7 Reasons You’ll Never Retire

Waking up and going to work is hard enough. The thought of doing that your whole life and saving for retirement feels a lot like a tiny, dim light at the end of a very long tunnel sometimes. Most of us expect to get closer and closer to that light, but more often than we would like to believe that light is going in the wrong direction. No one wants to spend their golden years struggling, wondering if they are going to get by, or working until the day they are laid to final rest. Unfortunately, that’s where many of us are headed. Here are 7 reasons you will never retire unless you change course.

Playing it Too Safe with Savings

Saving money is always a good idea right? You put back $100 so now you have $100 that you can use at some point in the future. If its earning interest then you will have $100 plus a little extra. That’s all well and good, but if you are playing it too safe you are losing money. Not in terms of total dollars, but in terms of what that money can do.

Think of it this way, if your grandfather had a $100 bill in 1950 he could take himself and 59 of his closest friends to the movies and buy them each a large tub of popcorn.

But instead of living it up, grandpa decided to save it for his future grandchild — you. He didn’t trust banks so he put it in a safe and locked it away, not to be opened until today Oct. 12, 2022. Grandpa was an oddly specific guy.

So today you have that same $100. What can you do with it? Well, you can try to take 59 friends to the movies and get them each a large popcorn, but you’d need that Mr. Franklin in your hands to find about 9 more of his closest friends to cover the tab.

What it boils down to is that money lost about 90% of its value being safe, and that is the price of safety. Inflation is essentially the insurance payment you make on your money.

If grandpa decided to gamble that $100 on the stock market for you, then what you would have today is approximately $95,500 based on average return (thank you compounding interest).

What he wouldn’t have is that insurance that his money was safe, but that’s where you need to find balance. Too safe isn’t great, but too risky can cost you as well.

Not Saving at All

The only thing worse than playing it too safe is not saving at all. I would almost recommend buying lottery tickets for your retirement as opposed to doing nothing at all. At least that way there is an infinitesimal chance you’ll get some kind of return.

It’s easy to coast through day to day not thinking about the future, or banking on social security to cover you, but the truth is that is a very weak safety net. In fact, its less of a safety net and more of a rickey bridge over a boiling lake of lava.

Yes, you’re paying in on social security, but the best way to think of it is that you’re being mugged by that grandpa that left you a crisp $100 bill instead of investing it. He got the social security, you probably won’t.

It’s not his fault exactly, but reckless spending and a complete lack of understanding of what a budget is by countless elected officials over several decades has pretty much squashed “security” out of social security.

Not only that, but unexpected bills come up, things change, life is not static. You need something put back, you just do.

Relying on Your Job Alone

It’s great to have a job and be able to provide for yourself and maybe even a family. Its great to put back money from that job, but it may be a mistake to limit yourself to that alone. It’s good practice to put back 10–15% of your income each month for retirement. That is incredibly difficult if not impossible for a lot of people. If you’re making $50,000 per year and have a family you are likely doing well if you can put back $2,000 annually, much less $5–7,000.

Regardless of how much you can put back from your salary, it’s a good idea to find a side hustle or income producing investments. Not only do they help in the event of unemployment, but they can contribute toward retirement savings and be a source of income long after you have called it quits.

Some easy examples are crowdfunded real estate investing, dividend aristocrats, blogs, podcasts, print on demand, and many more mentioned in some of my other articles in greater detail.

Earning $10 today can mean a lot of money down the road (think about grandpa’s stock investments).

Not Understanding your Expenses

Money goes in, money comes out, sometimes there’s a little left, sometimes there’s not. That seems to be the average American’s understanding of their finances. Money is one of the largest stressors according to science. Its one of the main reasons for divorce and a huge motivation for criminal activities. It’s no wonder that many people don’t like to get into the weeds of it.

The truth is however, that you need to understand exactly where your money is going and why in order to make your money work for you or you will work for it the rest of your life.

Understanding what bills will remain into your retirement is key to knowing when you can retire and how much you need to put back today (though I always recommend putting back more than you need).

Canceling an unnecessary $5 monthly subscription and repurposing that money can mean a new revenue stream, you may find that you can pay off debt faster, or just put that back into investments.

Not Accounting for Inflation

Much like the grandpa situation, your money today likely isn’t going to have the same purchasing power tomorrow. If you’ve calculated your bare minimum living expenses today at $5,000 monthly expect them to be slightly higher year over year until you retire.

If you don’t account for inflation, you may find that light at the end of the tunnel is a train.

Plan for the worst and hope for the best. You will never be disappointed that you have too much money in retirement, but you’ll may be devastated to find you don’t have enough. Especially if you plan to retire early.

Not Taking Advantage of 401K Match

If your employer offers a 401K and you aren’t participating then you are likely making your future self curse you right now, and wow does future you have a potty mouth.

The two best things about company 401K are the tax benefits and the employer match. Many employers match a certain percentage of the employee contribution. For example, my employer matches 50% of the first 5%. That’s confusing, I know.

Basically, what that means is that if my check were for $100 and I contribute $5 of that then my company matches $2.5. That is an instant 50% ROI for me.

401K is also taken out pre-tax so there is a bit of a tax benefit there for me as well. So lets say for the sake of easy math that I’m taxed at 20%, without contributing to my 401K my check for $100 has $20 withheld on taxes leaving me with $80.

If I contribute to the account then I put in $5, my employer puts in $2.5 and I’m taxed on $95. The tax would be $19 leaving me with a net income of $76 on my check and $7.5 in my retirement account. So rather than $80 I receive $83.50 total.

Also, under certain circumstances this contribution can qualify you for a savers tax credit and benefit you on your yearly tax filing as well.

Not Learning About Tax Breaks

Now this one isn’t necessarily going to make or break your retirement, but it can definitely help. Much like the savers credit I just mentioned, there are other tax incentives for saving toward retirement.

IRA contributions can often be deducted from your taxes, HSA contributions can as well. Certain home improvements relating to energy efficiencies can earn you some hansom tax credits and set you up for lower future home expenses as well.

I’m not here to give you tax advice, that’s not my place, but what I am saying is that knowing is half the battle. Planning for retirement or even general financial planning without learning tax laws is like playing chess without knowing what the little horse does or why there’s a piece that looks like a castle — You may get the general idea, but its hard to win without a deeper understanding.

Take it One Step at a Time

All this can seem overwhelming, there is a lot to consider. You don’t have to run out and try to fix everything today, just take it one step at a time and work to make good decisions daily. Enjoy your life and when its finally time to relax, do just that. Kick your feet up, lie back, and don’t stress about money.