Ten years ago I hadn’t heard of the FIRE movement. Financial independence, early retirement, 4% safe withdrawal rate, pfftt! Like the majority of Americans, I was caught in the consumerism trap, wondering where most of my money went at the end of every month, and wondering if I’d ever have enough to retire.
Today, I’m a believer and pusher of FIRE. And yes it can become addicting.
No idea what FIRE is? Here’s a great beginner’s guide from my friend Steve, at Think Save Retire.
Those of us on the FIRE path are often looking for new ways to increase our high by earning more, saving more, and capitalizing on investments. We get impatient, rework our spreadsheets umpteen times, and learn not to sweat the up and down stock market. And we try to spread the flames to others.
We want all to know the benefits of financial independence too. To be in control of their own life, escaping the cubicle if desired, and realizing happiness and joy.
But if we look, we see reminders everywhere, that for most Americans’ the thought of retiring early is inconceivable. Some even believe they may not ever retire.
Is Saving Money Hard?
Survey after survey, tells us Americans have very little if anything saved for household emergencies let alone retirement. Reasons provided for this lack of savings include:
- Income not high enough/Living paycheck to paycheck
- Too early to start saving/Too late to save
- Won’t need retirement savings
- Paying down debt
- Investing is complicated/Too risky
- No access to retirement savings plans
- Kids expenses to pay for
- I want what I want now, not later
Many of these reasons were ones I used in the past. Fortunately, I realized for us they were all just excuses. Some were significant to overcome, others easier. They all had one thing in common though, and that was a need to change my mindset.
Stand up to your obstacles and do something about them. You’ll find they haven’t half the strength you think they have. ~ Norman Vincent Peale
With some thought, we can surely figure out ways to save money – eat meals at home, adjust the thermostat, cut cable, shop at discount and thrift stores, or even downsize our vehicles and home.
But actually adopting the attitude and behaviors to save money – and all those other things listed above – is where it’s so easy to get tripped up.
Sometimes it’s because we care too much about what we think it means, and we worry how it will look to others. Or we think we deserve to eat out, watch HGTV, go on fancy vacations and shop wherever the hell we want to when we want to.
I get it.
But I also get that without adequate savings for retirement, life is going to be H.A.R.D.
But I’ll Start Saving Later
You might think you’ll save later. When the kids are gone, when you’re making more money, or when the house is paid off, however, economist Anthony Webb says the opposite happens.
In this WSJ article, Webb explains that instead of saving for retirement empty-nesters begin spending more on eating out, nice vacations, and non-durable goods. These spenders indicate they’d delay their retirement to amass the additional funds necessary to maintain their current lifestyle.
The problem with this? They (and you) may not have that option.
Liz, Chief Mom Officer, points out in her post that approximately 50% of people retire earlier than planned, due to health issues, disability, company layoffs, family needs, or other work/job-related reasons.
Retirement Savings Crisis?
According to a research report published by the National Institute on Retirement Security, there is indeed a retirement crisis.
Key findings from the report:
“The analysis finds that overall, four out of five working Americans have less than one year’s income saved in retirement accounts. Also, 77 percent of Americans fall short of conservative retirement savings targets for their age based on working until age 67, even after counting an individual’s entire net worth – a generous measure of retirement savings. Moreover, a large majority of working Americans cannot meet even a substantially reduced savings target.”
Savings and Investments by Age
When asked if they’ve calculated the amount of retirement savings they need, only 51% of those over the age of 55 had. Approximately 40% of those between the ages of 35 – 54 have also calculated their retirement savings needs.
Whether they used a retirement calculator to determine their needs or are just guessing, over 37% of all workers (any age) think they’ll need at least $1 million saved, with 26-28% in all age groups believing $500,000 – $999,999 will do it.
Amount Needed for Retirement, by Current Age
Save Today to Comfortably Retire Ever (and Quite Possibly Early!) on Your Terms
Understandably, for some people saving $400 for an emergency let alone $500K or more for retirement, is indeed hard if not impossible at their current income level. For most of us though it’s achievable.
As I mentioned earlier, it will likely take a change of mindset – or quite frankly an attitude adjustment, but it is possible.
Start tracking your progress today with free financial tools – I love using Personal Capital.
Let’s take a look at those reasons given for not saving again, but this time with articles to help you find some potential ways around them (Note: many are from my other websites WomenWhoMoney and WomensMoneyTalk):
- Income not high enough
- Living paycheck to paycheck
- Too early to start saving/Too late to save
- Won’t need retirement savings (Really?)
- Paying down debt
- Investing is complicated/Too risky
- No access to retirement savings plans
- Kids expenses to pay for
- I want what I want now, not later
There are so many resources to help, but if you can’t find the information you need, please feel free to reach out to me, and I’ll work to help you find it.
It’s never too early to begin saving. It is also never too late; it’s just a whole lot harder.
While you might not be able to retire early or even want to, retiring ever won’t be a problem, unless of course, you never start.
Lots of well curated information here and that list you put together is full of so much helpful information for your readers.
Thanks for the comment Chris! Really want to help.
Many folks have yet to realize they should calculate retirement savings based on expenses. If you pick some grand number because someone’s article said you need 3M dollars, of course you’ll be discouraged. If more folks knew they could shape their future by how they spend now, it might be easier to save. But this seems like a relatively new concept hardly discussed outside the FIRE community.
Thanks for including my post!
You’re right, Mrs. G, paying attention to information presented in mainstream media is often discouraging…and can be paralyzing.
I feel like this is exactly what people who attack FIRE are missing – that the alternative (generally) is never getting to that place of any kind of financial security.
Yes, unfortunately it seems that’s happening all over.
Hi Amy, I think you could have put the headline “Retirement Savings Crisis” in BOLD.
We are just beginning to see the effect that phasing out pension plans in corporations will have on retirees. Previous generations had a defined-benefit pension plan to fall back on. Now it’s up to all of us to save for our own retirements. It’s pretty scary to read the statistics!
It is indeed scary! I’m so thankful I realized this a few years ago…late, but not as painfully late as others.
That is one awesome in depth post and glad Angela shared it on her blog 🙂
These stats are terrifying! I’m super risk averse, and so FIRE is a fairly easy movement for me to hop on board with because I grew up in an awkwardly rich / impoverished house (my parents had six kids and my dad was in the military, which meant that some places we moved we were rich, and others, we weren’t… I’ll never forget when we had to live in a homeless shelter though.) and I think that background allowed me to feel both sides of the coin, and I definitely like feeling the one with the full belly and sports equipment. But it’s astonishing to me the number of people that a) don’t have the means to save or b) do, and just don’t care…
This is such a well researched piece! I’m definitely going to send it on to my sister, she’s in college, and just starting her financial journey.
Thank you! I hope she’ll find it useful!
Nice blog! started a blog 6 months ago at 67 and am looking for blogs that I can learn from. This is certainly one. I know it is hard work and often frustrating.
That’s wonderful! If you’ve any questions feel free to shoot them over and I’ll help if I can. Thanks for stopping by.
This was an excellent post! The retirement crisis indeed. That caught my attention. $0 saved for retirement. This is scary stuff here. I especially liked your topic sexy vehicles or sexy finances. Anyone who has ever read my blog knows I can’t stand cars. You could spend a couple hundred grand on them in your lifetime. Forget cars! Buy stocks, not cars. Invest instead of spend. Your future self will thank you.
Miriam
I’d never heard of FIRE and having enough money to retire on has been a huge stress of mine the last couple years as I think about how to put the kids through college.
I’m so grateful I found the FIRE community. I know it’s not easy prioritizing our own futures over our kids, but since we can’t borrow for our retirement we do need to make sure we’re saving for it.
Thanks for sharing