24 Signs That You Could be in Financial Trouble #6: Lack of Adequately Funding a Retirement Account

In this series I am covering the 24 tell-tale signs that you could be in financial trouble. Over the next few weeks I will be presenting these signs, how to identify them and tips on how to address the issue.

This one may go without saying but it certainly still needs to be mentioned. If you fail to adequately fund a retirement account you may find yourself living a retirement lifestyle not much better than living in poverty. There are simply far too many uncertainties out there to rely on outside sources of retirement income to simply ignore saving money yourself.

Unfortunately it isn’t always easy to save money, especially when you are younger. Throughout your 20s and 30s you may be working primarily to pay off student loans, buy a home or start a family. Generally retirement seems so far off that the last thing you want to do is put money aside for it. Still, if you don’t start saving and investing in a tax-qualified retirement plan as soon as possible you are missing out on one of the greatest opportunities available to you.

Saving for Retirement Doesn’t Have to be Hard

Saving for retirement doesn’t mean you have to feel like you are denying yourself other things. For many people, employers make saving for retirement as easy as signing up and having money come directly out of their pay check. On top of that, many employers offer matching programs where you can essentially earn free money simply by participating. Saving for retirement doesn’t get any easier than that.

If your employer doesn’t offer a retirement savings plan or their plan has poor investment options or high fees you still have easy options available. You can typically open an IRA account, either Traditional or Roth and begin saving for retirement in those accounts. Unfortunately you may not be able to have money automatically deducted from your pay check nor receive a company match, you can set up small automatic deposits into these accounts just as easily.

Retirement is Your Responsibility

When it comes to retirement you are solely responsible for how you want it to be. You are foolish to think that the government or your company’s defined benefit plan will be there to support you. While there certainly may be some help from outside sources it is up to you to take control of your retirement finances. Will Social Security be there for you? Will your pension, if you are lucky enough to have one, be enough?

It is doubtful you will be able to live a lifestyle you desire with just Social Security and a pension, provided you receive both of these. Recent studies show that current retiree households find that Social Security and a pension combined make up only 50-54% of their needed income. This means you still need to find a source for the other half of your income in retirement. Some do this by still working, others start a business, and some utilize their retirement savings to generate this income. The real problem is that we don’t know what our health will be in retirement. Will you be healthy enough to work? Will your health require additional health care costs that increase your income requirements?

With so many unknowns about the future it is foolish to assume anything. Sure, maybe you are 30 years old right now and you don’t think you need to save for retirement because after 60 you’re going to continue to work part-time or start your own business. That sounds fine on paper but you have no way of knowing what will happen tomorrow let alone 30 years from now.

Don’t Delay

Regardless of your age it is never too early to start saving for retirement. If you don’t think you have money to spare it is just fine to start small. Even if it is only $20 a month it is far better than nothing at all. Time can be either your greatest asset or your worst enemy. Compounding interest works on any amount of money whether it is $100 or $100,000.

If you start early even a small amount will grow significantly over time. But once time has passed, you can never get that time back. Every week, month or year that passes is gone forever and you cannot get it back. The only thing you can do is to save even more money to try and make up for the time you lost. What will hurt more, saving $20 a month now or $200 a month ten years from now?

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Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.


You're right TJP and that is the number one thing I stress in my retirement plan seminars. Time will make you or break you. So many people are in the frame of mind that they can put it off now and just do more later.

The real problem is that most people don't end up doing it later or they have some other excuse as to why they can't afford to save. This happens for years until it is too late.

Start with $5.00 a paycheck if you have to. It won't amount to much but it is much easier to increase the amount you are saving when you already have a habit in place of automatic saving. You get that statement in the mail and think hey that isn't too bad, let's make it $10 now. But anyway, more on that in a later post I'm sure.

And thanks, I'm glad you enjoy the series so far :)

TJP @ Investor Trip
TJP @ Investor Trip

Time is the key to investing, as you stated so well in your post.

When I first started out, I set the bar at $50 a month. Now, I've increased that amount to $200 a month for savings as I begin to earn more money. Sometimes I don't reach that exact goal due to school expenses, but I try to get as close as possible.

I really like this series, and am looking forward to the next 18 parts.