Regret can be a powerful motivator to change behavior.
For anyone younger than 60 I hope you will avoid an all too common regret that today’s near-retirees and retirees have.
|More than 5 in 10 people between the age of 60 and 74 said they regret that they didn’t save more earlier in their life. Among women who had been divorced or widowed, 6 in 10 regret not saving more.
The good news is that about 4 in 10 people surveyed were satisfied with their saving. But that’s still less than half of people nearing or in retirement. And for the record, just 1.5% of people surveyed said they regretted saving too much. So let’s all agree that saving is not something that leads to regret.
I hope those of you who are younger will learn from the regrets of the generations ahead of you. When it comes to saving, more definitely seems to be better in terms of landing near retirement feeling good about how you tackled your financial security.
Can’t imagine saving more now? You sure?
A few tips:
Set a small goal to spend less. Cut $10 from your spending each week for a month. I think you can achieve this by constantly asking yourself when shopping: “Is this a want or a need?” I bet you will quickly have $10 a week in “want” purchases you can forego.
The next month, double your saving-by-spending-less goal to $20. Keep ratcheting up your savings. Often when we start with a smaller goal that we can easily reach, it builds confidence and momentum. See if you can get to $100 a week in savings.
Make it automatic. The best way to avoid future regret, is to make your savings automatic. If you have a workplace retirement plan, congrats, you have automated savings. Each paycheck some of your money is being deposited into your retirement account.
It’s easy to create the same automated saving with an IRA; there is no charge to have money auto-deposited each month from your bank account into your IRA. And for those of you working on building your emergency savings, I want you to check out The Ultimate Opportunity Savings Account from Alliant Credit Union (learn more about why I love this account so much at the bottom of this newsletter).
Don’t assume your workplace plan has set you up to save enough. If you’ve started a new job the past few years, chances are you were “auto-enrolled” in the plan. That’s great. But what’s not so great is if you didn’t tell the plan what percentage of your salary you want to contribute each paycheck. If you didn’t speak up, the plan will have chosen an “auto default rate” for you. And it is typically way too low. At a minimum you want to aim to save at least 10% of your salary. I think 15% is an even better target. But many plans set your initial contribution rate at 4% or less. Even with a solid matching contribution that’s not going to get you to 10%, let alone 15%.
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