How To Stop Being Scared About Retirement Saving

It can be worrisome, but don't let that keep you from saving for retirement now.

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Scott Holsopple

Halloween has passed, but there are plenty of scary things that can happen year-round, and they're often events that could be prevented, especially when it comes to money, like the fright-inducing reality of an under-funded or non-existent retirement nest egg.

You may be thinking, "Really? Do you seriously think that's truly scary?" I do, considering what could happen if you don't take control of your retirement planning:

  1. You may have to work until the day you die in order to keep a roof over your head and food on your plate.
  2. You may not be physically or mentally able to work until the day you die, and instead may find yourself having to rely on others to take care of you.
  3. You may have to downsize your home or move in with relatives if you are unable to afford your current living situation.
  4. You may lose some or even all of your treasured possessions because you're forced to sell them to make ends meet.
  5. You may lose the ability to make decisions about your own health care because you can't afford your choice of care options.
  6. You may not be able to afford to see friends and family very often or do the things you enjoy.
  7. Here's the bottom line: Decisions you make now affect how and if you'll be able to support yourself in the future, and that's scary.

    Half of a creepy skull face painting for Halloween

    (iStockPhoto)

    Don't want to live in fear of those six outcomes? Here are some choices you can make today, regardless of your current age, that can improve your options in the future:

    • Start saving for retirement now. Whether you're 20 or 65, if you aren't saving for retirement, today is the best day to start. Save the largest amount your budget will allow right now – even if that's only $20 per month. Something is better than nothing.
    • Increase the amount you save each year. It's easier than you may think to increase your 401(k) contribution by one percent of your income each year. It's a gradual and relatively minor out-of-pocket impact, but before you know it, you'll be saving 10 percent or more, and that's a great range to make some serious headway. In fact, the difference between a 5 percent contribution rate and a 10 percent contribution rate could be more than $500,000 after 40 years of saving!*
    • Invest your savings appropriately. Putting money in a bank with little-to-no interest or throwing all of it in a money market fund isn't going to help you beat inflation. Saving money that loses value is akin to losing money. If you're not investing in a balanced portfolio — one that's aligned with your goals and personal situation — you're reducing your chances of keeping pace with or outpacing inflation.
    • Develop a retirement plan. Saving, increasing your rate of saving, and investing are the basic steps in the right direction. Once you've gotten the ball rolling, it's time to make a plan. Here are four first steps: Figure out how much money you need for retirement; how much you need to save each month in order to get there, given your investing style; what time table you'll use for increasing your rate of investment; and what investing line-up is most appropriate for you now. Revisit your plan every couple years to revise and make appropriate changes.
    • Saving for retirement can be a daunting task, but it pales in comparison to the realization that you don't have enough money to fund your retirement. If haven't already, start saving and planning for retirement today.

      Scott Holsopple is the president of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.

      * Assumptions: $40,000 annual salary, contributions beginning at 5 percent (or 10 percent) made monthly and compounded annually, and an 8 percent rate of return, invested for 40 years. Please note that the above example is for illustrative purposes only. The compounding concept is hypothetical and for illustrative purposes only and is not intended to represent performance of any specific investment, which may fluctuate. No taxes are considered; generally withdrawals are taxable at ordinary rates and may be subject to tax penalties. It is possible to lose money by investing in securities.