The Importance of Discipline in Investing and Saving for Retirement

We’ve heard about the importance of saving for retirement in a number of different ways from many different resources. Still, more and more Americans are going into retirement underprepared. 21% of Americans have nothing at all saved for retirement, and a third of US citizens have less than $5,000 put away in savings. Part of this under-saving phenomenon comes from one simple behavioral mistake: we’re not disciplined enough to stick with a retirement savings plan.

It’s all too easy to put off retirement saving when we have pressing immediate financial needs to take care of – like putting food on the table, paying down debt, or sending our kids to college. But the longer we put off saving for retirement, the more likely we are to not have nearly enough when it comes time to walk away from our full-time job.

So, how can you find the discipline to invest and save for retirement? What steps can you take to ensure you’re financially prepared?

Creating a Savings Plan

The first step to being consistent with your retirement savings is to have an easy-to-follow plan. If you haven’t been saving at all, your plan might start small. Try to contribute a small amount each paycheck to your workplace retirement account or other retirement savings vehicle. As you continue to stay consistent, you can increase your contributions to reflect your retirement savings goals.

Not sure how much you need to retire? You’re not alone. There seems to be a wide range of opinions on what the “right” amount of money is in order to retire comfortably. The truth is there is no “right” answer that fits everyone’s unique lifestyle and vision of retirement. Speaking with a financial planner can help to clarify your retirement savings goal and build a savings plan that puts you on track to reach it.

Staying the Course

Once your retirement savings plan is set, it’s critical to stay the course. Being disciplined in your saving can be difficult, so it’s important to plan ahead and make choices that facilitate success and consistency. For example, having a comprehensive financial plan that addresses the money-related concerns in your life can help you prevent a savings slip-up.

An emergency fund protects against the need to use the funds intended for retirement for other things – like paying for a car that needs repairs, or having to unexpectedly shell out for a medical emergency. A budget helps you to allocate all of your funds every month to a specific purpose – including retirement saving. This can help you avoid overspending in one area and “forgetting” to contribute toward your retirement.

It’s also important to stay the course during market downturns. Many people, who have always been consistent investors, get side-tracked when they see the stock market going sideways. Their emotional reaction is to sell, or to change their investment strategy – and this can hurt in the long run. One of the benefits of having a financial planner in your corner is that they can act as a sounding board during these market lulls. Their job is to help adjust your portfolio in light of market ups and downs, as well as your ever-evolving risk capacity. If you’re feeling emotionally overwhelmed by the prospect of staying in the market when things start to dip, a financial planner can help to ease your worries and highlight the benefits of staying the course.

Understanding Compound Interest

The true benefit of staying disciplined in your retirement saving is the compound interest your funds earn over time. The best analogy for compound interest is that of a snowball. If you stand at the top of a hill and make a small snowball, it doesn’t look very big. But if you start to roll that snowball downhill, it picks up the snow around it. The snowball gets bigger and bigger. The larger the snowball gets, the more surface area it has to pick up even more snow. And it all started with the small snowball you balled up at the top of the hill.

Compound interest works this way in your investing strategy. The earlier you begin to invest, the longer your funds have to grow. As the return on your investments grow, they’ll pick up speed – growing bigger and bigger until you reach retirement and begin to tap your accounts.

All of this is to say that staying disciplined with your investments and retirement savings now, pays off in a big way later on in your life. Even if you have to start small, the important thing is to begin and to keep at it.

Reach Out for Help

Are you struggling to stay disciplined when it comes to saving for retirement? Kelly Financial Planning can help. Together, we can build a plan that helps you stay on track – and monitor your ongoing progress. Contact us today to learn more about how we can help!