Student loans. Buying a home. Taking a dream vacation. Raising kids. Starting a business. Caring for an aging parent.
These are all examples of short-term, sometimes immediate, financial goals and responsibilities. They’re also not an excuse to delay saving for retirement, although they are sometimes used for such.
In its latest survey, financial services firm Edward Jones found seven out of 10 women say they’re confident in their financial knowledge, but many find other priorities come before investing for retirement. Only a quarter of the 1,000 women participants said saving for retirement was an important goal in the next three to five years. Others said more immediate goals, especially those pertaining to family, took precedence.
Balancing short-term and long-term financial goals is hard, but financial advisers say doing so is necessary to ensuring a comfortable, secure retirement in the decades to come. Retirement research is released regularly showing Americans are not saving enough for retirement, or at all, or won’t have pensions or sufficient Social Security benefits to fall back on. Some workers risk falling near or in poverty upon retirement.
Of course, advice suggesting Americans stop what they’re doing and allocate a significant portion of their income toward retirement isn’t always well-received. One Fidelity Investments benchmark of saving twice your salary by age 35 faced severe backlash across the internet, with many millennials saying that simply wasn’t possible and citing current financial stresses and responsibilities as the reason.
Young adults do have to make tough choices, including living with student debt longer than they’d like or renting instead of buying (if they want to buy a home but it’s not in the budget). Because retirement isn’t for another 30 or more years, it can fall to the bottom of the priorities list, some said.
There are a few things Americans of all ages and backgrounds can do, the first of which: just start. Although advisers typically suggest workers put away 10-20% of their salary for retirement, many agree stashing away even $5 or $10 every month in the beginning is better than nothing.
Not only will that money grow, especially if invested because of compound interest, but putting away a few dollars every month builds the habit, which will eventually help when workers have more money they can save. Americans can use retirement accounts, like an individual retirement account (IRA), or use apps designed to invest a few dollars at a time.
Those with access to a workplace retirement savings account, like a 401(k), should try to defer a small percentage of their salary into that plan, and meet the employer match if possible.
More companies are beginning to automatically enroll their employees in retirement accounts, and in some cases, automatically escalate their contribution rates once or twice a year. Where that isn’t available, employees should consider increasing their contribution once a year, such as around the time of a raise or at the beginning of a new year.
A few more options: when possible, make an additional payment toward loan principals (and clearly state to lenders you want that money to go toward the principal); after paying off a loan, such as with student debt, pretend you still have debt payments and put that money toward a retirement account; and picture your future, coming up with a list of hopes and dreams you’d like to have in retirement and imagining yourself actually accomplishing them.
If a lack of confidence in financial literacy is a problem, talk to a financial professional or consider reading up on investing. The Edward Jones survey, called Female Financial Empowerment, found a lack of financial confidence negatively impacted women when it came to major life events, such as starting a family or pursuing an education.
But 40% of women who said they weren’t yet confident about their financial literacy said they expected to be more knowledgeable in one to three years, and were already taking steps toward that by meeting with an adviser or using financial tools and resources.
Sometimes, even using an online calculator to determine how much one may need to save or where they may want to live in retirement could be the optimal starting point to better financial planning.