Why Bother to Invest if I Never Plan to Retire?
A few weeks ago I received a call from a new Smart401k member. This individual was upset about how much money they lost during the bear market of 2008 and early 2009. They were worried that they would never have enough saved for retirement and would have to, as this individual put it, “work until the day I die.” The member asked me to give them one good reason to keep investing if they didn’t think they would be able to retire. I’ll admit that I was a little stunned by the question at first, but after thinking about it for a minute, I came up with four pretty good reasons.
1. Just because you plan to keep working, doesn’t mean your employer plans to allow you.
It’s been an unfortunate reality during the past two years that millions of workers have been laid off. I have read numerous articles telling stories of workers who had dedicated their careers to one company only to be let go within a few years of reaching their planned retirement. Now, because of their age and specialized experience, many have struggled to find equivalent jobs in the slow-to-recover job market. Their stories have shown the increased importance of having savings to fall back on when unexpected early retirement happens.
2. Medical issues can creep up out of nowhere.
Perhaps the only thing more unexpected than losing your job is experiencing a medical emergency. When this happens, there’s no way of knowing what the expenses will be, how long you may be out of work and what types of adjustments you will have to make to your standard of living. Many studies have even shown that a great number of people who retire earlier than planned are doing so not because they have adequate savings, but because they have experienced health issues that have forced them out of work.
3. You need to make sure your family is taken care of.
Similar to medical emergencies, accidents happen and people often die too young. If you are working and supporting a spouse (and possibly children) will they be able to support themselves in the same capacity if you pass away? If you don’t have life insurance (or don’t have enough), and haven’t saved for retirement, will your family have enough to enjoy the same standard of living that you’ll be leaving behind?
4. Sometimes you change your mind or just need a break
You may not plan to retire now, but what if you change your mind in 5 or 10 years? If you haven’t been saving then you’ll have no choice but to keep working. Also, what if in 10 years, you decide the type of work you want to do pays less than you make now? What if it’s volunteer work? Having savings gives you the flexibility to make these life-changing decisions.
It’s tough to find an individual who hasn’t been negatively impacted by the market over the past few years. But it’s important to remember that investing is a very long-term commitment –this client still has a time horizon of 20 to 30 years. An even more dramatic example is if you begin investing in your 20s. This could provide you with an investment time horizon of 70 years or more! With this in mind, we need to be sure we are making investment decisions with our heads and not our hearts. A recent blog post by one of our other advisers discusses the pitfalls of emotional investing.
Whether you are searching for a reason to keep investing or simply feel overwhelmed by all the options you have to consider, feel free to contact the investment advisers at Smart401k with your questions. Our advisers are available to answer your questions and help keep you on the right track toward achieving your retirement goals. You can reach us via e-mail, info@smart401k.com, or phone, 877.627.8401.
Joe McCulloch, Investment Adviser
About Smart401k
Smart401k is a Web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans. Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at Smart401k.com.
