You’re probably thinking, Retirement! Are you kidding? I’m trying to get a job, or, I’m trying to get a promotion. I’m years away from having to worry about retirement. The thing is that retirement isn’t something you save for when you are only a few years away from it. Saving for retirement is something you should be doing from the moment you have money that can be saved. That’s not easy. When you don’t have much money it’s really hard to give up a portion of what little you do have. It doesn’t matter if you’re not really giving it up, it still feels that way.
Your best option is to take advantage of any retirement program your place of business has to offer. It’s a lot easier to have money taken straight out of your paycheck before you ever see it than it is to give up money that is already in your hands. And that brings me to the main thing I wanted to discuss in this post. A lot of people do have retirement accounts they are paying money into. Some are even lucky enough to have their employer match their contributions. This can add up very nicely over the years. But you have to leave it there for it to do any good for you.
Several times I’ve seen people leave their job after 5 or 6 years and take out their retirement. Each time I heard the person talking excitedly about the lump sum they were going to get as if Christmas had come early. Not even one of them thought about what it would mean to them down the line. The way they saw it is they would get another job and start another retirement account. They were willing to throw away years of saving without a thought to how it was going to lower the amount they would have available to live on when they finally do retire. These are the people who are going to be in financial trouble whenever something mildly expensive happens. Things like the air conditioning going out in your house, the house needing a new roof, the transmission going out in their car or problems of that sort.
The worst case I saw of this kind of lack of foresight was a woman who had 15 years at her job, had been paying into her retirement account for the whole time and her employer matched her contributions at a rate of 2:1. They put in two times the amount she did. That was a good step towards her retirement. Unfortunately she decided to retire so she could take her retirement out in a lump sum. That meant she had to pay fees and taxes at a higher rate. She took the money out because she wanted to buy a house. She wanted the money for a down payment. After she took everything out and bought her house, she then re-applied with the agency she had left and started all over again. She put off her ability to retire by 15 years. She’s going to have to work 45 years to get 30 year benefits.
Don’t make the mistake this woman did. You can start by deciding what your goals in life are. Then start saving for each of those goals even if you have to label a jar for each of your goals and add money to each jar every chance you can. Use the money you set aside for your goals not your retirement money. Leave that money alone. You will come to a point in your life where you will be very glad you did.