Most young families have tons of question about retirement planning (or investing in general). Yet, one of the most common questions that young people ask is this one:
How much do I need to save to have enough money when I retire?
There are many variations of this same question, but it all boils down to the same basic philosophy. What’s the minimum that I can sacrifice now and not regret it later? Do you see anything wrong with this approach? Too often families under-prepare for their retirement and I believe it is a result of this approach.
Why People Have Problems Saving Enough for Retirement
The problem with people entering retirement without enough money is NOT a result or cause of the following reasons *cough* excuses *cough*:
- Having to pay too high of taxes
- Not making enough money
- Paying for children and/or their college education (not a legitimate excuse because you could choose not to have kids and reap the benefits)
While some of these reasons may seem like legitimate excuses (and actually make it more difficult to save), this is not the main reason why people fail to do it. The major reason that people fail to do it is because they approach retirement planning with this question.
What’s the minimum sacrifice I can make NOW to SURVIVE LATER?
It’s no wonder why a large percentage of the adult population are behind in saving for retirement. Families are more concerned with the immediate – the temporary and have no vision for the future. They are more concerned about driving a nice car, living in a large house, buying a big TV, eating out every night, or many of the other unnecessary expenses.
Different Approach to Retirement Planning
Instead of just trying to get by, why not be proactive? There is an alternative to just scraping by when it comes to retirement planning. As a young family, you can choose to take advantage of compound interest and save aggressively. This is part of my easy retirement plan. The easiest way to be prepared for retirement is to over-save. This can come to fruition if we start asking ourselves a different question:
How much can I save now to make it easier on myself later?
There are many benefits to saving aggressively now:
- Ability to retire early
- More money to spend later, once you know you can afford it and won’t regret this decision
- Ability to financially help your children and grandchildren when they could need it most
- Ability to afford proper health care (when you need it most)
- Peace of mind
Asking how much you can save now and therefore saving aggressively for your retirement now can offer you a lot of things. Most importantly, at least as far as I see it, is that you have more options later in life. You won’t be forced to work a part-time job, or fight illnesses without proper healthcare, nor will you be forced to be dependent on someone else. Instead, you can help others and make the world a better place. While it may seem like a small distinction, your approach to retirement planning affects almost every aspect of your life (now and in retirement).