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5 Reasons We’re Not Saving For Retirement — And Why They’re All Bogus

5 Reasons We’re Not Saving for Retirement — and Why They’re All Bogus

There’s a reason retirement plans like IRAs and 401(k)s exist. Without independent savings, retired workers won’t have enough income to pay their bills once they leave the workforce. Yet a frightening number of U.S. adults still aren’t putting money aside for the future. According to a recent GOBankingRates study, an alarming one-third of American adults still have $0 saved for retirement.

But while that statistic may not come as much of a shock, you may be surprised to learn why today’s workers aren’t saving. Here are some of the most common reasons why Americans are putting off retirement savings — and why none of them hold water.

Retirement piggy bank
IMAGE SOURCE: GETTY IMAGES.

1. We’re prioritizing other things

It’s hard to focus on retirement savings in the face of more immediate goals. If you’re trying to buy a house, for example, it’s natural to want to save for a down payment that you’ll need in a year or two before you start stashing money that you can’t touch for a few decades. But a large number of Americans are ignoring their nest eggs for far more frivolous reasons — like taking vacations.

In fact, GOBankingRates found that some workers spend more time planning their upcoming vacations than they do planning for retirement. This takeaway is consistent with a recently released report from COUNTRY Financial, which found that Americans put vacations ahead of their financial future. In fact, a good 40% of workers aren’t saving for retirement because it just plain isn’t important to them. And that’s a huge mistake, because if you don’t start putting money aside for retirement now, you’ll have less opportunity to accumulate a sufficient nest egg down the line.

Case in point: If you start saving $200 a month at age 30, and you invest that money at an average annual 7% return, then by age 65 you’ll have $332,000 to help cover your senior living costs. Wait another 20 years to start saving, however, and you’ll have just $60,000, which, over a 20-year retirement, gives you a mere $250 a month of income. And that’s hardly enough to pay the bills, even when you factor Social Security into the equation.

2. We’re spending our retirement savings on emergencies

In a separate GOBankingRates survey, 69% of Americans admitted to having less than $1,000 in the bank, while 34% owned up to having no savings at all. And that’s a problem, because every working adult should aim to amass three to six months’ worth of living expenses in an emergency fund. Yet more and more of us are cashing out our retirement savings to cover immediate expenses — a move that can have serious consequences.

Any time you remove funds from a retirement plan to cover a near-term expense, that’s money you won’t have available in the future. Not only will you lose out on that principal, but you’ll also lose out on any growth it could’ve achieved. That’s why it’s critical to keep your retirement and…

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