As we go through life, we make various promises and justifications to ourselves, often losing focus of a long-term goal for the sake of a short-term goal. We know we should save for retirement because it is extremely difficult to retire and live comfortably solely on a Social Security benefit. “I may die early, or marry rich or win the lottery” are all comfortable lies we tell ourselves instead of the unpleasant truths. The unpleasant truths are that you may not die early, marry rich, or win the lottery.
From a financial standpoint, the unpleasant truths are the things that really need to be addressed, such as saving for retirement, college costs for children, or reducing your debt. A few of our earlier blogs have dealt with being prepared for an early exit from life by taking care of the basic estate planning steps; this one deals with the more likely scenario of living to the average age of 79 for men and 81 for women and the steps you should take in order to enjoy getting there.
By saving for retirement early in your career, you have the benefit of compounding interest and/or growing financial market returns. Money doesn’t grow in a straight line but gathers steam as it goes along. Obviously starting earlier, time is on your side giving money more time to accumulate upon itself. “I have plenty of time to save for retirement” is another comforting lie. “I need to forgo this frivolous expenditure and stay committed to a long-term plan” is the unpleasant truth.
A client once told me about an extremely unsuitable investment he had been sold. When he discussed it with the person who sold it to him, he was told, “Don’t worry, when you die your wife will be fine.” The client’s perfect response was “But what if I need the money before I die?” Again, you have to prepare for leaving this earth early but you also need to plan on staying as long as possible. “I need this new complex product with many moving pieces” is a comforting lie. “I need to stick to a boring ‘Plain Jane’ long-term strategy that helps me meet my goals” is the unpleasant truth.
As you have children, the comforting lie is that “I’ll always have time to catch up when they get older.” The unpleasant truth is that there will be bicycles, soccer equipment, dance recitals and other things that will suck up the dollars that should be going to college savings. Again, because time is on your side, the amounts needed to save at a young age are much more manageable than waiting until the child is in high school to worry about college funding.
“I can charge this expense now and pay it off in 12 easy installments” is a comforting lie. “I need to save my money until I can purchase it outright” is the unpleasant truth. A financial bonus of saving the money is that you may find by the time you’ve accumulated enough, you may decide you really didn’t need the item in the first place.
Indeed, while we have discussed several “unpleasant” truths here, you can be sure that by addressing them, you can greatly increase your chances of a very pleasant retirement. And, that’s a very comfortable truth.
