Remember the famous fable The Hare and the Tortoise? Spoiler Alert: The tortoise ends ups winning the race.
That story always comes to mind when speaking with individuals about saving for retirement. The tortoise looked at the race as a marathon – maintained a steady pace, kept his eye on the finish line, didn’t deviate from the path – while the hare thought he had it all under control. So much so, that he took a nap during the race! He figured he could still win by sprinting to the finish. However, as life happens, he overslept and by the time he woke up the tortoise was approaching the finish line. The hare was not able to catch the tortoise in time to win the race.
How does this compare to saving for retirement?
The hare is someone who is too busy to save or think about saving for the future. He (or she) lives for the moment and can’t (or doesn’t want to) think about when he’s older. He may struggle financially and think he can’t save; or that his meager attempt at saving won’t amount to anything worthwhile later. Or, the hare may have plenty of money to save, but doesn’t put any away for a rainy day or the future. When life’s unexpected events happen, and they will, it will be harder for the hare to find the resources to recover. When that finish line (which represents retirement) is quickly approaching, the hare will then “wake up” but won’t have enough time to catch up and build a successful retirement plan. ‘Well, what about social security?’ he asks. Unfortunately, social security only replaces a percentage of earnings (currently, 40%). By the time the hare retires, that amount may be lower.
Now, the tortoise is someone who started saving early and saves regularly through the company 401k, an individual retirement account, or an investment account. The monthly amount may not be large; however, the tortoise is consistently putting money into one or more of those accounts month after month. Sure, there will be times when the path turns uphill, and the tortoise may need to slow the pace for the interim, but keeps contributing. Once over the hill of that “life event,” the tortoise goes right back to the normal pace of saving. As the path continues, there will be times when it takes no effort at all to contribute and perhaps, allow for increased contributions, which will lead to more savings in the future.
So, who are you? The tortoise or the hare? Looking at your savings plan as a marathon and not a sprint will prepare you for life’s bumps on the road to a successful retirement path.
Michele Sarna is a financial advisor at Beacon Pointe and can be reached at (760) 932.0930.
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