If you’re under the age of 50 and hear the word retirement, chances are you think to yourself “oh that’s so far in the future”, but you couldn’t be more wrong. The unfortunate truth is, as soon as you start working, you probably need to start planning about retirement, because one day, it’s going to come.
Like most Americans, it’s easy to brush off planning for retirement, especially when you’re younger. This has led to the notion of how Americans are destroying their retirement by not actively planning nor saving for it.
Today, let’s take a look at exactly how Americans are slowly destroying their future retirement.
1. Discretionary spending
In 2019 alone, Americans spent over $1.3 Trillion dollars in discretionary spending. Trillion with a T! That’s a heck of a lot of money to spend on non-essential items. At the same time, over 22% of Americans have less than $5,000 saved for retirement.
Did you say $5,000 saved for retirement? Yup. That’s really really low!
Now, you’re probably wondering, where exactly is the $1.3 Trillion dollars in discretionary spending going to? Well, I’m glad you asked!
According to a report put together by Consumer Reports, here is where Americans are spending most of their money:
So, according to this report, Americans spend their income on:
- Electronics (54%)
- Appliances (33%)
- Cars (27%)
- Home Remodeling (23%)
Now, there are many arguments that could be made advocating for some of this spending, but to be completely honest, majority of it is not necessary.
Electronics topping the list just shows where priorities lie when it comes to spending. These items become obsolete in a few years, almost never increase in value, and some eventually end up in the garage collecting dust after it’s replaced by something else.
Cars are another devastating spending item that does nothing but destroys wealth, and in turn, retirement. As depreciating assets, cars not only take money away with taxes, insurance, gas, and maintenance, they lose value year over year. Money down the drain.
And you know why Americans spend so much in these categories? Because you can. Here’s why.
2. Access to cheap credit
And here lies why there is so much being spent on stuff. It’s so easy and cheap to get credit!
Have you ever watched an ad for a new truck on tv, and wondered how much the truck actually costs? All you hear are the monthly payments. Same thing with furniture, and even appliances. Credit here, credit there. Getting a loan for a car, house, furniture, you name it, it’s as easy as pie!
There was a time, in the American past, when getting “stuff” meant saving for it. Credit was much harder to attain, and when you did get it, it meant substantial down payments.
Nowadays, you could walk into a dealership, and drive away with a $45,000 car and paid nothing down. Just a few signatures, and signing up for a $600 monthly payment. Or buying a $1,500 cell phone and make payments on it. Absolutely financially destructive.
Delayed gratification is virtually non-existent in the American culture, and as such, it’s better to get stuff now and worry about it tomorrow. Do you know what that does? It takes away from saving for retirement. Makes it easy to just focus on the here and now, without taking into account saving for retirement instead.
3. Reversed priorities
Today’s culture has promoted the acquisition of stuff. Unlike most developed nations in the world, America unfortunately is the biggest consumer of said stuff.
Now don’t get me wrong. I love stuff. I love fiddling with the latest phone or even the fastest coolest car, but without moderation, it all spirals out of control. It’s important that Americans stop destroying their future retirement and instead exercise caution.
Totally pretending that one day we’re all not going to retire is a recipe for disaster. The mentality of never planning for the far future is something many will need to work on, so that when retirement comes (and it will), it doesn’t come as a surprise.
Being born and raised in Zimbabwe, seeing what poverty and lack looks like has given me a much higher appreciation of life than most. Being in America has shown me just how easy it can be to get carried away by so much abundance and ease of credit.
But at the same time, not planning for the future and spending as much as you can isn’t financially smart.
So exercise caution, practice delayed gratification, and no matter what, contribute towards your retirement! Future older you will be so thankful you did!
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