Can I Really Afford to Save For Retirement?

My wife and I were having a conversation the other day about saving for retirement and what regrets, if any, that I had. I had accumulated a fair share of debt early in life and when I finally decided it was time to repay that debt I ignored saving or investing. Sure, I had a laser like focus on paying down that debt, but did I do myself a disservice by not also saving for retirement at the same time? Believe it or not, a variation of this issue is dealt with by quite a number of individuals in various stages of life.

Older couple in Retirement, saving for retirement

What if I Have Little Money to Invest?

Looking back to my personal situation I felt as if I had little to save or invest with. I thought everything had to be going towards my debt repayment and because of that I sacrificed several years of retirement planning. In fact, retirement planning was the last thing on my mind at the time. The principle I was failing to realize was the magic of compounding and the importance of starting investing as soon as possible. I have a favorite saying – “time is the greenhouse to your investing dollars.” Time grows invested money and the earlier you start, the more it will grow. The thing that holds many back is the belief that having a small amount to invest means they should wait to get started. As one who used to believe that false maxim, I can assure you that is only a self-defeating belief. Even if you only have $50 a month to start investing with, don’t allow that to hold you back. Starting small will help you develop the discipline of investing, which will reap you benefits in the future.

Make Your Money Work For You

Once you’ve decided to start investing you need to make your money work for you. That means if you have a 401k with your employer and they offer you a match, you should take it. Why wouldn’t you want to? After all, free money is the best kind I am aware of. Immediately after taking that match you have automatically doubled your money or at least grown it by 50 percent. Once you start investing in your 401k be mindful that not all investment choices are the same. Be careful to choose ones that have the lower fees so your money is not eaten up by needless fees. If you’re brave enough to also add a self-directed IRA on top of your 401k investing then make sure you choose a brokerage that you like and one that will not nickel and dime you with fees.

Saving For Retirement is a Marathon, Not a Sprint

The faulty belief I had years ago was that I could get to saving for retirement when I could afford to and could be done easily. The fact is that saving for retirement takes years and not days and your mindset should be as such. If you know any long distance runners, that’s how you should view your investing for retirement. They spend weeks and months preparing for their grueling race. A beginning marathoner will generally train six months for his or her first marathon. Then they gradually increase running distances daily and weekly to prepare themselves for the big race. If they did not, they generally would fail miserably. This is how you should approach retirement investing. Start off even with small amounts, so the stocks you’re investing in can grow over time and help secure a suitable retirement.

Have you ever faced a situation where you felt you could not afford to save for retirement? How did you solve it?

Saving for retirement

This post was originally published on June 5, 2013 and updated on June 17, 2021.

Can I Really Afford to Save For Retirement?

16 thoughts on “Can I Really Afford to Save For Retirement?”

  1. I realized early on (maybe because I was a finance major) that even saving a tiny bit can grow into a large amount over time. Because of this, I saved something, anything, each month. I too got myself into debt early on but I made it so that even as I focused on paying that debt off, I would still save money. Even if that meant I was saving $10, I still saved.

    1. That’s a great way to look at it Jon and one that we all too often miss at times. I know that $10 might seem like nothing but I helps develop and grow that discipline as well as take advantage of compounding. You can really never start too early in my opinion.

  2. Einstein once said that one of the greatest discovery of mankind is compound interest. You are so right that saving is a Marathon and not a sprint. If you see why you feel like you don’t have enough to save for retirement is when you’re thinking in sprint mentality. Thanks for the article, I think we all needed to be reminded of this.

    1. I love that Einstein quote Peter because it’s so true. It takes hard work, but the beauty is that time can do wonderful things for your saving/investing…you just need to start. 🙂

      1. Very true Jenny. However, you don’t want to sacrifice years worth of retirement savings (even if done in small amounts) either. I am of the belief that both can be done at the same time. It just requires you to make it a priority and look for ways to be creative about it.

  3. Wonderful advice John. Even when we were drowning it debt I always made it a priority to contribute to a 401k. That is just free money and a 100% return beats paying 10-18% in interest!

    1. Thanks Nick. I could not agree more. Even when in debt not taking advantage of a 401k match does not make much sense to me…free money IS free money after all. 😉

  4. To me its a simple question of interest rates. Like it has been stated before, if you are getting matched on 401k contributions, you should obviously go that route. If you are in debt, compare interest rates, if the best you can hope for on an investment is 10%, I say you should pay off all debt with an interest rate of greater than 10% first.

    1. That is definitely one way to look at it Michael. I would argue that if a 401k match or a 401k is not available then I would invest at least something in a Roth. I think both paying off debt & investing can happen at the same time, it’s just a delicate balance.

  5. I’ve always set up my life so that I was able to save for retirement, even when I was making $24k and living in the DC area. To me it’s not a question of whether I can afford to but how can I afford not to?

    1. I completely agree Emily and kudos to you for making it work on that amount in the DC area! It is possible to do, you just have to be creative about it and determine your priorities.

  6. there is always something you can cut to start saving for retirement. sure it won’t be fun but it will be less fun to be broke at 65. I don’t have a retirement account but invested early and can now live off investments so the effort was really worth it.

    1. I agree Pauline, there is almost always something you can cut. It might suck in the near term but in the long term it’s generally well worth the sacrifice.

  7. I loved this article. I am so guilty and need help with this topic. I’m 32, have no retirement or investments and I know that I need to fix this. I do not make much money (contractor, no college education) but I am very frugal with a paid off car and excellent credit. My question to all of of you is what can I do if I don’t have a 401k? I always feel so embarrassed and insignificant to talk with an investment person. I don’t want them laughing at the fact I can only put away like $10-$20 a week. Any suggestions? Anyway I can start small and work up? Help!

    1. I’m in a similar scenario as Sheena and was about to ask the same question. Though – ours is more serious because we are more than 10 and 18 years older. We have been putting it off for years for numerous reasons, much of it the above belief of not having enough, but this is the year we have to start socking away as much as we possibly can. The problem is, I have no idea where to start and who to to trust. Years ago I lost a fairly substantial amount in my first and only attempt at working with a broker who invested too much in tech stocks. After that I got scared, and I don’t think we have a huge risk tolerance now. On the one hand we need to accumulate as much as possible because of our age and lost time to make up for, but for the same reasons we can’t afford the losses that go along with those higher risk/potentially higher gain stocks. We also want to invest in ethical, socially responsible companies not just the ones that will give the biggest return. We’re self employed, so no 401K. What do you suggest for people like us? I feel like you need a degree in stock picking and investing unless you are lucky enough to choose the right adviser.

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