I was reading the other day (see, youâ€™re not the only one) and found a report by Country Financial that said only 35% of Americans surveyed by phone thought that a typical middle-income family could save enough for a secure retirement. And that was up from an earlier report that stated less than 30% would be able to save enough.
Now I realize that times have been tough; I understand that wages have not kept pace with inflation for years. But Iâ€™m thinking that neither is a good reason for two-thirds of you to think that middle-income America cannot have a secure retirement.
All it takes is discipline. And thatâ€™s what makes it hard.
It takes discipline to know what it will take to afford retirement. For instance, when someone comes into my office wanting to save for retirement, Iâ€™ll ask them how much theyâ€™ll need to live on. They donâ€™t know. Fair enough, many feel thatâ€™s similar to predicting the future, so instead I ask about their current cash flow (or â€œbudgetâ€) to give us a starting point. Usually they donâ€™t know that either. Thatâ€™s not a problem; after all, thatâ€™s probably why they are coming to me.
So I have them go home and look at their monthly spending (on recurring bills like electricity), periodic expenses (like vacations), and longer-term savings needs (like the next car). Quite a few donâ€™t come back. The assignment is too hard, too boring, or too time-consuming.
It takes discipline to invest for the long-term. The markets go up, the markets go down. People get euphoric, and then they panic (especially if they are going it alone). Part of the reason–they didnâ€™t take time to learn about what their investments were in. Did they understand that a short-term loss was not just possible, but likely? Did they prepare themselves for it?
Or did they, like so many others, put long-term money in a short-term investment and short-term money in a long-term investment? Were they so surprised by the gyrations of the markets that they sold at the worst possible time? Most peopleâ€™s savings and investment plans unravel because, frankly, they donâ€™t have a plan.
It takes discipline to put the money aside. It takes discipline to put aside rationalization, too. So many times, Iâ€™ve heard that an SUV was not a Â â€œwantâ€ but a need; itâ€™s just not safe to be out on the road without one. Iâ€™ve also learned that a vacation in the Caribbean is not just a dream, but a family health necessity.
Unfortunately, I never hear that putting money away for retirement is essential or a necessity.
Certainly there are families, including middle-income families, who truly cannot save for a secure retirement. My point is those are well below two-thirds of the potential savers out there. The rest who believe that they cannot just donâ€™t have the discipline to create and follow a plan. Hereâ€™s hoping that you are not among them.
Gary Silverman holds the Certified Financial Planner (CFPÂ®) license, and is a member of the Financial Planning Association (FPAÂ®). Gary is the founder of Personal Money Planning, a retirement planning and investment advisory firm. Find out more about Personal Money Planning at the company website or follow on Facebook.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.