The Top 4 Retirement Savings Trends (and what they mean for you)

Posted on March 22, 2013 | By Mindy Crary

The Top 4 Retirement Savings Trends

I recently did a radio show here in Seattle on Trying Not To Die Broke: Saving For Retirement Before You Hit 40.  I am uniquely suited to discuss retirement savings for people under 40, since the majority of my clients are 40-ish and under.  Most older people like to work with a planner who is a bit more traditional than I am—a suit and tie instead of yoga pants and a hoodie.

Although the segment was mostly questions and answers, I thought I would share some key points from the conversation.

Retirement Savings Trends

Here four trends that I see consistently as I work with individuals on retirement planning:

  • No confidence in social security.  Did you know that the benefit most 30-40 year olds see on their social security statements are about 18% less than what the baby boomers are getting?  Most of my clients don’t want to factor in social security at all into their retirement savings, but a reduction in benefits is more likely.
  • Conservative growth.   People are FINALLY gaining confidence in the stock market again, but when I do retirement savings analyses, I typically plan for a rate of return around 7%–and most people are comfortable with that (if they get more over the next 25-30 years, so much the better).
  • Onus on the individual to fund retirement.  With social security benefits reduced, pensions going away and even employer 401k matching becoming less common, individuals should more and more of the complete responsibility for their retirement savings.
  • Accept their role.  What is really refreshing about my work is that NO ONE IS WHINING.  I find this amazing.  The people I work with are stepping up, acknowledging their role and no wasting time over pointing fingers or regrets.  I find this inspiring.

The New Retirement

The key to feeling confident about your retirement savings is to quit comparing yourself to everyone else.  Here are three steps that are especially important:

Realize you don’t need a baby boomer retirement.  Baby Boomers worked hard and deferred all relaxation and enjoyment until they stopped working completely.  We don’t think this way anymore.  Most of my clients are okay working 5 years longer if they get to have fun along the way, with travel and a more balanced life.
Don’t focus on what you don’t have, focus on what’s possible.  25-30 years in the future really is a long timeframe, so there is no point in freaking out if you haven’t started retirement savings yet.  Get the clarity you need to know what to do to get started, and don’t beat yourself up too much. 
Future planning makes today more relevant.  When people gain clarity on what they need to do in order to be on track for their personal retirement savings, it tends to motivate them to cut back in the present, and start to take a harder look at how they spend their money.

Current Economic Trends

The economy has been changing how my clients are looking at the financial picture.  They are:

  • Making employers part of the retirement savings equation.  It used to be, people just looked at their salary and the quality of work they were offered as a way to compare one job offer with another.  Now, choosing to work for the employer who offers 401k matches and other benefits have become a way to make a job offer more attractive to sought-after employees, so they can get an edge in their retirement savings.
  • Backing away from more expensive homes.  Seattle real estate growth rates are above the national average, yet I notice clients preparing to buy are not planning on home equity increasing through growth.  They are conservative in deciding purchase prices and how much mortgage debt they want to take on, in order to keep cash flow available for savings.
  • Engaging in less flashy lifestyles.  When I first moved to Seattle prior to the economic downturn, everyone seemed to be involved in the foodie culture and expensive hobbies.  Now, I notice more and more of my clients are buying cheaper cars and fewer expensive dinners.  It appears that people are prioritizing experiences like travel over “stuff” when they engage in spending. 

How To Save For Retirement

When you’re under 40 years old, there are a lot of priorities more immediate than retirement savings.  Here are some tips on how to save for retirement even with having children, moving into your first (or larger) home and paying off student loans:

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Build the saving habit.  I always say that wealth is dictated by paying attention to savings, not the stock market.  Focus on what you CAN do instead of what you can’t.  Saving something—even as little as $50 monthly—is better than nothing.  Make it automatic and increase the amount as you are able.

Always get the free money.  If your employer does provide matching funds, save into your 401k so you get 100% of the allowable match.  If your employer offers company stock at a reduced price (usually through the employer stock purchase plan or ESPP), take advantage of it.

Know that funding one IRA annually probably won’t get you there.  If you don’t have an employer plan available for retirement savings, you can use an IRA or Roth IRA, but the maximum contribution for 2013 is $5,500 for people under 50 years old.  You’ll probably need to save more like in the $15,000 to $20,000 range annually.

Consider a side hustle to boost your savings.   I have many clients who supplement their income through a side hustle: selling photos or crafts on Etsy, working as a virtual assistant, walking dogs and designing websites.  You never know when your passion or hobby could become financially lucrative!

Retirement savings doesn’t need to be scary or intimidating to people who are under 40 years old.  The key is to do what you can and be creative in finding ways to save a few more dollars as you go.  The most important step is to simply begin.

Actions This Week

  1. Resolve To Do Something.  You might increase your current savings by $50, or simply open a new account.  Find one small step that you can take to help you focus on retirement savings.
  2. Stay Positive.  I come across a lot of anxiety when people start thinking—and worrying—about the future.  YOU control the future by taking action.  It’s possible you will need to adapt as you go, but isn’t that true of everything you decide is worth doing?
  3. Get Clarity.  Some people start simply by saving.  Other people need a road map to get motivated.  Decide what information you need to take action, and then get it. 

And in the comments, tell me…

 What issue do you wrestle with when you think of retirement savings?

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14 Responses to “The Top 4 Retirement Savings Trends (and what they mean for you)”

  1. Lindsay says:

    So, I’m self-employed but want to start saving a little for retirement (and taxes, in a separate account). What do you think would be the best long-term types of savings for those? I’m only 24 so I have a ways to go until retirement, but I definitely want something that’ll be relatively stable and that I don’t have to contribute a ton to every month, since my business is still pretty feast/famine.
    Lindsay recently posted..Biz Tips // Organizing Your ExpensesMy Profile

  2. Kristy says:

    I love that more people are talking about this, as I’m finding it a huge struggle to understand how anyone manages to retire. I guess I still wonder, though, how on earth the average person would be able to put $15-20K in a retirement account annually, still manage the daily grind, AND save for things like a house and/or a child, and small luxuries like travel. I can tell you that even without saving for a house and child, and only putting $5K/year in retirement, I am nearly down to the wire most months. Sure, I have a couple thousand tucked away for emergencies, and contribute about $150 monthly to that fund, but that’s it. And I make the average income for a Seattlite, based on city stats. Taking an additional 10-15K out of my functional money for the year would be impossible; devestating (literally, not emotionally) my ability to manage rent, meals, and basic costs, much less have the availability for leisure. Is the $15-20K you mention for a double income household? If so, I guess that would be a bit more manageable.

    • Mindy Crary says:

      Hey Kristy! Thanks so much for commenting, I appreciate it! So, don’t compare yourself to other Seattleites, what do YOU want for your retirement, and what are YOU inspired to do? Yes, I look at $20,000 for a couple lots of times, but with saving + employer match, a lot of people can get to at least $15,000 without a partner. This is why I say, don’t compare, start where you’re at. No devastation required :o)
      Mindy Crary recently posted..The Top 4 Retirement Savings Trends (and what they mean for you)My Profile

  3. Time to step it up in this area! Thanks for the great tips and push Mindy!
    Christie Halmick | Jewels Branch Creative recently posted..Women Branching Out: Mindy CraryMy Profile

  4. I am so happy to find your blog. I am an entrepreneur who can imagine coming up with new ways to work into my late eighties. I’m pushing 40 but my life speaks directly to your first point about the new retirement. I love what I do and don’t mind doing it longer.
    I’d appreciate any additional tips for women like me. The only employer plan in place is to reinvest money into growing my business. Retirement isn’t even a thought in my head. *Of course, just hearing myself say that was a wake-up call. Thanks for that.
    Jen McLaughlin recently posted..Gratitude Walk – Thanks Brené BrownMy Profile

  5. Christina says:

    I really enjoyed this post. It makes saving for retirement less scary and more within reach. Getting clarity is key – thanks for providing such a great resource.
    Christina recently posted..Up Your Glow Factor for SpringMy Profile

  6. claire says:

    Thanks for the inspiration! I am going to highlight the “side hustle” for my push this next month. Am partnering with a Reiki Master and an Animal Communicator to do some packages. Woot woot!

  7. Judy says:

    Some very good points on keeping an eye on retirement while enjoying your life along the way.

  8. Jenna Dalton says:

    Great post, Mindy! I am definitely taking steps towards retirement but I think the one thing that’s usually in the back of my mind is, “Am I doing enough?”

    It’s hard to predict what the economy will be doing or where the dollar will head in the future and I sometimes wonder if I should be doing more as a sort of back-up plan.

    I am definitely going to start thinking about that Side Hustle and think about areas I can partner with others to make money outside of my own business. Thank you!
    Jenna Dalton recently posted..Are You Daring Greatly?My Profile

  9. I’m with Jenna. I really wonder if I am doing enough. I have a 401k that is matched, but I don’t really have the confidence to any other investing. It’s probably time to get over this fear. Thanks for this post.
    Trinidad Pena recently posted..How to Add a “Pin It” Button to Your ImagesMy Profile

  10. jason fox says:

    Mindy,

    I know I need to fund my retirement but the problem I have is that nothing seems like a good bet. The stock market is shaky, the real estate market is shaky, CD’s and Money Markets don’t pay anymore, savings accounts are a joke. I do not have a matched 401K.

    Anyway thanks for the information.

    Jason
    jason fox recently posted..Your Internet Marketing Campaign Will Fail… Without ThisMy Profile

    • Mindy Crary says:

      I agree that it’s “a problem that nothing seems like a good bet.” The problem is, you’ve been burned and now you’re not SEEING all of the great stuff that is happening this year and last. Seattle specifically has real estate growth in the double digits as so does the stock market. Take the plunge, my friend!
      Mindy Crary recently posted..The Universal Truth About Your MoneyMy Profile

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