Retirement Saving Is Essential

Saving for retirement is difficult, but it is essential. You might ask – “why should I save when I want to spend the money now?” Of course it’s more fun to spend now, but what happens when you are 65 and don’t have any saving left. Do you think you can depend on Uncle Sam or other people to bail you out? Social security is in trouble and it won’t even pay out much anyway. We all need to think about the future and save a portion of our paycheck away in a 401(k) and other retirement funds.


The traditional pension plan is getting rarer every day. Most private employers do not offer a pension plan anymore. We are living longer and longer and the healthcare cost keeps increasing. This makes it very difficult for a private pension plan to meet their obligations. Pension plans are a much more common in the public sector, but there are likely to be reforms there in the future. Many public employee plans are already having trouble keeping up with the healthcare cost.

Social Security Benefit

The latest estimate from the government is that the social security trust funds will run out in 2033. The baby boomers are retiring and they are taking a big toll on the social security trust funds. If there are no reforms by the time the trust funds disappear, then a retiree will receive only 75% of their social security benefit. This is a big reduction and the benefit can only go down from that point. The US has an aging population and by 2033, we will have many more retiree than now.

Personal Saving

The only sure thing we can rely on is our personal saving and investments. The government is encouraging us to save by giving us tax breaks on many of our retirement accounts. The 401(k) is tax-deferred and it will be able to grow much faster than a taxable account. The Roth IRA is a great tax advantaged account. The money you invest in a Roth account is taxed, but you will never have to pay tax on the gain. These two accounts are great ways to start saving for retirement and everyone should maximize their contribution to get the most tax benefit.

Start Saving Now

The traditional three legs of retirement are pension, social security, and personal saving. As we can see, personal saving is the only one we can really depend on. That’s why it’s essential to start saving for retirement as soon as we can. Many people think they won’t be around by the time they turn 65 so they neglect to save for retirement. What happens if they are wrong? Living on 75% of your social security benefit isn’t going to be any fun at all. The average social security check is about $1,200 per month. Take 25% out of that and you get $900. That won’t even pay the rent in many cities.

Save for retirement now or you’ll regret it later.


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