It goes without saying that for many of us, much of the planning, the hard work, the saving and the sacrifice we endure during our young lives is focused towards the goal of achieving a more comfortable retirement. We work, we save, we invest – and then we hope for the best. I say “hope” because realistically, things happen that we have no control over.
I’m pretty sure that what’s occurred in America this past few years cements my point. For lack of a better phrase – shit happens. As such, not all of us will be able to achieve the retirement goals that we expect. It’s not because we didn’t conduct ourselves responsibly, it’s because we can’t always be fully prepared for the unexpected.
Markets crash, jobs are lost, crimes occur, relationships fail, people get sick, governments change the rules.. the list is long. Any or all of these things can leave their mark our personal finances and cause us to take a hard look at our retirement planning.
I think that’s the issue being alluded to in the following Morningstar video about delaying retirement. Morningstar’s Christine Price and Christine Fahlund from T. Rowe Price discuss a few strategies on how to make delaying retirement more palatable.
The strategies being presented in this video are all good retirement planning choices when things go wrong. Christine Benz, Morningstar, T. Rowe Price and Ms. Fahlund have all provided good advice, ideas, and information about managing one’s wealth, and have even helped educate me over the years. So, it’s not my intention to criticize what’s being said in this video.
It’s what’s not being said that I think is important.
As illustrated in this video, we plan our goals with the mindset of supporting a certain lifestyle in retirement. If things interrupt our retirement goals, we then worry about not being able to support that lifestyle, and seek ways to delay retirement while finding ways to make working longer more palatable.
But those aren’t our only choices. While those strategies are good options, it’s only a part of the retirement equation. We could also consider altering the lifestyle that we expect to live in retirement.
Are those expectations too high? We also have the choice of lowering our lifestyle expectations instead of delaying retirement and working longer. There are plenty of ways to cut unnecessary costs, live frugally, and still be happy in retirement. We just have to decide which choice is more important.
America Saves Week
The personal savings rate has risen above 4% recently, but most Americans are still not saving adequately for retirement, and most lower-income households do not have adequate emergency savings for unexpected expenditures like a car repair. But with more societal encouragement and support, more Americans can be persuaded to build wealth, not debt.
For my contribution to America Saves Week I thought I would share a personal story of a simple strategy that I use to save a portion of my income.
My personal checking account is with Arizona Federal Credit Union (AZFCU). Opening a checking account at AZFCU requires first opening a “share” savings account with a minimum of $25.00. One doesn’t have to contribute further savings to this share account in order to keep the checking account open. It’s just a requirement for being a member, and it can also be used for overdraft protection.
I also have a piggy bank at home. When I empty my pockets upon changing my clothes everyday, I feed the pig with my leftover change from that day. When the piggy bank gets full, I rolled up the coins and periodically deposit them into my share account at the credit union.
I’ve been saving my change for approximately five years now. I don’t contribute anything to this account except my spare change, and use this share savings account for the sole purpose of seeing just how much I can save over time with this strategy. It’s not a lot of money, but with time and consistency, I’ve managed to save just under $2000.00.
Now, I know that your probably saying to yourself “$2000.00?!, that isn’t squat”. If so, then you’re right. But it doesn’t take a significant effort on my part and doesn’t cause me undue financial hardship. It also shows that even a few cents here or there can become a significant level over time.
So, what are you going to do during America Saves Week? Take action.