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Saving for retirement

For whatever reason I woke up this morning thinking about retirement.  Maybe it all started as a wonderful dream (being retired and perpetually on the golf course), but by the time I was in the shower I began thinking about my 401K account balance and my average rate of return.  At that point, I knew I wasn’t in the middle of a wonderful dream any longer…

Like a lot of people our age, my wife and I are trying our best to sock away as much of our hard-earned paychecks as we can for retirement.  It’s not easy, what with taxes, daycare bills, mortgages, college savings, etc eating up a large chunk of our income.  I did a little research this morning and found that almost 50% of all American adults have nothing saved for retirement.  Many that do have retirement savings accounts are woefully underfunded, and that includes younger earners in their 20s as well as older earners who are rapidly approaching the age of retirement.

Those stats are pretty scary, and unfortunately very common in our country today.  Many Americans in their 30s and 40s are counting on social security to be their main source of income during their golden years.  The problem with that is that social security was never designed to be a retiree’s main source of income, and as a result the program itself is vastly underfunded.  In fact, by the time people my age retire, there may well be nothing left in social security for us to collect.  If that’s the case, it would be the largest ponzi scheme in history (think about it, you pay into it every two weeks for your entire working life, and then never collect a dime once you retire).

So what’s the answer to these retirement woes?  My financial advisor has a pretty good outlook on it.  He recommends that you look at your retirement savings like any other bill you have each month.  In other words, it has to be paid in-full and on-time, just like everything else.  The best way to do that is to set up an auto withdraw to your 401K or retirement account from each and every paycheck.  By doing so, you never forget to transfer that savings over, and you learn to live without it as a part of your discretionary income.

But that’s the easy part.  The hard part is learning to live below your means, so that you can afford to pay yourself every two weeks for retirement.  That’s not so easy to do.  We live in a country that rewards instant gratification.  There is always something shiny and new to buy.  The “keeping up with the Joneses” mentality is always out there, and we all have unexpected bills that pop up from time to time (medical bills, car repairs, etc).  But if we can all learn to live below our means and fund our retirement accounts every pay period, we may well be able to turn things around.

Just don’t cut out the advertising budget…