The news headlines paint a pretty depressing picture these days when it comes to how much money we’re saving. If the media’s correct, many of us are destined to end up living in cardboard boxes someday instead of enjoying a comfortable retirement. While these stories do highlight the importance of saving, they rely largely on fear to get their point across. I decided to dissect the most common ways the media tries to scare you into saving more, why this method will never work, and why I’m just plain annoyed.
1. You’ll die a slow and painful death from student loan debt
If you’re working on paying down five or six figures in loan debt, reading headlines saying how it will basically destroy your retirement isn’t too encouraging. In fact, you may even develop a “why bother” attitude when it comes to paying off the debt and saving. (In fact, this guy wrote an entire article published in the NY Times, proudly telling the world that he defaulted on his student loans.)
These stories are effectively creating a self-fulfilling prophecy because all the reader ends up focusing on are the scary statistics instead of looking for practical solutions.
Yes, it’s true…
Student loan debt is one of the biggest financial problems Americans are facing these days and a lot of the focus is on how the debt affects borrowers’ retirement prospects. Just a few weeks ago, the news was flooded with stories about this study which said that student loan debt accounts for 15 percent of the average retiree’s debt load. Among pre-retirees, student loans make up a 30 percent share of the debt pie.
Saving for retirement while you pay off loans doesn’t require a huge amount. For example, deferring just enough of your income to qualify for a matching contribution to your 401(k) can make a huge difference in the size of your nest egg later on. If a 401(k) isn’t an option, you can put $10 or $20 per pay period into a Roth IRA or a Health Savings Account if you’ve got a high-deductible health insurance plan.
Unless your budget is so tight you literally don’t have an extra penny to spare, saving isn’t impossible — the media just makes it seem like you need to save a million dollars now, or you’ll die broke.
2. Social Security will one day be a unicorn
Social Security gets its fair share of news coverage these days, and it’s never good news. It’s always a story about delaying your Social Security benefits or why it’ll go away all together when you’re old and grey.
The media also harps on the fact that by 2035, the program will only be able to pay 75 percent of schedule benefits to retirees. Over and over again, the projected Social Security shortfall is dubbed one of the biggest threats to retirement, leaving many of us to feel like Chicken Little waiting for the sky to fall.
Here’s the problem I have with these stories. They make us worry about whether Social Security is going to be there when we retire when what we should really be doing is working on creating a retirement where we don’t need it. That means chipping away at your debt and looking for ways to lower your expenses so that the money you are able to save now can stretch that much further.
If you know a thing or two about finances, you know it’s impossible to live off of only a Social Security check, so don’t let the media scare you on this one — just ignore it and think of it as an added bonus if you do manage to get a monthly Social Security check when you retire.
3. Savings rates are terrible, but no one’s saving anyway…
Following the collapse of the housing market, the personal savings rate in this country took a serious nosedive and the media made sure that we knew all about it. Since December 2012, the rate has dropped from 10.5 percent to 5.6 percent as of April, which only seems to highlight what slackers we are when it comes to saving.
Why I’m annoyed…
What the news doesn’t pick up on is that following that initial drop off, the savings rate has been on a steady climb over the last two years. While 5.6 percent is a far cry from the 15 to 20 percent that most financial experts recommend we save for retirement, it’s not necessarily bad news.
The fact that the rate is increasing is a sign, that contrary to popular belief, people are making a conscious effort to hang on to more of their money, which means the future may not be as bleak as the media makes it out to be. As of late, CD rates doubled, and there’s been whispers of a rate increase from the central bank (but hasn’t happened yet).
What do you think of these scare tactics?
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Scare tactics are dumb
Getting ahead financially is a pretty simple formula: spend less money than you earn. The news media keeps rolling out these doom and gloom stories but they don’t make us better savers in the long run. The only thing that it does is taking the necessary steps to live within your means.
For some people, it’s as simple as cutting back on spending. For others, it means knocking out student loan debt or increasing their income to put an end to the paycheck-to-paycheck cycle. In the end, tuning out the shock value-driven headlines and focusing on action is the only way to really see results.
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