When faced with a substantial challenge we sometimes don’t even bother to try. Even if it would be beneficial to complete only part of the goal, the total goal is so overwhelming that we do not even feel compelled to begin. We are frozen into inaction. For some, the retirement savings is like that. A recent poll in the UK found nearly one-quarter of adults aged 50 to 64 are not bothering to save for retirement. They don’t feel able to save enough to meet their financial needs in retirement and they have given up hope of experiencing a financially stable retirement. Anecdotal evidence suggests this is happening in Canada too.
Financial inaction can lead not only to poor financial outcomes, but also to health risks. When lifestyles suffer there is likely to be increased stress on families and increased demand for social and health services. Along with retirement savings inertia comes a decrease in any interest in financial literacy. As more financial options become available they are ignored and so the downward financial spiral continues. In accepting their financial fate they completely tune out the financial industry and possible options to get their finances back on track again.
There’s no doubt that staying committed to our personal financial stability can be challenging, especially when facing daunting retirement targets. There’s no magic in getting started and staying committed. Here’s a mini summary of ideas to consider when getting back on track:
- Pick an amount and set up a monthly automatic direct deposit into your retirement savings account.
- Rather than create an elaborate financial plan at the outset, start saving right away. Consider something simple such as the Canadian Couch Potato approach. In the long run you will likely need a financial plan but at least get the savings momentum started.
- Look for an online investing option with low fees to avoid costs biting into your nest egg. This article is a bit dated but worth reading.
- Revisit your savings approach regularly. Eventually consider engaging an adviser, such as a fee-only adviser.
Don’t let those financial surveys with the six- and seven-figure retirement savings goals turn you off setting your own financial future in motion.
Lee Anne Davies has worked as a consultant for insurance, wealth management, banking and financial education companies. She has a PhD in Aging, Health and Well-being and a Masters of Arts (MA) in Gerontology and Health Studies from the University of Waterloo and an MBA from Athabasca University’s Information Technology Management program. She’s also successfully completed the Canadian Securities Course and the Professional Financial Planning Course. To read more from Davies, visit her blog Agenomics.