Personal Finance

7 Surprising Reasons People Aren't Saving for Retirement


About 40 percent of Americans said saving for retirement simply isn't a priority for them, found the GOBankingRates survey.

"People spend more time planning for their next vacation than for retirement — a huge mistake," said Scott Bishop, partner and executive vice president of financial planning at STA Wealth Management in Houston, Texas.

Putting your vacation — and other savings goals — ahead of your retirement plan can make your golden years difficult. If you wait until the last minute to start saving for retirement, you won't have time to catch up on retirement savings. As a result, you might be forced to delay your retirement and stay within the workforce until you earn enough money to finally leave it.

If you've been ignoring the fact that a low-income lifestyle filled with uncertainty is in your future without retirement savings, now is a great time to start building up that nest egg. If you don't know how much you actually need for retirement, use an online retirement calculator to estimate how much you should save every year to reach your goals.


Many Americans don't have a single penny set aside in a retirement account because they used the funds to take care of emergency expenses or other priorities. In fact, nearly 22 percent of respondents said they have no retirement savings because they used the money to pay for a financial emergency. But tapping into your retirement fund before you retire can have severe consequences.

From medical expenses to house repairs, emergency expenses can put a large dent in your retirement savings account. And it can take months or years to rebuild those savings. Even worse, if you withdraw money from your 401k before you're eligible, that decision can cost you 10 percent or more in early withdrawal penalties — further reducing your savings potential.

That's why having an emergency fund is so important and needs to be a part of your financial plan in addition to your retirement fund. Aim to have enough savings to cover all your major expenses for at least six to nine months. Having financial reserves can make it easier to set up a separate account for retirement savings when things are more stable.


Approximately 19 percent of survey respondents pointed out their employer doesn't offer them a retirement plan. So they haven't saved anything.

According to research from The Pew Charitable Trusts, many employers are hesitant to offer retirement plans as part of a benefits package because some believe low-wage workers would struggle to afford regular contributions. And some simply don't trust state-affiliated savings programs, such as auto-IRAs.

Whether they're not aware of the importance of retirement savings or simply haven't explored options to set up a retirement plan on their own, one thing is clear — almost one in five Americans have placed the responsibility of saving for retirement on their employer. But that shouldn't be you.

If you own your own business, you can follow the IRS's advice for setting up your own retirement plan for you and your employees. Or, if you're gainfully employed but don't have access to an employer-sponsored plan, there are several retirement plans available to you.


Whether it's because they expect to earn enough through passive income when they leave the workforce or they're expecting a trust fund payout, about one in 10 Americans don't feel the need to set aside a portion of their paycheck for the future, found the survey. Unfortunately, this could put them on the fast track toward financial disaster during retirement.

Once you reach retirement, it's unlikely your expenses will stay the same. Sure, you might save money on gas because you're no longer driving to and from work five days a week. And you might save money on clothing because you no longer have to fill your wardrobe with work-appropriate attire.

However, you can expect to spend more money on healthcare costs. In fact, the average 65-year-old couple that retired in 2016 needs an estimated $260,000 to pay for healthcare costs. And what about all of the traveling you have planned? You'll need to save enough money to take those well-deserved trips.

The bottom line: Don't fool yourself into thinking you can get by without retirement savings. Take steps now to reduce your current expenses and stash away extra money into an account. As Bishop said, you "need to have a plan, have a budget and stick to the budget."


Adults 65 and older spend an average of nearly $45,000 a year, according to the Bureau of Labor Statistics. Will your Social Security checks be enough to provide that level of income? It's unlikely.

The average Social Security benefit in 2016 for retired workers was $1,360, according to the Social Security Administration. That's only $16,320 per year, just over a third of what the typical retiree spends. If you rely only on Social Security in retirement, you'll quickly learn that your check won't go far.

Additionally, it's risky to rely solely on Social Security because the program is susceptible to changes. This year, the average benefit might be around $1,360 again. But what happens if that benefit shrinks because of major political, social or economic changes?

To be safe, you'll need other sources of income to maintain a comfortable lifestyle through your retirement years. Make sure you have sources of income that are equal to 60 percent to 90 percent of your current income, recommended the STA Wealth Management Retirement Survival Guide.


It might be nearly 10 years later, but many people are still recovering from the 2008 financial crisis — and survey participants said this is the reason they haven't saved for retirement.

The crisis in the American housing market left millions of homes in foreclosure. The series of events that ensued made people lose confidence in the markets. Those who felt the effects of the 2008 crisis the most could be less likely to save money for retirement and focus more on taking care of current bills — especially the mortgage and other living expenses.

But creating a retirement plan could actually make you feel secure in the event of another economic crisis during your lifetime. David Freitag, a financial planning consultant with MassMutual, points to a MassMutual study that found a relationship between happiness and planning.

"Retirees who expressed the highest levels of satisfaction were also those who took concrete steps to put both their emotional and financial lives in order at least five years before retirement," he said.

If you have a nest egg in a safe investment or savings vehicle as well a separate emergency fund, you could protect yourself — and your retirement — from the unexpected. So starting saving now.


Not earning enough money is another reason some Americans are ignoring their retirement fund, found the GOBankingRates survey.

If you think you need to meet a certain salary level to start building up your retirement fund, think again. All it takes is a small contribution each month and a little bit of interest to grow your retirement nest egg. Consider the following example:

Let's say you're 40 years old, and you don't have anything saved for retirement. If you save just $200 a month, earn an annual interest rate of 7 percent and let your savings compound annually, you'll save more than $150,000 by the time you retire at age 65. That extra $150,000 could be the difference between living a dream retirement — or retiring completely broke.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

GOBanking Rates is a leading portal for personal finance news and features, offering visitors the latest information on everything from interest rates to savings strategies, managing a budget and getting out of debt. Its editors are regularly featured on top-tier media outlets, including U.S. News, Business Insider, Daily Finance, Huffington Post and more. GOBankingRates specializes in connecting consumers with the best financial institutions and interest rates nationwide.

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