Getting the Wrong Message. It's probably because we're not getting the right messages about retirement planning. Sure, most people understand that they're not doing enough to save for retirement, but few seem to know how to change their situation. Solutions seem hard to come by and most of what we hear is counterproductive.
Consider the messages we receive hundreds of times a day on radio and television begging us to "buy, buy, buy!" You don't find too many advertisements encouraging you to "save, save, save"; except perhaps from mutual fund companies who earn fees for managing your retirement accounts.
One of the most egregious television ads I've seen recently is one for Hyundai sedans. The ad offers $3,000 cash back if you buy a car. "Seems like a good time to buy," a customer says to the salesman. Then, some guy who has written a best-selling book on financial planning lowers the window of a new Hyundai and tells the customer that it would be foolish not to take such a good deal on a car, adding "take your savings and put it in a Roth IRA." Who are they kidding! Are they really telling us that it’s a good idea to buy a new car and invest the "savings" for retirement? Whoa! When a television ad selling cars gives you retirement planning advice it’s time to watch out.
Duped Again? Do a lot of people fall for this stuff? I suppose the twisted reasoning would go something like this:
- I'm broke and I can't pay my bills, much less save for retirement;
- I want a new car (doesn't everyone?);
- If I buy a car on credit, they'll give me cash back for free;
- I'll save so much on the car that I can invest the savings for my retirement; and
- If I do this, I'm a financial genius!
The funny thing is that plenty of smart people fall for these types of ads. We're bombarded with them relentlessly. After a while you begin to believe that they make sense. Maybe we should require opposing view ads like the Democrat's response to President Bush's State of the Union Address. Perhaps we need someone to scream at us: "No, don't buy a new car you lunkhead! That would be dumb. Buy a used car instead or, better yet, drive that old clunker into the ground. Save for your retirement! SAVE, SAVE, SAVE!"
Feel Good Economics. Sure, we'd all like to have a new car. Buying new stuff makes us feel good. But buying a new car, or any other unnecessary consumer item (especially on credit), will put you farther away from what should be your real goal: financial independence. Financial independence means that you have enough income from savings, pensions, etc., to support yourself without working. You can't retire unless you're financially independent. Remember, a new car becomes an old car in a hurry, but financial independence will last (if you plan it right) forever.
Wouldn't you feel better if you didn't have to work? In fact, you'd feel great. Imagine getting up each day knowing that you didn't owe anybody anything. Imagine working at what you wanted to do, not what you had to do to keep your head above water. Or imagine not working at all. Imagine how good you'd feel then? Now that's financial genius.I don't have anything against Hyundai or the financial experts in their ads. They're just trying to make a buck like the rest of us. I'm sure that Hyundai makes a fine car and those financial experts give out good financial advice. But do they think we will believe it's a good retirement planning move to buy their car and put what we "saved" on the deal in an IRA?
Defend Yourself. So what can an average American do to defend against the onslaught of messages that are contrary to a goal of building a secure retirement future? We need to change how we think about saving for retirement. Let's go back to the Bank of America survey for a moment. They found that "[n]early one-third (30%) of Americans say that starting retirement planning is difficult -- as many as those who say it is difficult to start a fitness routine (29%) or a diet (28%). Only one in three (33%) Americans report that they are on track with their retirement planning efforts, and nearly one quarter (23%) report that they have not started planning at all."
Saving for retirement may seem difficult. With all the bills you have to pay --for credit cards, college tuition, cable television, cell phones, car loans, food, utilities, insurance, taxes, etc. --there never seems to be enough left over to save. But if you think about it, saving for retirement has a lot in common with the way the human body becomes overweight.
About 127 million adults in the U.S. are overweight, around 60 million are obese, and close to a million are severely obese, so this is something we all can relate to. Becoming overweight is easy (and we all know it can be fun). You simply take in more calories than you use. The plumper you get, the more sedentary you become. As you slow down and expend even less energy, the amount of fat your body stores increases dramatically.
Fatten Up Your Retirement Savings. A retirement savings plan works the same way. If you simply spend a little less than you earn each week, each month, and each year, storing the excess in a savings account, your retirement nest egg begins to fatten up. Like becoming overweight, it isn't very noticeable at first. But as the earnings on your savings starts contributing to the plumpness of your nest egg, and if you continue to spend less and add more to your nest egg each year, your retirement savings will increase dramatically. Soon your financial chubbiness will begin to show. And believe it or not, fattening up your retirement nest egg is fun too. While your neighbors are driving down the street flaunting their new cars, you can laugh all the way to the bank knowing that your future retirement is secure.Want to learn more about retirement and retirement strategies? Go to www.WhoSaidYouNeedMillions.com.
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