
Even if you do all that you can preparing for your retirement, life can get in the way of your best intentions. A career crisis or business failure late in life can not only stop retirement contributions, but it can also force you to make early withdrawals in order to survive. A medical catastrophe could have the same effect at any point in life.
There are also events that pertain to dependents and other loved ones. The need to care for a sick, crippled or troubled family member on a long-term basis could change your entire financial plan. Retirement contributions may have to be eliminated, and all assets used in the care of the loved one.
Do you see yourself in any of these? If one of the first three are the real reason for not saving for retirement, you can do something to change it. If it’s one of the last two, you can only do the best you can.
Can you think of other reasons people don’t save (or save enough) for retirement? Leave a comment!