More than half of Americans are worried about running out of money when they retire, yet a staggering 80 percent don’t have the knowledge they need to successfully build a nest egg, according to The American College 2014 Retirement Income Survey. Yet by changing just five basic behaviors, Americans can improve their saving habits – and their financial security throughout retirement.
- Underestimating life expectancy
A study by the Society of Actuaries found that more than half of Americans underestimate how long they’ll live – and how long their savings will need to last. Better health care and increased life expectancy mean you may live 20 years, 30 or even longer. This means it’s not only important to save for retirement, but to understand how to make your savings last throughout your lifetime.
When you’re wrestling with everyday financial commitments, it can be tempting to put off. In fact, 53 percent of workers polled by the Employee Benefit Research Institute cite cost of living and day-to-day expenses as the top reasons why they don’t save for retirement. Yet starting early with just nominal monthly contributions can help build your nest egg.
- Failing to expect – and prepare for – the worst
Job loss, illness, accident, the death of a spouse – many things can impact your ability to save. While it’s human nature to hope nothing bad will happen, it’s important to be realistic when planning for retirement. Hope for the best, but plan for the unexpected.
- Following others
Human beings are very social; if you see other people doing something, you want to follow. But sometimes “following the pack” in financial decisions can get you in trouble. Resist the temptation to “keep up with the Joneses.” Buy what you can afford. Staying on track for retirement often means resisting peer pressure.
- Impulse buying
Human brains are hard-wired to live in the moment. An “I want it now” approach could lead you to have trouble putting money away for tomorrow. An occasional splurge may be OK, but don’t get yourself into a spot where you think you have to tap into your retirement savings to fund impulse purchases. Dipping into your retirement savings can be devastating to your long-term financial goals.