7 Lousy Excuses for Not Saving for Retirement

A small income or fear of investing shouldn’t prevent you from building a nest egg.


When my mom was in her forties, she considered going back to college to get an education degree. I recall her wondering if she was too old to go back to school. My response: “Mom, God willing, some day you’ll be 50. And you’ll be 50 either with a college degree or without one. The choice is yours.” All I was really doing was giving her back the same kind of advice she’s given me all my life. At nearly 70, she just retired from a rewarding career teaching English as a second language to middle school children.

We have grown adept at coming up with justifications for doing the things we shouldn’t, and avoiding the things we should do. As the musician Carlos Santana put it, “Most people don't have that willingness to break bad habits. They have a lot of excuses and they talk like victims.”

So, with a hat tip to Santana (and my mom), here are seven common excuses people make for failing to save for retirement:

1. Not enough money. The lack of money is the easiest excuse to dispel. Retirement investing doesn't require a lot of money. Most 401(k) retirement accounts allow for small monthly contributions. There is no federally mandated minimum contribution. Most employers allow workers to contribute as little as 1 percent of their income to a 401(k) plan. IRA accounts allow for even smaller monthly contributions.

2. Paying off debt is more important. You don’t need to pay off all non-mortgage debt before saving for retirement. Becoming debt free before saving would mean delaying retirement savings for years, even decades. Instead, lower the interest rates on debt as much as possible by taking advantage of 0 percent balance transfer credit cards and refinancing school and auto loans when feasible. With lower rates on existing debt, you can continue to tackle debt while also saving for retirement without paying excessive interest charges.

3. There's plenty of time. No there’s not. The longer you wait to begin saving for retirement, the harder it will be to meet your goals. Remember, the vast majority of a retirement nest egg doesn’t come from the actual money saved for retirement. Rather, it comes from the interest, dividends and capital gains earned from the money saved. For example, if you save $10,000 a year for 40 years, the total money set aside is $400,000. But if that money earns an 8 percent annual return, the retirement account will grow to more than $4.8 million thanks to the magic of compounding.

However, compounding takes time. If you save $10,000 for just 30 years, the balance will grow to $2.2 million, or less than half the 40-year balance.

4. Investing is too complicated. Investing can be complicated, but it doesn’t have to be. With a 401(k) and a phone call to the administrator of the plan, you can get help picking just a couple of mutual funds that will offer ample diversification. With companies like Vanguard and Fidelity, it’s easy to save for retirement with a single mutual fund. Lifetime funds allow you to diversify into U.S. and international stocks and bonds with a single investment.

5. It's too late to make a difference. The later you start saving for retirement, the less you will have in your golden years. But every dollar still counts. You may have to make some sacrifices, perhaps by spending less to save more and working past age 65 if possible. If you start saving at age 50, can continue working for 20 years, save $1,000 a month and earn an 8 percent return, your retirement savings will grow to more than $580,000.

6. Scared of the stock market. The volatility of the stock market can be unnerving. However, there are several ways to address this concern. First, invest in low cost index funds, rather than actively managed funds. By doing so, you know that any losses are simply the result of general market declines, rather than bad decisions by an active manager. Second, adjust your asset allocation to include more bonds and other fixed-income funds. While the long-term returns are generally lower than equities, the right mix can reduce the volatility. And finally, recognize that you won’t need your retirement nest egg for many years. As a result, short-term declines in the market can and should be ignored.

7. No access to an employer retirement plan. Having access to a 401(k) or 403(b) retirement plan at work makes retirement planning easier. Add to that an employer match of your contributions, and you’ve found a great way to build your retirement savings. But if you’re not fortunate enough to have a 401(k), you do have options. It’s extremely easy to open an IRA account directly with mutual fund companies like Vanguard. You can set up automatic contributions directly from a savings or checking account.

While there are plenty of excuses to delay saving for retirement, there are even better reasons to start saving now.

Rob Berger is an attorney and founder of the popular personal finance and investing blog, doughroller.net. He is also the editor of the Dough Roller Weekly Newsletter, a free newsletter covering all aspects of personal finance and investing.