Top 3 excuses workers give why they aren't saving money for retirement

Kailey Hagen
The Motley Fool

Retirement is getting more expensive all the time, so it's best to start saving for it as early as you can. Many workers know this, yet one-third of Americans aren't currently setting aside any money for their future, according to a recent Anytime Estimate survey

No one is going to make you save for retirement if you choose not to. But it's usually best to make it a habit if you're able to do so. If you put off saving for too long or you only contribute money infrequently, you run the risk of retiring without enough. 

Here are three of the most common reasons participants gave for not saving for retirement right now, along with some strategies you can use to overcome them.

1. Not making enough money

Lack of funds was the biggest reason most people said they couldn't save for retirement. Approximately 37% of survey participants said they didn't earn enough money, while 26% said they didn't have a job at all. That's understandably a huge obstacle, but there may be ways to fix the situation.

First, you'll need some type of job. If you don't already have one, look for employers that are hiring. Whenever possible, see if you can find one that offers retirement benefits, like a 401(k) with a matching contribution. If a job doesn't offer a retirement account, you may have to open an IRA on your own to save for retirement.

If you have a job but you need all your income to cover your essential bills, it might be time to think about a career change. You could also start a side hustle. You can decide what you do and how much you work. But some side hustles have upfront or ongoing costs, and you have to decide if this is worth it for you.

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2. Being too young

About one in five workers surveyed said they felt they were too young to start saving for retirement. This is a common misconception – and a dangerous one. Retirement might be decades away for you, but it'll sneak up on you faster than you expect. And the longer you wait, the more difficult your task becomes.

Let's say your goal is to save $1 million by the time you're 65, and you expect to earn a 7% average annual rate of return. If you start saving at 25, you only need to save about $403 per month. If you delay one year, you'll have to save an extra $30 a month to hit your goal. And if you wait until 35 to start saving, you'll need to save $851 per month. Over the course of your working life, that 10-year savings delay will cost you nearly $113,000.

That's because the longer you wait, the less time your investments have to grow before you need to withdraw the funds. As a result, you'll need to contribute more of your own money to hit your target. But when you start early, you'll have more investment earnings to help you out. So if you can afford to save for retirement, don't let age stop you. Begin saving right away. 

If you put off saving for too long or you only contribute money infrequently, you run the risk of retiring without enough.

3. Prioritizing other investments

About one-fifth of survey participants said they weren't saving for retirement because they were prioritizing other investments. The survey didn't make it clear what these other investments were. It's possible that some people are choosing to save in a taxable brokerage account rather than a retirement account, so they can access their funds at any age. Typically, you can't withdraw money from retirement accounts without penalty until you reach age 59 1/2.

There's nothing wrong with investing outside of a retirement account, but if you don't plan to use the money in the foreseeable future, a retirement account is probably a better choice. They offer unique tax advantages that taxable brokerage accounts don't.

Tax-deferred retirement accounts, like 401(k)s and traditional IRAs, give you a tax break this year. If you earn $40,000 this year and put $4,000 in a traditional IRA, the government only taxes you on the remaining $36,000. But you'll pay taxes on your withdrawals later on.

Roth accounts give you your tax break in retirement. You pay taxes on your contributions in the year you make them, but then you don't have to pay taxes on your withdrawals in retirement. This is usually the best way to go if you believe you'll be in the same or a higher tax bracket once you retire.

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