Ruining retirement with bad planning

3 stupid ways we’re ruining retirement

How do you know if the economy is really improving? You could look at jobs numbers, gross domestic product, what experts say — or you could just look at the excuses we’re using to not save for retirement.

National tax firm Deloitte released an annual survey about 401(k) savings. One key finding: The top reason for not participating in employer-sponsored retirement plans has shifted from “uncertain economy/job market” to “lack of awareness and understanding.” Nearly a quarter of participants used the economy excuse for 2012, but only 14 percent did for 2013.

In other words, it’s no longer because we’re worried about the jobs market. It’s just because we’re stupid. Let us count the ways…

1. Half of us save nothing until our 40s

More than a third of Americans haven’t saved anything for retirement yet, according to a new study from personal finance site Bankrate. Nearly 70 percent of adults under 30 haven’t, although they report feeling more financially secure than any other age group.

A third of 30-49 year olds, a quarter of 50-64 year olds, and 14 percent of those 65 and older are also ruining retirement by not saving anything. The sooner you start, the fewer dollars you have to sock away to become a millionaire.

“If you start saving for retirement at age 25, you only have to save about $4,830 annually to reach $1 million by age 65, assuming an annual return of 7 percent after fees,” says U.S. News and World Report. “If you wait until age 40 to start saving, you’ll need to tuck away much more: $15,240 per year, assuming the same retirement age and annual return.”

What you should do: Start saving as soon as possible, even if it’s just a little.

2. Not getting matching money

Many companies match your retirement contributions up to a certain amount. That’s free money you may be throwing away.

Using the U.S. News figures and assuming a dollar-for-dollar match throughout your career, that means you’d only have to contribute $2,415 a year from 25 to 65 to retire with a million bucks. That’s $96,600, less than half what you need if you start at 40.

While some companies make you work a certain amount of time to qualify for the match, the waiting period is getting shorter. “Immediate eligibility for matching contributions increased to 62 percent in 2013,” Deloitte says.

What you should do: Contribute at least as much as needed to squeeze every matching dollar out of your employer.


3. We plan better for pets than ourselves

Saving for retirement? Yeah, maybe later. I’m working on my pets-after-death plan.

A study of more than 900 pet owners from insurance company Securian Financial Group concludes 44 percent of us have made financial plans for pet care, including naming a pet caregiver as beneficiary of a life insurance policy.

Life insurance. For pets. But we can’t open a 401(k).

The study also found many would consider sacrificing vacation money (73 percent), long-term saving (52 percent), credit card payments (24 percent), and retirement contributions (22 percent) to afford keeping a pet or saving its life.

There’s nothing wrong with spending money on pet care, but don’t take money out of your retirement plan to do it.

While some companies allow you to borrow from your 401(k), there are a lot of risks — if you leave the company you have to repay the money quickly or owe taxes and penalties on it, and you’re not getting matching funds or earning interest on that borrowed cash.

And unless you have a pet cockatoo — which can live 50 years or more — odds are you’re going to outlive multiple pets. Plan accordingly.

What you should do: Don’t focus on pets (or college savings, or anything) to the exclusion of retirement savings.


Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

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