7 Excuses That Are Delaying Your Retirement

Antwone Harris®, certified financial planner and financial consultant for Charles Schwab, and Ted Benna, author of 401(k)s for Dummies who is commonly referred to as the “father of 401(k)s” explored some of the common excuses people make about why they don’t contribute to a retirement investment vehicle. They offered this advice.

1. I Don’t Make Enough Money.

“This is certainly true for some people–probably anyone earning less than $20,000 per year. Otherwise it is a matter of priorities. Tracking discretionary spending for only one week will show that substantial amounts are being spent on unnecessary items,” says Benna. “Someone who does this should be able to identify items to eliminate that will enable at least 1% of pay to be saved.” Of course, that is far from the amount that you need to save, but it beats not saving anything. The goal should be to move up from there in workable increments.

2. My Employer Doesn’t Match.

“The greatest

benefit for most workers of a 401(k) plan isn’t the tax break or the employer match. It is the fact that savings takes place automatically each pay period,” Benna says. “Very few workers have the discipline to save outside the plan what they would be able to save through the plan.” Whether it’s a 401(k), Roth, or traditional IRA, retirement savings offer immediate tax deductions, tax-deferred growth on your savings, and usually a matching contribution from your employer.

3. I Have Too Much Debt.

“Set up a budget and stick to it if you don’t have one. Do not continue adding to your debt; get your debt load down to a level where you can contribute at least the amount that is matched by your employer ASAP,” says Benna. “If you have a match provision it’s a no-brainer; it’s 100% return,” says Harris. If you do not have a match it may behoove you to focus on the high-interest nondeductible debt first, but it’s imperative that you speak with a professional who can help you create a strategy to pay off your debt and secure enough funds for your golden years.

4. My Job Doesn’t Have a 401(k)

If you have your own business and are self-employed with no employees, Harris recommends an SEP IRA, which allows you to make contributions based upon the earnings from the business. If you have employees, Harris recommends a Simple IRA account. If you’re not self-employed, Harris suggests a Roth account first because contributions can  be withdrawn tax free at age 59¹

/₂. If you can’t do a Roth, go with a traditional, says Harris, but go with some type of vehicle that allows the growth to be tax deferred. If you choose to invest in an IRA, Benna suggests considering automatic monthly withdrawals from your checking account into your IRA if you have a tough time coming up with lump sum contributions.

NOTE FROM THE EDITORS: Some retirement plans have fees that can impact your performance over time. Review your plan with a professional.

Continue reading more excuses on the next page (and learn how to get over them)

5. The Economy Is Bad.

“Saving for retirement is for the long term, and a down economy is just a part of the business cycle,” says Benna. Even during market fluctuations it is important not to suspend your contributions; instead make sure your assets are diversified to protect you against market fluctuations. “The fact that the economy is bad now should not prevent you from contributing to your retirement, provided you have at least a seven-year period before you need the money,” says Harris. “The goal is to buy low and sell high.”

6. Retirement Is Decades Away, I Can Wait.

“Time is the most critical element,”

says Harris. “Regardless of how much money you have, it is so important to start as soon as possible with any amount you can. Time is more important than how much you put away, because time has much more of an impact.” Benna agrees. “The sooner you start the greater the amount that will come from investment income. The longer you wait, the more you will have to contribute from your pay later to reach your goal.”

7. Social Security Will Provide.

Social Security was never designed to be the sole source of retirement funds. It was designed to supplement. Right now the average benefit is $1,153 a month, which is less than $14,000 a year, explains Harris. “That’s right above the poverty line. Is that enough to maintain your lifestyle?”

For more, read “Too Young to Think About Retirement? Think Again!” in the October 2011 issue of BLACK ENTERPRISE.