Time is said to be our most valuable asset, so if you’re behind on saving for retirement, just work longer! Sounds simple enough, right? While this theoretically seems like a great solution, it isn’t so easy in the real world. Nobody likes to hear this, but the best way to improve your chance of having a comfortable retirement is by saving more aggressively.
A recent article on Bloomberg News shared some interesting statistics from this year’s Retirement Confidence Survey. Since 1991, more workers have increased their expected retirement age beyond 65. Expectations are nice, but what’s actually been happening? During that same time period, the median retirement age has remained 62. Additionally, 26% of people surveyed said they planned to retire after age 70, but statistics show that just 6% go on to do so. As Steinbeck wrote, “the best laid plans of mice and men often go awry”.
Why haven’t people started to retire later despite their intentions to do so? It really isn’t up to them in many cases. People don’t plan to not have a say in their retirement, but it happens more frequently than you probably think. 40-50% of retirees stop work earlier than planned due to health problems, changes at their company, or a family member needing their care. We have absolutely no control over these factors. Whether or not you’ll retire at the age you expect is basically a coin toss.
Focus on what you can control. We have much less control over our retirement age than we think, but we have plenty of control over our spending and saving habits. If you don’t know yourself financially, spending less and saving more might sound impossible. It’s easy to feel overwhelmed without a sense of direction. Fortunately, nailing down your financial basics isn’t all that difficult. You absolutely must know:
– How much you make after taxes in a month (You’d be surprised at how many people operate without this knowledge)
– How much your lifestyle costs you monthly (Again, so many people simply don’t know this number)
– What your goals are (You get to prioritize the list!)
If your most important goal is a comfortable retirement, I’m willing to bet you can find a few more bucks to save after assessing your situation. Don’t get hung up on the number, if you can afford to chip in another $25 a week, do it. The power of compounding returns will amaze you.
The message here is one we send a lot at Mullooly Asset Management: focus on what you can control. You may or may not be able to work longer to fund your retirement, but you can start saving more and spending less today.