Save Now or Pay later
One of the hardest things for Americans to do is save. It seems like consumption and immediate gratification is ingrained in our culture. The three ways Americans tend to save is through employer-sponsored retirement plans, Social Security and personal savings. Out of the three many Americans focus on two. Many Americans focus on Social Security and employee sponsored retirement plans.
The problem is that counting on employee-sponsored retirement plans and Social Security is not enough. Both options place the responsibility on other people. In the case of Social Security, it is the hope that the government will be able to fund it when you retire. When the Social Security Act was signed into law by President Franklin Roosevelt, it was never intended to be one’s sole source of retirement. In addition, there is increased talk in Washington of not being able to fund Social Security. If the worst case scenario happens many people will find themselves in dire financial need.
Employer-sponsored retirement plans also places the responsibility in other hands. In the case of 401(k) and 403(b) plans one is not truly saving. One is not saving because one is investing. Every time you invest you are placing your funds at risk. Investing can be beneficial for retirement but does not replace saving. Investing should be in addition to saving, it should never replace one’s savings. When the market correction happened many older employees were forced to continue to work due to the fact that they lost a great deal of their retirement funds.
Employer-sponsored retirement plans and Social Security has replaced personal saving. Money has a time value associated with it.
One needs to increase one’s personal savings. The time value of money means that money today is worth more than money tomorrow. Hence the younger you are the more beneficial it is to start saving today. The older you are the less opportunity you have to gain value on your money.