Why It’s So Darn Hard to Save

HCR Wealth Advisors
6 min readDec 19, 2019
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Photo by Annie Spratt on Unsplash

Unless you’ve won the lottery, have a rich uncle you don’t know about, or are in the top 1% of the population with a net worth of over $10 million, savings are essential. Unfortunately, one thing that few people think about is that everyone has an earnings peak. The more you can contribute to your financial security before that peak, the easier it will be. Sadly, saving regularly over the years is not what most Americans have done.

For decades, financial institutions have preached that Americans are grossly ‘undersaving’ for retirement. You might say, “Well, somehow, those people made it work.” But you don’t want to look at the cost of no retirement savings in human terms of anxiety, stress, health, relationships, and general wellbeing.

Those with no savings and small Social Security checks are virtually invisible. They don’t shop beyond essentials, eat out, travel, or buy ‘entertainment.’ They live a restricted life, focusing only on making their money match their month.

You don’t want that to be you, so let’s look at what you can do to help to ensure that it isn’t.

Three Types of Savings

There are three types of saving that a person can do to meet financial needs:

  • Short-term: building an emergency fund that covers at least six months of living expenses
  • Medium-term: saving for large ticket items like a house, a boat or the kids’ college
  • Long-term: saving for retirement

So, what is the state of savings in the U.S.?

When it comes to short-term savings, 29% or people surveyed reported they had enough to cover six months of expenses. But 23% of those surveyed still had no money at all saved for an emergency.

So how did people say they’d cover a $1,000 emergency expense like a surprise hospital visit or a fender bender?

  • Only 40% said they would pay out of a savings account
  • Over a third would have to borrow it from a credit card, friends or family
  • Around 14% would cut back on other spending to cover it
  • The remaining 10% would either “figure something out” or “don’t know what I’d do”

Medium-term savings for big purchases are much harder to measure because these savings could be hidden in investment accounts. Or savings for college could be parked in 529 plans.

But medium-term savings are certainly not sitting in savings accounts: CNBC reports that the average household has only $8,863 tucked away in a savings account, and not many cars or house down-payments are going to be covered with that.

Long-term savings for retirement are stashed in all sorts of accounts, including IRAs, stock trading accounts, and instruments for both growth and lifetime income. While the national averages don’t look so great, remember that they also hide the 42% of the population that isn’t saving for retirement at all.

Here are the median savings for different age groups:

  • Twenty-somethings: $16,000
  • Thirty-somethings: $45,000
  • Forty-somethings: $63,000
  • Fifty-somethings: $117,000
  • Sixty-somethings: $172,000

So how does ‘undersaving’ look in retirement? The median annual income of retiree households is $32,000. One-quarter of retirees have a household income below $25,000, while only 15% have income above $100,000.

And do retirees feel they’ve saved enough? Only 46% agree that they have built a large-enough retirement nest egg. But 39% cite “just getting by to cover basic living expenses” as their financial priority.

A Quick-and-Dirty, Aged-Based Savings Guideline

Various well-known financial institutions put out guidelines on how much you should have saved towards retirement at different ages. Some are complex, and some are simple. Just to give you a rough idea of how you’re doing, here’s one of the simpler ones:

  • 1 time your salary by age 30
  • 3 times your salary by age 40
  • 6 times your salary by age 50
  • 8 times your salary by age 60
  • 10 times your salary by age 67

What Factors Will Impact Your Savings Goal?

Two main things will impact your personal savings goal:

  • the age you plan to retire
  • the lifestyle you envision for retirement

Your planned retirement age plays a big role in determining how much (and how fast) you need to save.

If you’re a FIRE-type, you know the drastic steps you need to take to be ready to retire in a very short period. (But many are proving it can be done. Where there’s a will, there’s a way.)

Even if you’re only planning to retire at age 67, the key is to remember that retirement could last 30 years. Social Security reminds us that “About one out of every three 65-year-olds today will live past age 90, and about one out of seven will live past age 95.”

But then, if you decide minimalism and downsizing are your thing — or if you choose to become one of the many Americans to move abroad for a lower-cost quality of life — you may find your nest egg will go a lot further.

How to Play Catch-up

And what if you’re behind on your retirement savings? It all depends on your age.

If you are under 35 or 40, commit to saving more and investing for growth. That will require a diversified investment mix with as much risk as you’re comfortable with. The good news is that, if there’s a downturn in the stock market, you have the time for a turnaround and recuperation.

If you’re much over 40, it gets a little harder because you’ve lost those vital early years where compound interest is creating its magic over time. For you, the answer may be a combination of:

  • getting professional help to maximize your investments
  • increasing your savings rate
  • reducing your spending
  • working longer

Any extra work years you tack on in your sixties can make a worthwhile difference in additional earnings, contribution to retirement accounts, and higher Social Security checks (especially if you delay claiming your benefits to when they max out at age 70).

No matter how far behind you are, anything you do can put you in a better place than if you do nothing. But it requires action. And if you’re stuck in paralysis, see if one of these excuses is what’s holding you back. (For many people, one or two are.)

Ten Excuses for Why You Haven’t Saved Money

People come up with some pretty clever excuses. And yet, they’re enough to keep them from saving. Here are a few:

  1. “Mine’s the ‘leftover’ savings plan: I save what’s leftover at the end of the month, and that’s usually zero.”
  2. “I move money regularly into savings, but end up using that to cover my checking account overdrafts.”
  3. “I pour every spare dollar back into my business; I know it’ll succeed some day.”
  4. “I save windfalls, like IRS refunds, but I don’t get enough of them.”
  5. “Any time I put money aside, one of my kids comes and asks for help. I’m divorced, and I can’t say ‘No.’”
  6. “I have a professional image to maintain so I can move up at work, and that’s expensive.”
  7. “I’m still young enough, and I’ll have plenty of time to save later on.”
  8. “It’s not my fault; Amazon Prime makes shopping far too easy.”
  9. “It must be genetics. No one in my family is a good saver, and I’m not either.”
  10. “I never know if I should pay down that debt or save, so I end up doing neither.”

How do your savings compare with where they should be for your age group? And which — if any — of the ten excuses feel familiar?

This article is provided for information purposes only and should not be interpreted as financial advice.

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