Aren’t you excited that this week is National Save for Retirement Week? I know I am! Actually, I had no idea that it was this week. As a matter of fact, I didn’t even know there was such a thing as National Save for Retirement Week. Well there is such a thing, and this year it is held during this week from October 20 to October 26.
National Save for Retirement Week is a national effort to raise public awareness about the importance of saving for retirement. The week provides an opportunity for employees to reflect on their personal retirement goals and determine if they are on target to reach those goals. I started in 2006, when Senators Gordon Smith (R-OR) and Kent Conrad (D-ND) introduced the first resolution establishing National Save for Retirement Week. Their goals were to elevate public knowledge about retirement savings and to encourage employees to save and participate in their employer-sponsored retirement plans.
So why do we need a resolution to be passed holding a week to encourage people to save for retirement? It probably is due to the low savings rate in this country and low participation rates in retirement plans. The biggest reason people cite for not saving for retirement is that they cannot afford to save for retirement. I think the opposite is true. You cannot afford not to save for retirement. If you do not have enough money to save, you have to change your mindset, live within your means and cut some expenses.
A similar excuse I’ve heard for not saving for retirement is that they don’t have enough to invest in their retirement plan. But even a small amount will start the ball rolling. As a matter of fact, the theme of this years National Save for Retirement Week is “Small Steps Big Change.” Many employer-sponsored plans allow you to contribute a mere 1% of your income, or if you prefer, you can just pick a fixed amount that you are comfortable with. Remember, your contribution is pre-tax, so even if you invest $25 a paycheck, the impact to your paycheck will be less. Check out this calculator to see how much the impact will be. If you do not have access to an employer-sponsored plan, you can open an IRA which generally have a $1,000 minimum to open and you can make contributions to it at a minimum of $50 to $100.
When I first graduated from college and started working, many of the excuses my co-workers gave for not participating in the retirement plan was that they were young and felt they had time. Time is on your side when you’re young. You’ve heard about the miracle of compounding right? Well, it needs time to work its magic. You are better off investing early, even a little bit will make a big difference in the end.
Check out Brad’s post from Richmond Savers which shows you the magic of compounding.
Another great post to read that might inspire you to invest early is by Joe from Retire 40 entitled, Is Saving a Sprint or a Marathon?
Another reason for not investing that I often hear is that investing is too complicated or that they need to do some research first. But as I mentioned in a previous post of mine, I explained that investing doesn’t have to be complicated. Also, most retirement plan administrators as well as investment institutions will give you some suggestions if you are unsure as to what you want to do. Plus, there are plenty of all-in-one funds or target retirement funds that you can start off with while you do your research. (Just make sure you choose low cost funds!)
Finally, I know a lot of people are not saving for retirement because they are paying off debt. I understand if you have high interest debt, but for people with student loan or mortgage debt, I am in the camp that believes that you should still invest even when you have debt. If you wait until you are out of debt to invest, then you have wasted valuable compounding time. See above for the importance of that compounding.
Enjoy National Save for Retirement Week! Make sure you start saving for retirement and don’t forget to encourage your friends, co-workers, and family members to start saving for retirement.
So why haven’t you started to save for retirement? If you have, are you on target with your retirement goals?