“I’ll gladly pay you Tuesday for a hamburger today” was often said when the character Wimpy came on screen to join Popeye in that great cartoon. That saying can be applied to many aspects of life, but most poignantly applies to finances. At what point do you want to eat the hamburger and have you saved up enough money to buy it. This line of thought we will parallel to one’s retirement plan. In other words, do I need to spend the $75 out of my weekly paycheck or can I save that amount in a 401(k) account or an IRA for a time in the future when I will want the freedom that a larger retirement investment account could provide?
A sobering report issued by the U.S. Government Accountability Office found that half of Americans 55 and older have no retirement savings, such as 401(k)s or IRAs. It’s true that these retirement vehicles were not as prevalent in the 1960s and 1970s as they are today and more companies offered a pension plan for their workers, but it seems that there is a heavy emphasis on the hamburger today versus a meal in the future for many individuals. While some pre-retirees have nothing saved, many have been vigilant to save and invest over their working years, but with the standard of living going up each year and Social Security checks not keeping pace – it still may not be enough. This situation has resulted in the common occurrence of many facing a retirement shortfall.
So what should one do in such a circumstance? First, the longer you have to plan, the more options available to you to eliminate the shortfall. If an individual has reached the point where they are considering retirement the options are limited. As always, planning early eliminates many headaches. Below is a basic list of ways to reconfigure your retirement picture:
- Work longer or work part-time in retirement
- Delay filing for Social Security
- Save more before retirement
- Spend less during retirement
- Tweak investments (i.e. take on more risk)
- Lower investment costs
The first two listed are often used in tandem as an individual may consider working a few extra years, thus being able to push back the start date on their social security and ensure a larger check. Saving more and spending less are self-explanatory. In terms of the investments end of things, not all of us will be able to take on more risk, but we can control costs. Costs matter as they can deduct precious return dollars away from future potential.
The most important commodity any of us has is time. We all want to have time that we can share with family and friends thus creating wonderful memories, and time is vital to allow our investment returns to increase in value. The future always seems like a far off place in time that is light years away until the day arrives, as it most assuredly always does. As for the present, each day there is an opportunity to buy that hamburger but maybe it makes sense to buy the apple at a fifth of the cost and thus stave off the doctor and save towards a rosier retirement.