With so many people predicting doom and gloom in the last few years, it's hard not to feel like we are trashing our future retirement prospects with every move. We reminisce about the good old days, wish interest rates were higher and 401(k) fees were lower, all the while failing to recognize how great our retirement prospects really are. Here are a few reasons we have a better chance of living a comfortable retirement than at any other time in history:
Our standard of living has never been higher. Innovations in every area imaginable have made life much easier than in the past. From mobile banking to disinfectant wipes, we have never spent less time dealing with mundane chores that used to take up so much of our precious time.
The current retirement system isn’t perfect, but it still offers a solid chance for almost anyone to retire comfortably. Not everybody has access to low-cost investment options in their 401(k), but at least many people have access to tax-preferred accounts from their employer. Additionally, every employee can contribute to an IRA, where the best investment options are available. There are improvements we can make to the current retirement system, but disciplined savers will have no problem reaching financial independence through what we already have.
Advances in technology have made us more efficient. These days, there are many alternatives that allow people to save money. Innovations like Netflix are allowing millions of people to save money on their cable TV and media consumption, while the convenience of comparison shopping is helping prudent shoppers spend much less than they used to. This translates to more money saved and a bigger retirement nest egg.
We have never been more informed. Part of the reason the general public knows about the deficiencies of the 401(k) system is because we are more informed than ever before. With a bigger spotlight directed at our retirement system, expect improvements in the future that will help us achieve our goals more easily. And thanks to easy access to researchers, experts and enthusiasts in the area of investing, we are able to gain insight into the strategies that will give us the best chances of reaching financial freedom.
It's never been easier to capture market returns. Trading costs, commissions, loads, expense ratios and other hidden fees are all coming down as automation makes everything less expensive. Obviously, more and more people paying attention to investment costs also helps push the low-cost movement forward. The first index funds from Vanguard debuted a few decades ago with an expense ratio of 0.43 percent. The same index fund only charges 0.05 percent now.
Individuals are increasingly rewarded for talent. Back in the old days, being recognized was only possible through the help of a select few, as they controlled the broadcast medium. These days, it's easy for thought leaders and skilled individuals to show off their talent to the world through social media and other Internet-based platforms. And without the big brands serving as middlemen, more of the financial rewards are kept at the individual level, which is appropriate and beneficial for those who put in the effort.
Sometimes the financial media (myself included) gets carried away with warnings about potential doom. We live in a great country with a long history of prosperity and innovation. I wouldn't bet against America. You shouldn't either.
David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.