IF YOU'RE LOOKING AT your retirement fund, or you're not looking at it because you don't have one yet, you may be wondering what in the heck happened.
Well, you may have happened. Yes, life events can get in the way of saving for retirement; things like illnesses, divorce, putting kids through college or paying for a wedding, not to mention simply paying the mortgage and a slew of other bills are challenge enough. But our own human behavior is also often a factor when it comes to not saving for retirement. If you've just bought a hat and are learning guitar because you're pretty sure the only remaining way you can fund your retirement is as a street corner musician, you may want to first ask yourself if you're engaging in any of the following kinds of behaviors. If you fix these habits, perhaps you'll fix your retirement problem.
Maybe you have trouble thinking ahead? Dawn-Marie Joseph, founder of Estate Planning & Preservation in Williamston, Michigan, says that too many people worry about putting out fires now, instead of planning for the raging inferno down the road.
As a group, 20-somethings in particular, she says, "can't see the future. It comes over all of us at that age. Speaking from experience, I see it all the time. Saving for anything is just a habit. We all have good [spending] habits – and habits we don't want our parents to see."
Do you give up when the going gets tough? It isn't only the millennials who are torching their chances of having a stable retirement. Joseph says that 50-somethings often fall into the trap of not saving for retirement because they think it's too late to save anything meaningful.
"It's not too late," she says. "You may not have as much as your neighbor has in the bank, but so what? It's your life, not theirs. Start saving immediately. There are many excuses for not saving, like raising children, vacations, paying for education for children and buying a new car or a new house."
But stop it with the excuses, Joseph urges. "Be proactive with your future. It will be a lot more comfortable if you take control," she says.
Are you overly optimistic with your budget? Thinking your finances are going to work out fine in the short term can hurt you in the long term if you're ever wrong, and you're paying to fix and replace items and scrambling to keep your bills paid on time. Jennifer Myers, a certified financial planner and president of SageVest Wealth Management in McLean, Virginia, says that a lot of people plan their finances without thinking about unplanned expenses. And so when those unplanned expenses occur, naturally, their budget is thrown into disarray, and over the long haul, if you never have extra money or occasionally stop automatic withdrawals to your retirement accounts, that can lead to putting away a lot less during your earning years.
"A wise financial plan has to include a buffer for things that go bump in the night. Something always emerges like new tires, a new roof, a new car, college application fees, tuition expenses, home repairs, dental work," Myers says. "Smart, successful people know they need to allocate resources for the stuff called life."
In other words, be smart with your money today, and it should pay off tomorrow. Don't do that, and you're constantly in a form of denial, Myers says.
"Some people simply don't want to budget and be prepared. Having an expense to blame is a scapegoat excuse. It's a classic human behavior trait," she says.
Do you procrastinate a lot? That could be a very bad sign for your retirement. If as a kid you studied for a test at the last possible minute and you're always late to appointments as an adult, it's possible you might be prone to not saving up for retirement until, say, your middle-aged years.
Brenda Eichelberger is sympathetic. She's an instructor of management and finance at the School of Business at Portland State University in Portland, Oregon.
"It takes a very long time to save, and you constantly have to work on not spending. Spending happens in a moment, and we have several opportunities for spending each day," Eichelberger says.
But we don't have daily opportunities in which we're encouraged to save.
That's why she recommends saving via automatic withdrawal, having something "even as low as 2 percent to start," coming out of everyone's paycheck. She suggests then, with every raise, adding more to your retirement savings until you're paying 10 percent of your checks to retirement.
"If you are late to the game, the sooner you get started, the better," she says.
You aren't thinking like a retired person, are you? And why should you? If you aren't retired, why think like a retiree?
But you would do yourself a favor if you could start remembering that, far off in the future, you'll be living on a budget.
If you can't get that retirement mindset into your head, the problem is that the skills that help people in retirement are often not being used throughout their pre-retirement life, says Jordan Nietzel, who is based out of Leawood, Kansas, and is the director of investment operations at blooom.com, a robo 401(k) advisor.
As he puts it, "too often, people start their careers and immediately pile on debt. They get a new car, new furniture, new clothes, and that's on top of the student loan debt they already had. They're putting themselves at a disadvantage to start."
There's nothing inherently wrong with doing this, of course. It's how society works. But as Nietzel says, "Once you're accustomed to this lifestyle, it's really hard to break the habit. The most important factor in your ability to retire is your savings rate, or in other words, your ability to live below your means."
But many people, throughout their lives, live above their means. Which means you probably don't have much leftover income to put aside for retirement. It may not be a lot of fun to take money away from the present to put toward the future, but by adjusting the behaviors that affect your spending, you won't only save for your retirement years – you may literally save your retirement years.