There’s a big difference between not saving enough and not saving at all.
You will only find out how big that difference is if you live it out, and a new study suggests that more people than ever are doing just that.
The latest country Financial Security Index released Thursday showed that one in four Americans, across all age groups, is not saving at all for retirement. A majority of respondents (55%) said they either are not participating in a workplace sponsored retirement plan like a 401(k) or they don’t know if they are in a plan.
In certain age groups, nearly half of respondents no longer believe it’s possible for a typical middle-income family to save for retirement.
Nations can kick problems like this down the road, coming up with stall tactics and delays that ensure trouble comes as far down the line as possible, pushing trouble out of the lifetime of many current adults even as they raise the danger level for future generations.
Individuals, however, need to rely on themselves. Social Security was never intended to be more than a crutch, so relying on it to be the bulk of support is to guarantee that you will limp financially to life’s finish line.
Surveys have long shown that people “aren’t saving enough” by standards defined by the financial planning community. The side that seldom gets discussed in those surveys is that those situations don’t have to play out badly; investors have a tendency to increase their retirement savings as they near the end of their working life — when they no longer have to worry about college tuitions — and so they close the gap.
Moreover, the savings level that financial advisers consider adequate, in general, goes beyond what the average person needs because it assumes a very long, active life span. Falling short of that “perfect” level of savings isn’t a big deal for someone who is shooting for it, because coming reasonably close should ensure a nest egg that is more than adequate.
But the problem with all of these surveys is that they don’t allow for the logical follow-up question, because for folks who are not saving at all for retirement or who knowingly are under-saving with no visible means for recovering, there’s a simple, logical retort: What the heck are you people thinking?
It may seem like a rhetorical question, but it’s not.
Instead, it’s part of a bit of a self-test for your own financial planning.
The first part, of course, is that basic question about savings, namely: “What are you doing to save and do you think it will be sufficient to at least get you close to your financial goals?”
The second question is: “What will you do if your savings is insufficient?”
This is not about relying on Social Security to prop you up, it’s about what you would do in case of financial disaster, because that’s what you could be facing.
Start listing the options and there will be choices, starting with easy things like “give up travel plans,” crossing through “sell off belongings” and ending with things like “move in with the kids” or “learn to eat cat food.”
Those are not the financial “plans,” they are calamities.
They are the kinds of things you hear from people who suffered catastrophic health-care issues that drained their savings, or who fell victim to financial fraud. They tell stories about those drastic measures and stark choices when fate or some crook robbed them of the future they had built and planned for themselves.
If you’re not saving, however, you are the thief here, the one stealing from your future. You’re forcing those horrible decisions on yourself.
Unless you are independently wealthy and set for life, spending and saving decisions are about trade-offs, delaying gratification today for comfort tomorrow, balancing today’s wants against tomorrow’s needs and your ability to provide for both.
You either set yourself up for a comfortable retirement, or you live in discomfort through it.
I recently chatted with Elise, an active retiree in Daytona Beach, Fla., in her early 70s, who acknowledged a lifetime of inattentiveness to money because “I didn’t feel I had to pay attention to it. … My husband made a good salary and he watched the money, I never felt like I needed much to be happy.”
But her husband died in his early 60s, and while he was a good provider, he was never a great saver; there were some bad investments, along with one particularly good one (the home she lives in). She has a small pension and Social Security, but financial planners would say she can withdraw no more than four percent of her savings each year and hope to maintain her nest egg; with $120,000 in savings — mostly from her husband’s life-insurance policy — that means she’s got access to $400 a month if she hopes to make her money last.
“Now all I do is feel like I have to pay attention to my money,” she said. “Every little expense isn’t little at all.”
Ultimately, the house is her safety net. While Elise is debt free, she has acknowledged that selling the house — the last thing she really wants to do — is the choice she must make. It’s the price she is paying for having not saved enough when her income made real savings progress possible.
Now she’s trying to make sure that, with the proceeds of her home, she can be set for life, whether that means living in a retirement community, moving in with her daughter or simply trying to manage the money and live on a reduced scale.
“This is not what I saw happening to myself,” she said.
That’s mostly because she never looked into her future and considered the consequences of not saving enough.
Judging from the country survey, she’s far from alone.
The moral of the story is that Americans need to face the music now, while they can still change the tune. Otherwise, the building retirement-savings crisis in this country will hit home in personal, uncomfortable ways.
This article originally appeared on MarketWatch.com.