When I ask people what their number one financial goal is, many of them say things like this:
“Pay off my house.”
“Buy a better car.”
“Go on vacation.”
“Pay off my credit card debt.”
Those are all really good goals to have. But there’s one I think that’s just as important as all the rest: preparing for retirement. Now, just about everyone would agree that preparing for retirement is important. But thinking something and actually doing it are two completely different things. It can be hard to prepare for retirement, because when you retire, you’re not actually buying something with a price tag on it, like a car. And you’re not getting monthly bills to pay, like you do with a mortgage or a credit card. Because retirement is often far off, and because it’s a state of being more than just a single event, preparing for it sometimes takes a back seat to other financial concerns.
But it shouldn’t. Retirement plays as big a part of our lives as anything else, and it costs as much, too. The biggest thing to remember is that our expenses don’t go down after we retire. In fact, sometimes they go up. Our income, on the other hand, does go down. And if our income goes down, while our expenses stay the same, well…that’s not a fun equation to solve. You also have to consider your discretionary spending, like travel, presents for the grandkids, and the like. Because more than anything else, retirement should be enjoyable.
Another thing to remember about retirement: the average lifespan is longer than ever before. If we take reasonable care of ourselves, most of us can expect to live well into our eighties or beyond. So retirement is not only expensive, but long. It’s crucial that our money lasts as long as we do.
So how do we prepare for retirement? The best thing to do is to start setting money aside, and to start now. Here’s what the legendary fabler Aesop has to say about it, in his story The Ant and the Grasshopper.
In a field one summer’s day, a Grasshopper was hopping about, chirping and singing to its heart’s content. An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest.
“Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?”
“I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.”
“Why bother about winter?” said the Grasshopper. “We have got plenty of food at present.” But the Ant went on its way and continued its toil. When the winter came the Grasshopper had no food and found itself dying of hunger, while it saw the ants distributing every ear of corn and grain from the stores they had collected in the summer. Then the Grasshopper knew:
It is best to prepare for the days of necessity.
To be like the ant instead of the grasshopper, start setting aside money for your own days of necessity. There are many ways to do it, from prudent investing to simply setting aside a little bit of your paycheck every month in a special savings account. But whatever you choose, do it soon and do it consistently. It’s the best way to make retirement a long and fruitful summer, rather than a cold and bitter winter.
Next month, I’ll share some smart, simple tips on how to start preparing for retirement.
From the desk of Brent Woyat