LIFETIME DILEMMA

 Forever, ever?

Forever, ever?

"Forever never seems that long until you're grown." When Andre 3000 first uttered these words in the Outkast song, Ms. Jackson, he probably never imagined they'd be quoted in a financial blog about retirement planning, and yet, here we are. The gist of what he's getting at is how hard it is to wrap your head around concepts like "forever" and "lifetime." It happens to be the same reason why it's difficult for you to routinely take money out of your paycheck each month to save for a retirement that is 25 to 35 years down the road. When dealing with a problem that's that far away, you'll mentally do two things. First-you'll have a hard time grasping it. Think about it, let's say you're thirty, your "lifetime" is thirty years, and yet you're supposed to plan for something that is further away than all of the life you've lived plus five years? That's tough to conceptualize. Secondly, you'll take the same approach that you took with your papers when you were in school; you'll procrastinate on doing it until you get closer to the deadline. The problem with delaying to start saving for retirement is that retirement doesn't become "real" or attainable until you get around fifty years old. At fifty, retirement is only fifteen years away; it's much easier to visualize something at this point. Ultimately, this dilemma doesn't stem from you not wanting to save for retirement but just from the simple psychology of the situation. Does this mean we shouldn't save for retirement until we can visualize it? Of course not. What has to happen and what we've been doing at Wela is changing the conversation around what retirement planning should be.

 Beach in Fiji

Beach in Fiji

Saving for retirement shouldn't be some abstract concept that is years away, but rather it should be the vacation you want to take in six months to Costa Rica or maybe the Coachella festival you want to attend next April. Ultimately saving for retirement is like anything else, it's built on habits. So, creating the right habits and incentives are what will lead to success. If you were to ask any financial advisor about saving, they'd suggest you automate it to make it easier. Using this idea, you could set up a fund to automatically save $25 a week for that trip to Costa Rica. What you'll realize after you've taken your dream vacation is that you've now made savings a habit. Because of this, you'll have rewarded yourself with two things: A great vacation and a new habit of saving that will continue. Another way to accomplish this is to match the savings with the incentive. For example, if you want to save for another beach vacation, this time to Fiji then save $25 a month to a savings account and automate the same amount of savings to a Roth IRA. As you reach your vacation goal and experience that, you have now created a positive savings habit that can last a lifetime.

There are plenty of variations and creative ways to think about retirement and everyday savings that bring the conversation back to today, to something concrete instead of the dated idea of "just save a million dollars for something 35 years away." Making practical changes like staying within your daily spend limit, Wela's guilt free way of providing clarity to how you spend your money. With your daily spend limit, you're equipped with the knowledge to know how your purchases today affect your ability to save tomorrow and the flexibility to adjust your budget day to day depending on each day's unique needs. At Wela, we're helping you do more. Contrary to how you've always thought about finance, you can do both; live for today and save for tomorrow.