Growing up, I never had personal finance as part of the curriculum. But everything I’ve learned about motivation to save for retirement, I’ve learned in high school.
Recently, TeacHer Finance wrote a post sharing her perspective – she hates saving for retirement. I understand her reasons.. maybe that’s why I don’t really think about them – because I am afraid of mentally discouraging myself from saving! It is difficult to balance retirement with shorter-term goals, that is for sure. And although there are good, logical reasons to save for retirement, the motivation factor, like I mentioned at the beginning of this post, was completely from high school.
From High School to Retirement Saving
This might be a nerdy way to explain it, but here is it. When I was in high school, I’d often slack off a little at the beginning of the semester – I wouldn’t study as hard as I should have, or prepare for the occasional pop quizzes that I KNOW will come up in class. It’ll be okay, I told myself, I will work harder for the next test, the next presentation, the next project.
Towards the second half or 2/3 of the semester, I’d look at my class progress reports, feel disappointed, and then I’d hunker down and put my nose to the grindstone. But the simple mathematical truth was that for every 80% I got in the first half of the class, I’d have to get a 100% to achieve the 90% ending score I wanted. Let’s just say that it was a rare day that I got those 100%s.
And every time before the final, when it’s 4 AM in the morning and I am still pouring over my notes on European history or statistics or macroeconomics, stressed out of my mind, I think, why didn’t I start preparing earlier? If I had JUST prepared a little more at the beginning of the term, I wouldn’t have to work so hard towards the end, I would give myself more wiggle room, and I would probably have gotten a better grade.
The lesson I learned? Put the work in early, get better results for less effort.
That’s the thought process I bring to retirement saving. I am saving as much as I can right now so that I wouldn’t have to panic and start saving 30% of my income when I’m in my 30s or 40s, when I will surely have more financial obligations. Now, when I think of not saving for retirement, I think of high school.
Do you love saving for retirement (is love too strong a word?) Do you hate it? How do you motivate yourself to save for something that is so abstract, and so far away?
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May I ask what your GPA was in high school? I've always wondered whether "C" students should deserve "A" lifestyles (not implying u r a C student!).
I took many AP classes (which means an A = 5.0), so that skewed my GPA upward. I don't really remember what my GPA was.. I do remember that it could've been much higher if I studied the first half of the semester like I studied during the second half.
I am a little young to be thinking about retirement, wait, isn’t that what everyone says? Thanks for the great post, keep up the good work!
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I'm young, but I actually really like saving for retirement. I'm not nearly as good as I should be, but in my first two years out of college I managed to save about 5k, and my goal is in my first 5 have doubled that to 10k. For me, its a feeling of getting ahead of the curve, and knowing that through automated savings I'm used to living on less money and getting a higher rate of return. I also know that right now, I don't have to pay for a car, house, wedding, etc, so it's easier than it will be when I'm older. Plus, I'm a dork, and like seeing higher numbers for my net worth in Mint!
The word retirement should be replaced with freedom fund. In essence, we should be saving money that will allow us to do anything we want in the future. On a side note, I want to say how much I dislike those who use compound interest calculators telling you how rich you will be in the future. Investing is way more complicated and dangerous than those simple calculators might have you believe.
I hate saving for retirement, largely because I can never figure out what the heck I'm supposed to be doing. I am one of those lucky souls with a defined benefit pension, and hubby is another. They're so rare nowadays that there's not exactly a ton of information out there about what I should be saving for retirement outside of my DBP.
My DBP is based on my five highest average years of income when I retire, so it's not like I can easily or reliably calculate how much it'll be worth (I'm 26 so I have a lot of room to grow!). Will the DBP rules change and I'll find myself scrambling in my mid-40s? What if I want to change jobs and I haven't saved anything? Do I get any of that money? Do I have to cash it all out? My RRSP contribution room (the equivalent of a Roth IRA) is reduced because of my DBP- how does that affect any contributions I might put in? Do I get that room back one day?
And finally…
I'm unlikely to have this problem, but some people with DBPs might… What happens if the company goes under? Either before or after retirement?
It's all enough to make me dread having to save for retirement. Or not saving for retirement. Or whatever. Something in between. Good problem to have, I guess…?
I can't say that I LOVE saving for retirement. BUT it gives me a great sense of security. I keep motivated by knowing that I won't be a burden to my kids and that I should (keyword being should) be able to maintain a nice lifestyle. This should also give me enough to play with my grandkids and treat them to a few things. This was something my grandparents were never able to do.
I view retirement closer to using my fluoride rinse after brushing-not something everyone does, but I think it will pay off.
I don't love it, or hate it – it's just something that I do. That said, I don't force myself to save at least X%. Until my student loan is paid off – I'm happy if I contribuite $25-$100/month – depending on what's going on that month.
I don't love saving for retirement, but it's necessary. I don't want to be homeless in my old age or relying on non-existent social security.
Knowing that my retirement investments work much harder for me now motivates me to max out my Roth IRA. At 24, I'm afraid of having the future my mother is facing, so I work a lot of overtime to fund my retirement and pay down my student loans (at 9.75%). While I'm still building an emergency fund (currrently have 5 months, I want
and paying off student loans the 403b just has to wait.
Great analogy! I guess I was always the big nerd that worried if I wasn't uber-prepared at any moment, my life would be an utter failure (for example, I was absolutely hysterical crying when my grade 8 home ec teacher implied I might fail the class-I figured that I mylife would be over if I failed Gr 8 home ec! Perspective wasn't my strong suit at 13 years old apparently, says the woman who now has a PhD) So, to follow your analogy, I just assume that I better prepare for retirement as much as possible, because I assume something bad will happen if I don't! Hence, I don't love doing it, but I enjoy escaping the worries that I experience if I don't do it.
Thanks for the shout out! I loved the connection you draw between something we can all relate to – cramming for a test – and something that seems a little more abstract and distant – "cramming" for saving for retirement. Cool idea!
Well, you already know my feelings about saving for retirement, but something I don't think I was very clear about in my post was that I REALLY like the Roth IRA. I love how flexible it is and how it's possible to save for other goals (house, education) while working towards a comfortable retirement at the same time. Like I said in my post: it's more the concept of saving for old age that bothers me.
One of things I keep in mind is that I can retire much sooner than I want to – you read so many stories of 50- and 60-something who effectively retired ahead of schedule because they couldn't find a job after being laid off or for unexpected health reasons. Is the teaching profession fairly safe from those scenarios?
Unless financial independence IS a short term goal …
For people who hate saving for retirement, one idea to make it less painful is this: Don't put your savings in an IRA, 401k, or any other account you can't take it out of early without paying a penalty. Yes, you will lose out on some tax advantages, but in exchange you get tremendous flexibility. If you need the money for other reasons, it will be there for you. Knowing that you can use the money however and whenever you want may make you much more motivated to save, which means that you could end up with a lot more retirement money after all.
Speaking as someone who DID wait much too late to get serious about retirement saving, I second every thing you are saying. Hmm–come to think of it, I handled school much as you did, as well. Too bad I didn't wise up the way you have! The thing is, at age 61, a huge chunk of every paycheck is now making its way into my 401(k). I wouldn't have to be doing that if I'd saved much smaller amounts a whole lot earlier.
And Doug–I dunno about you, but if the money is easy for me to get to, then I get to it! Much better, at least for me, to have it as far away, and as expensive to take out, as possible.
Same here. I prefer to think that I am investing for someone else – a cool old lady whom I care a lot about, whom I want to have a grand old time in retirement, and whose circumstances will depend heavily on how I behave right now. I can't take money away from her, can I now?
I think if you can automate retirement savings when you first start working, it’s almost unnoticable. I don’t even think about my 401K contributions anymore… it’s all automated.
My only regret is that I didn’t start when I was 21!
When my balance is at an all time high, I love my 401k, when it’s down like now, I hate it
… but then again how doesn’t. The only positive is I’m dollar cost averaging shares 
Everything that is set seemed to result positively. The value of preparation takes an account for its future worth. As to retirement, the essence is that what we save is what we get in return. The present times beholds our future and what we plant in early times is what we will serve in the coming times of our life.