Why do we all struggle so much to save for retirement?
Of all personal finance hurdles, actively saving for my retirement is my biggest struggle. I have valid reasons why I struggle to save for the unseen future, I also have a tonne of excuses. At a rational level, we all know that keeping some money aside for the future is important. It should be done. We have seen people who failed to do so and in their old age rely on charity. We do not want to be those people. So why do we struggle so much?
This post looks at some of the things we tell ourselves, delaying that retirement fund by a year…two years…10 years.
I have too many problems now, to start thinking about 30 years from now. Times are hard economically, especially so for those of us who have no social structures in place. Worse that we are even expected to give financial support to our family members and others. It is therefore not surprising that retirement, trying to think 20-30 years ahead is not a priority.
I do not earn enough to save for retirement. This is common especially when starting out. On an entry level salary, you are not even earning enough to move out of home and live like an adult. Why would retirement be a priority? The thinking here is, as soon as you are earning enough, you can then have the luxury to think 10 years ahead and to start saving for the future.
My debts are priority for now. Most Kenyans have loans. I have two big loans that I am servicing at the moment (story for another blog post). Personal finance logic dictates that if I am paying interest on loans, I should use any extra funds to boost loan repayments, that way I get out of debt faster and then I can start saving seriously, for serious stuff like retirement.
I will make it big in business or in my career, I do not need a retirement fund. This ties in with the present concerns excuse. Where optimism about the future keeps us from doing anything to protect ourselves against the down side. We always hope that we will make more money in years to come, and at that point, we can then set aside a chunk of that money for retirement.
What about inflation? If I save little now, it will be worthless in future. I have heard this push-back whenever I talk to people about the power of compound interest. That any gains one could make from saving for retirement are wiped out by inflation. Yes, inflation is a real concern, but then ask in turn, what is the other option? Not saving at all and ending up in a future where you have no savings and everything still costs more because of inflation?
We will keep thinking this through, but a good starting point is to think about your retirement fund as a back up plan. When you create a back up of your computer files, you are not doing so because your computer is terrible and is about to crash, or that you will lose it tomorrow.
We do file back ups because we have either experienced or witnessed massive data loss because there was no back up. We save for retirement for the same reason. We have seen (and some of us are paying for) people who did not have a backup retirement plan, and they realised too late that the dreamed big pay off was not going to come.
The reasons, excuses and psychological blocks will however not go away by themselves. Next post, we look at what you CAN do to get over these mental blocks and start actively saving for retirement. No matter how your finances look like today.
What stories do you tell yourself, that keep you from saving for retirement? Tweet me @RookieKe let us talk about it.
This post is one of a series sponsored by the Retirements Benefits Authority, as part of the #kulegalega campaign. The campaign aims at educating us how pension funds work and the importance of starting to save for retirement while there still is time. Read the second post here.