Everyone looks forward to their eventual retirement. However, nobody wants to plan or save for it. Instead, they always want to hold off on thinking about it until sometime in the future. Retirement planning is something they’ll do when they’re much older. They don’t want to give up that chunk of income while they’re still young.
Unfortunately, “someday” then gets continually pushed further back, as workers remain in denial about how soon they need to start saving. This is a dangerous mentality, which can be detrimental to your future financial security.
The Disconnect with Our Future Selves
Even people who are generally money-conscious and fiscally responsible in the short term tend to shun concrete retirement planning. The reason is because, psychologically, we have a hard time connecting the person we are now with the person we’ll be in 20 or 30 years.
Therefore, when we have the chance to contribute to an IRA or 401(k), we tend to see it as a loss, rather than a gain. We’re giving up a portion of our paycheck each month and forcing ourselves to live within smaller means, so that some stranger who won’t exist for several decades can live off of the money.
Of course, we know that we need to plan for our retirement, but we figure it’s something we can worry about later. Someday, when we’re older and more financially settled and making more money, we’ll start building up a nest egg. Now, though, we need that income for ourselves.
When “Someday” Is Too Late
Eventually, we get close enough to retirement age to realize that it’s something we need to prepare for. Unfortunately, by the time that happens, it’s much more difficult to put away enough to live on.
Even as we get closer to retirement age, the disconnect between us and our future selves can still lead to denial and jeopardize our financial security. At 55, you can visualize yourself at 65 and understand that you need to save up. However, can you picture yourself at 85 or 90, and the needs you’ll have then?
Due to inflation, your fixed income likely won’t go nearly as far by then. At the same time, many of your basic expenses will be higher, such as routine healthcare. You may find yourself needing more prescription medications, more doctors’ visits, and possibly some significant medical procedure, all of which will cost money. However, visualizing these eventualities 30 years in advance and saving up enough money for them is difficult to do. You’re reasonably healthy now, so you assume you will be for the rest of your life—which you imagine will likely be another 20 years after you retire, tops.
Due to this mentality, people often underestimate how long they’ll live and end up outlasting their retirement fund, sometimes by several years or more. That, combined with a gradual increase in expenses, and the fact that they didn’t start saving soon enough, ends up leaving retirement funds completely depleted far sooner than expected.
The only solution to this problem is to break the cycle of denial and start saving for retirement immediately. The longer you save, the more you’ll be able to put away, and the bigger your nest egg will be. You’ll be financially prepared for the problems you have a hard time visualizing, and can live a comfortable lifestyle without having to worry about running through your savings early. It may seem like a difficult proposition now, but your future self will thank you.