Retirement planning is harder because…

I recently read an article on why Americans aren’t planning for retirement. It made the following points:

1. Americans are confused about how much income growth is needed to offset inflation

2. Most people don’t know how much income Social Security will provide

3. Retirement withdrawal rates are a mystery to many

The reality is that answers and guidance on these issues abounds. There are endless articles on the internet. YouTube has hundreds of videos on all these issues and more. Many are very good, some do it yourselfers not so much though. Of course, anyone can get a detailed or quick estimate of there Social Security benefit not to mention their annual statement.

Bottom line is a little effort can go a long way helping you plan.

In the near future 401k participants will receive annual statements illustrating the life income their 401k balance will generate.


  1. Retirement planning is hard because people do not give any serious thought until they become empty nesters. The kids are finish school, maybe married off and you realize the next step in your life is retirement. Some kid is now calling you grandpa and you think that it must be time to retire.

    Retirement planning is complicated by the lack of understanding about compound interest or investments and that wealth growth takes time measured in decades not months. Personal finance needs to be taught in schools. Everybody learns the math but doesn’t understand how to apply it to student loans, mortgages, nor investments. This would also help with understanding retirement withdraw rates too. You can’t look at that pile of money as a cash cow to be spent the first year.

    For the past few years, putting money into a savings account was a joke. How can you believe that if you save your money that somehow you will build wealth at 0.02% in a standard savings account at some big banks? So, why would you even think that you would do better in other investments such as CDs, bonds, or stocks without this basic understanding? In the 1980’s I learned that a CD at 7% will double your money in 10.3 years, at 10% every 7.2 years. 0.02%, won’t do crap. It will take 3600 years. The Rule of 72 can help you understand compound interest and there are internet calculators that will do this for you. Compounding and re-investment is the key to building wealth but it is hard to believe when you only earn a car payment increased value after a year in a small 401K when you first start out. Over time, that will grow to be the cost of a car, even at today’s prices.

    You are correct that there are endless articles and videos on the subject, maybe even too many. But if you read any financial sites explain why the markets are up or down, it is obvious that the articles are written for churn. One week the market is up because someone sneezed. The next week the market is down because that same person sneezed. One just has to assume that the same is true for retirement advice. But because retirement is not one size fits all, it is hard to know who you should listen to and over time and life events or job changes you may move from one situation to another requiring changes in your retirement planning. It is hard to find someone you can trust without them making money off you no matter if you make money or not.

    I think annual 401K report would be helpful. I used to get quarterly statements of my 401K investments. It seems like I was losing money every quarter. It also didn’t help that the statements were on a rolling 12-month bases so the returns may have been negative compared to 12 months ago but because I was contributing, my total kept going up. I couldn’t tell if I was really making money or was my contributions hiding my loses? Around the turn of the century (makes me sound old), I made an Excel spread sheet that showed my contributions, the company match, and the total value on every January 1st. The result was that it averaged out the dips and peaks and didn’t influence what the rolling 12 months was doing. I finally saw progress. Most years, I had more money above what I contributed.

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    1. I look at myself at 25 and I had no clue that age 65 would ever arrive and no clue as to how I would live then. This is of course before IRA and 401K were in existence and index funds were only a project that Jack Bogle was working on, I think that is the same mindset today for people even though the financial landscape has changed greatly.
      I had hopes that the low cost robo advisors and investment plans would help out for the beginner and the young and maybe they have some, I don’t know. People need to realize that future needs can’t be known because future inflation is not knowable. They only need to know that saving and investment need be done now. Savings and investments need to be taken out first before the worker gets his/her hands on it. Knowledge of investing and saving and retirement plans won’t help if the income is spent prior. The old saying “too soon old, too late smart” applies.

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