Saturday, October 18, 2014

Just "Because"

As you may have heard (but may not), we recently celebrated National Save for Retirement Week. Of course, there’s no “magic” to a week dedicated to a focus on saving for retirement — even one that Congress has seen fit to acknowledge with a resolution.

That said, saving for retirement — which seems far away for some (though likely not as far away as some think) — is something that many find easy to defer for another day, a more convenient time, a more settled financial situation. We all know we should do it — but some figure that it will take more time and energy than we can afford just now, some assume the process will provide a depressing, perhaps even insurmountable target, while others don’t even know how to get started.

You deal with these objections all the time. However, in recognition of National Save for Retirement Week, here are five simple reasons why you, or those you care about, should save — and specifically save for retirement — now:

Because you don’t want to work forever.

If you want to stop working one day, you are going to have to think about how much income you will need to live after you are no longer working for a paycheck.

Because living in retirement isn’t free.

Many people assume that expenses will go down in retirement, and they may for some. On the other hand, retirement often brings with it changes in how we spend, and on what — and that’s not necessarily less.

For example, research by the Employee Benefit Research Institute (EBRI) has found that health-related expenses are the second-largest component in the budget of older Americans, and a component that steadily increases with age (see “How Does Household Expenditure Change With Age for Older Americans?”).

Because you may not be able to work as long as you think.

In 1991, just 11% of workers expected to retire after age 65, according to the Retirement Confidence Survey. Twenty-three years later (2014), that same survey found that a third of workers report that they expect to retire after age 65, and 10% don’t plan to retire at all.

Expectations are one thing, but realities seem to be different. The RCS has consistently found that a large percentage of retirees leave the workforce earlier than planned (49% in 2014), and many who retire earlier than they had planned often do so for negative reasons, such as a health problem or disability (61%) — things that are not within their control.

Because you don’t know how long you will live.

People are living longer and the longer your life, the longer your potential retirement, particularly if it begins sooner than you think. Retiring at age 65 today? A man would have a 50% chance of still being alive at age 81 (and a woman at age 85); a 25% chance of living to nearly 90; a 10% chance of getting close to 100. How big a chance do you want to take of outliving your money?

Because the sooner you start, the easier it will be.


- Nevin E. Adams, JD

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