Put Retirement First

OUR HUNTER-GATHERER ANCESTORS were focused on surviving until tomorrow. We need to focus on retiring decades from now. Not surprisingly, this isn’t something that comes naturally.

Often, our inclination is to deal with life’s goals consecutively, rather than concurrently. In other words, we might save for the house down payment in our 30s, pay for the kids’ college in our 40s and then finally turn our attention to retirement in our 50s. But if we do that, we could find ourselves in financial trouble. It’s awfully tough to amass enough for retirement if we start saving in our 20s, let alone beginning at age 50.

Indeed, even as your attention is drawn to more immediate goals, don’t shortchange retirement. Maybe you can’t save 12% to 15% toward retirement in your 20s and 30s. But try to save at least some money every month.

The earlier you start saving, the longer your time horizon will be. In addition to having more years of saving regularly, you can take the risk of investing more in stocks and potentially earn higher returns. You may also get the chance to fund your employer’s 401(k) plan and collect a matching employer contribution. That’s free money—and you don’t want to miss out.

If you save a healthy sum from your 20s onwards, you will give yourself options. You may reach your late 40s or early 50s and discover that you are comfortably on track for retirement. At that point, you might opt to work fewer hours, switch to a less lucrative but perhaps more fulfilling career, and possibly even retire early.

Our Humble Opinion: While we aren’t advocating a life of self-imposed poverty, we would strongly suggest saving as much as you reasonably can whenever you can. In today’s turbulent job market, you don’t know when your ability to save may be disrupted by a bout of unemployment or if you might be forced to retire earlier than planned by ill health or layoffs. It might be ideal to save just enough every month for the retirement we want. But the reality is considerably messier: We retire with whatever we have managed to amass by that juncture—and the more we have, the easier our retirement will be.

Next: Financial Calculators

Previous: Life Stage No. 1: Your 20s, 30s and 40s

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