Is Your Motivation Challenged When It Comes To Saving for Retirement?
I think everyone deep down hopes to one day have a happy retirement. But it seems that people have a problem saving for it. After all, it is a consumer driven society with lots to spend money on. To get started saving and stay motivated it’s time to rethink how we look at our retirement. Think of it as our life’s biggest purchase and just like any other purchase it will be limited by our available cash.
The bummer when buying your retirement is that unlike other big lifetime purchases like our education, home, car, etc., a decent and happy retirement can’t be financed. We simply cannot wait to the last-minute and plop down a 10% to 20% down payment and borrow the rest to get what we need or want. It takes assets.
The other happy retirement equation that needs answered is knowing the retirement basics, features and options we REALLY want to have. Our retirement features and options has costs associated to them just like any other large purchase we make. We have to complete some product (retirement lifestyle) research and save as much as we can to buy the retirement we want. If we don’t it’s simply settling for the retirement we end up with.
A Decent and Happy Retirement is Years in the Making – So is a Bad One
Surprisingly, although 80% of Americans work for employers offering some kind of retirement program, only 32% of these employees are saving for retirement.
What are they waiting for?
OK I get it. Life happens, wages are stagnant, there are student loans, too many cool things to buy and do, etc. There are just too many reasons to ignore saving for retirement and put it off for later. Retirement is too far into the future to think about now. WRONG!
When it comes to saving for retirement, procrastination is our worst enemy. Saving something, even if it starts out as a small amount will be better than not saving anything. Especially when done earlier instead of later when time is on our side. It is a personal win-win with no downside. On the other hand not saving anything guarantees a worse retirement outcome.
Saving For Retirement is Putting Aside Money For YOUR Life’s Biggest Purchase.
You Do Want to Buy Something Nicer?
Nobody intentionally goes out to buy a bad education, house, car, or you name it. Who in their right mind would roll up to the grocery store cashier with only $25 to their name and $200 of needed groceries in the shopping cart. But when our money is short we do end up settling for what we can afford.
We have all had to settle a time or two for something either less than wanted, less than needed, or on the crappy side of things. Try doing that every day for the rest of your life.
There should be Social Security to help us with our retirement purchase. But it was never meant to be our retirement’s only source of funding. It would be very challenging to have a nice happy retirement purchased by Social Security alone. So ask yourself. Do you want to buy a crappy retirement? Are you OK with settling for a low quality of life over what might be decades?
Retirement is YOUR life that inevitably awaits you. Ignore or delay planning and saving for retirement all you want. It only hurts and limits you when it becomes your time to buy it. We can put retirement off for only so long.
We must rethink of it as our life’s biggest purchase and prioritize it as such. At some point everyone alive will have to buy a retirement. Either on their terms or not.
The Goal Should Be a Happy Retirement
Buying A Retirement You Will Want
Setting Your Retirement Base
Don’t let the numbers get in your way. We all hear the financial industry claims that we need to have enough to provide 80% (give or take) of our final income for retirement. Taking that number to get a retirement savings estimate would intimidate and demotivate any positive action for most folks. The big objective is to start saving something. You don’t have to set a savings goal to start. But eventually it is necessary to understand where you are and how you are doing.
Here’s what I did.
When buying something big there is always the base price. Then the cost rises when features or options are added. The same goes with our retirement.
The happy retirement base price is having our basic lifestyle costs covered. That being food, shelter, utilities, insurance, taxes, etc. The way I look at it is that not being able to cover these basics lifestyle needs is certainly a bad and unhappy retirement.
That base price can vary depending on where we live and other basic retirement lifestyle choices. Just like a big automotive purchase. Choosing a base Ford or Chevy will have a base cost or price before adding any features or options to it. We have to make sound retirement choices.
Setting Base Happy Retirement Goals
Figure out what your monthly budget will be to cover your basic needs. Use your current monthly basic costs. Then look at it for areas you will probably see reductions or increases and make adjustments. For example:
- Staying put or moving somewhere cheaper.
- Health Insurance. This is hard to figure given today’s political climate but assume it will be higher until Medicare kicks in.
- Taxes. Probably lower than paying while working.
- Transportation costs. No more commute may reduce the amount you will pay for fuel, maintenance, and insurance. More vacation road trips may cause this amount to break even or add to it.
- What we are retiring to. Must-have activities of passion and interests that have costs associated to them. For example, hobbies and travel.
Set a realistic base model retirement estimate. Then do the math. Hopefully it is much less than the 80% of current salary. This will help set your base retirement purchase price and be used to set your base happy retirement savings goals.
Keep in mind that at some point social security will also be there to help pay those happy retirement basics. Get your Social Security estimate and plug that into your equation to reduce savings needs. Also subtract out any expected pension coming your way. ( I had to mention it even though unlikely today)
Based on the 4% retirement withdrawal model you can simply take the yearly amount you estimate your savings will have to cover and multiply it by 25 to reach a retirement savings goal to shoot for. Remember that even if you don’t make your goal you are far better off than if you did nothing. Beat it and you have options. The future price of our happy retirement that we save for may vary as time goes on just like anything else. Make necessary adjustments.
Happy Retirement Features and Options
I love features and options but some are worth a lot more than others to me. I separated these out from my retirement savings calculations because I really don’t have to have costly add ons. Especially those that don’t really add anything to my happiness value. I would enjoy having some but I don’t need them to meet my basic happy retirement requirements. They are my wish list items that I used to set my highly optioned happy retirement savings goals. For example:
- Travel. World travel wasn’t part of my base retirement but would be a nice-to-have if finances allowed.
- Hobbies. For instance I have an active automotive hobby and would love to increase my participation which would mean more travel costs than my base happy retirement allows for.
- Sports. I always wanted to learn how to play golf but it does have costs to play.
Everyone’s valued options and features list is different. Just do a self assessment of things you enjoy doing now and wish to do in retirement. Figure out what the cost is. Then add it to your base retirement to calculate your highly optioned happy retirement estimate.
Consider Living Your Retirement Lifestyle Now
We decided to live our retirement lifestyle years before we retired early. We didn’t waste money on anything that didn’t meet our happiness values. This allowed us to reduce our monthly costs, pay off all debt, left more money to save, and gave us time to create a sustainable and enjoyable lifestyle.
In my case, our base retirement purchase number was more like 30% of our last salary. A lower base retirement lifestyle cost means needing less assets to pay for it.
When it Comes Time To Purchase Your Retirement
When the time comes to buy your retirement you will definitely get what you can pay for. Some get to choose when retirement is. For others it comes when they least expect it, ready or not. Hopefully there is enough assets to buy a happy retirement that covers all the required basics.
Having a successful retirement savings outcome increases the possibility of buying a retirement with valued features and options. As long as the base retirement is covered then being able to add from the wish list becomes an option. Limited only by what you can afford. Just like any other big purchase.
If a little short then anything saved will allow you to possibly fill the gap through cutting lifestyle costs or landing a part-time gig. That beats being far short with no money and few alternatives.
It’s a consumerist world and culture that we live in. Buy this, buy that. This article is all about ending the procrastination and seriously getting started with saving for your life’s biggest purchase – YOUR retirement.
- Motivate yourself by looking at retirement as something you want to buy for yourself, not just settle for.
- Figure out how much you can dedicate to retirement saving.
- Increase your retirement savings rate over time as conditions allow.
Never stop saving for the biggest purchase of your life. Saving anything is better than nothing. When the consumerist world calls your name and tempts you to stray from your retirement savings, remember that nobody else is going to buy you a happy retirement. Having a happy retirement is all on us to figure out and pay for ourselves.