Why Save for Retirement?

Retirement saving is hard. Why should I save when I can spend my money now? I can use the money to buy new clothes, tickets to shows, eat out, and many other fun things. There are many practical and emotional reasons why we should opt for delayed gratification and squirrel a portion of our paycheck away in 401(k) and other retirement accounts. If you think saving is tough now, just think how much harder it will be when you're 65 years old. Here's why saving for retirement is becoming increasingly important:

Pensions. The traditional pension plan is disappearing quickly. If you work in the private sector, it is likely that your employer no longer offers a pension plan. We are living longer and it is difficult for a traditional pension plan to support the long years of retirement and increasing health care costs. Many companies are freezing their pension plans and new employees are increasingly no longer eligible for that benefit. Pension plans are more common in the public sector, but we can see cracks there as well. Many plans are being reworked and made less generous. Perhaps they will start to become rare in the public sector as well.

Social Security. This week the Social Security Board of Trustees announced that the Social Security trust funds will be exhausted in 2033, which is three years earlier than the last projection. This means, in 2033, a retiree will receive only about 75 percent of the Social Security payout they have earned unless changes are made to the system. The slow economy and retiring boomers are taking a big toll on Social Security.

Personal savings. Retirees will become increasingly reliant on their own savings and investments. Talk to your older relatives to see how they are coping with retirement expenses. One of my grandmothers lived in her own home and she was able to take care of her own bills. She lived an independent lifestyle and was able to afford a spot in an assisted living facility when she needed it. She and her husband saved diligently for retirement and they were able to enjoy it.

Some of my other relatives didn't save as much, and they had to make some sacrifices in their retirement. One grandmother moved in with her son and wasn't able to travel or spend much money. Multigenerational households are on the rise and one in six Americans is now living with their extended family. Moving in with family members might become a necessity for retirees without pensions and with reduced Social Security payments. But I'd rather be independent for as long as I can. Saving for retirement means putting off some purchases now, but later on in life I can have more freedom and independence. I think that's worth the deferred gratification.

Joe Udo is planning an exit strategy from his corporate job by reducing expenses and increasing passive income. He blogs about his journey to early retirement at Retire by 40.

More From US News & World Report


Get stories like this on the Yahoo app and discover more every day.
Download it now.


  • IIM Ahmedabad is the best B-school in 2015

    The 54-year-old institute is not only drawing on its traditional strengths, but is also taking wings to meet the demands of the emerging new world of business. …

  • Change is only constant at these four B-schools

    It is the best of times for B-school students. And if they happen to be at the top four schools after IIM-Ahmedabad - IIM Calcutta, XLRI, SP Jain Institute of Management & Research and MDI- it is certainly ... …

  • India's best management schools for 2015

    The eagerly-awaited issue of Business Today is here. Find out which B-school has topped the list this time. …

  • Built To Last

    Six lesser-known infrastructure companies have prospered despite adverse economic circumstances. …

  • Sweeten your e-Deals

    Shopping online this festive season can be fun if you read the fine print carefully. …

  • Exercise Caution

    The IPO market is buoyant with a healthy line-up of issues, but investors should be cautious. …

  • No Headline

    Six lesser-known infrastructure companies have prospered despite adverse economic circumstances. …


  • Most Actives
    Most Actives
    NamePriceChange% Chg
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

      Sign-in to view quotes in your portfolios.