Quick! Take a look at your current net worth. If you had known 10 years ago that it would be what it is today, would you have been angry if you had been forced to save more money???
The reason I ask is because I’m getting older. And the older I get, the more I notice things. One of the things I’m noticing is that my friends are getting older too. And they’re starting to make worrying noises about not having saved enough for retirement. These disquieting rumblings are leading me to wonder if perhaps people shouldn’t simply be forced to save for their retirement.
It’s Easy to Put Off Saving
Want to know why I’m such a huge fan of automating your savings?
It’s due to the fact that automation removes freedom of choice. I know myself. If I to deliberately choose to siphon money from my paycheque to my future, then I wouldn’t. I’d go through that money like a hot knife through butter! I’d be no further ahead financially but I’m sure I’d have more stuff – clothes, electronics, whatever…
I’ve curbed my ability to spend away my retirement savings by setting up automatic transfers. My paycheque comes in – the automatic transfers are triggered – I spend whatever’s left over.
Yet, I’m realizing that a lot of people don’t use automation to improve their financial futures. To be fair, I’m not talking about people who don’t have any fat to cut. Sadly, lots of people are living by the skin of their teeth and an automated savings plan won’t help those people.
I’m talking about the people who do have fat to cut. The ones who can cut back without eliminating all the little extra in life in order to fund their future financial goals. Many of them don’t do so… a situation that I find perplexing.
There’s Little to No Urgency
Perhaps the Ones-Who-Can simply don’t because retirement is so far away. It’s in the distant future, so why worry about it now when it won’t be here for a very, very, very long time?
Good question.
The answer is that tempus fungit, which is Latin for “time flies”. Yes, I’m old enough that I took a semester of Latin in high school. It still blows my mind that this year was my 30-year anniversary of graduating high school!
Your retirement will be here before you know it. Everyone gets the same 24 hours in a day. And they pass by at the same speed for all of us. No matter how busy you are, no matter how full your life is of other priorities, believes me when I say that you will get old…unless you die. Sorry to be so blunt, but it’s the truth. The only people who aren’t getting any older are the ones who have already passed.
Regardless of how far away it feels, your retirement is on the horizon. Saving up enough money to pay for it is a priority that you should focus on throughout your life.
Money From Others…
Yes, that’s right. It’s up to you to pay for your own retirement. Whether you’ll earn CPP, OAS or GIS (or Social Security and its equivalents), the amount of money you get from the government won’t be enough.
If you’ve been promised a pension, then all you have right now is a promise. The harsh reality is that pensions can fail. Think of a pension as a repository of deferred pay. Your employer pays you less today with the promise that they will pay you after you’ve retired. When a pension fails, it means that the employee who did the work doesn’t get paid as he or she was promised. It sucks and it’s unfair, and it causes a lot of havoc to pensioners who can’t turn back time and go back to work.
You should be saving your own money to supplement whatever you receive from the government and your pension. If the government and/or your pension still has money to pay you in your dotage, then that’s great. If not, then you’ll be very happy that you made the choice to tuck a little something away over the years. Err on the side of caution and start saving for your retirement.
It’s Vitally Important
There’s not much more to say at this point. You know how happy you are when you’re hungry and you eat something? That awful hungry feeling goes away and you can go on about your daily life.
You will continue to be hungry when you’re retired. You’ll still need shelter, a few clothes, access to transportation, some entertainment once in awhile. When you’re retired, I promise you that you will still yearn for your creature comforts – much in the way that you do today. In order to acquire them, your retirement funds will have to take the place of your paycheque.
Gathering sufficient retirement funds is an integral step in taking care of Future You. For the vast majority of us, it’s going to take a very long time. So unless you’re next to destitute, take immediate action. Set up a plan whereby you funnel some of today’s money towards tomorrow’s financial needs. I promise that you won’t regret doing so when the time comes to live off your retirement nest egg.
Yet…
I suspect you’ll read this, think it’s a good idea, and go on about your lives. There might be one or two of you who actually take my suggestion and plant their money tree. The rest of you… not so much.
All of us will need money until we draw our last breath. That’s the world we live in. And that’s why I’m starting to come around to the idea that people must be forced to save for their retirement. It cannot be optional. If it’s optional, then people will choose not to do it and that’s a bad choice. No one is telling you to give up all of the things that make you happy today in order to save for tomorrow. Instead, I’m encouraging you to cut back a little bit. This is so you’ll have the money you’ll need for Future You. Isn’t taking care of Future You worth a little bit of sacrifice today?
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Weekly Tip: Use your tax refund in a way that allows you to pay down some debt (30%), to invest in the future (50%), and to enjoy the present (20%). Life is about balance and enjoying the journey along the way.