Finance gurus love to put a righteous fear in you about retirement. You hear a lot about how much more money “Brian” has than “Elizabeth” because Brian invested in his early 20s and Elizabeth didn’t start until she was nearly 40. You’ve probably seen the spreadsheet about how Brian will have more money even if he doesn’t invest after the first two years, but Elizabeth will always be playing catch up, right?
I don’t know how Brian's retirement looks, but oh, hi - I’m Elizabeth, and I didn’t start investing in my early 20s. I didn’t even start in my early 30s. I’m nearing the age of 40 and just now beginning to save for retirement. A guru somewhere is yelling at me, but in reality, the important thing about this story is that I did start. You can start, too. Guess what? The hardest part of saving for retirement is just getting started.
Why Aren’t We Saving?
21% of Americans have $0 in retirement savings. Retirement is one of the pillars of financial stability, and if you ask anyone, retirement is on the list of critical financial decisions. Most of us do not expect an old school pension, and it’s 30% more expensive to be middle class than it was 20 years ago. We know saving is important, so why aren’t we doing it?
A lot of reasons. Financial advice tends to look at humans as coldly rational. It assumes that humans will always do what’s in their best interest despite environmental and emotional factors at play. That’s not reality.
Environmental factors figure heavily into the retirement equation. According to Barron’s, a third of private-sector employees aren’t offered a retirement savings plan through their employer, and over half of part-time workers have no access. The less money you make, the less likely you are to have access to an employer covered plan (58% of bottom quartile earners).
If you don’t have access to an employer-offered retirement plan, you can open on of your own, but there’s a huge catch. With an employer-sponsored plan, you have the option of automated contributions set up correctly when you’re eligible with human resources handling the paperwork. With individual retirement plans, it’s much harder to 1.) fund the account in the first place and 2.) set up regular contributions.
If you’re a freelancer, gig worker, or self-employed, those regular contributions can be more difficult because your income isn’t regular. You must remember to make a contribution manually with each check, and decide individually how much you want to contribute. It’s easy to forget.
Automation is Key
I worked a lot of odd jobs in my 20’s. I was a waitress, a library assistant, a personal assistant, an elegant invitation and stationery seller, an exchange student coordinator, and a secretary. I even dabbled in MLM (and no I won’t tell you what company). These jobs had no retirement benefits or any benefits at all. Even if they did, I was a serial job hopper and left before I was eligible to contribute.
The bulk of my real career was ESL, but I worked for small independent language schools or as adjunct faculty for small colleges. In some cases, I wasn’t even in the United States (China and Japan). Once again, I was mostly shut out of retirement.
I finally landed a job with benefits, including the option for retirement, but the school went out of business two months before I was eligible to contribute.
So here I am in my late 30’s. As a freelancer, I need to build financial stability so I don’t lose my mind with anxiety, and retirement is one of those critical steps.
Sometimes I’m paid ten times in a week. Sometimes I’m paid zero times. The weeks I have money coming in, Catch draws money from my account based on a percentage I set up. I started at 5% and slowly worked up to 10%. The goal is 20% of my income or the max yearly contribution I can make by the end of next year.
Automation has made retirement savings a reality for me. No more forgetting. No more schedule based withdrawals from my account. When I have money coming in, Catch pulls my contribution. When I don’t, it leaves me alone.
Small Steps to Your Future
Listening to financial gurus could have you in full panic attack mode trying to get your finances in order. Once that happens, it’s tempting to ignore things. The most significant step you can take for yourself is to begin saving. If you’ve got $5 a week, then do it shamelessly. Your contribution is a positive step.
Once you start, it gets a lot easier. Do I wish I’d started in my 20s? Sure. Since I can’t get that time back, there’s no point in dwelling on it. My biggest lesson is that my contributions now are still valid and still an essential step towards financial stability. Each payment is a gift to my future self, and yours will be, too, wherever and whenever you start.