We all know that the majority of Americans, especially the middle-class, are indeed saving for retirement. They're just not saving enough! The group laughter around water coolers, in staff lounges, and other employee gathering places, originates with the wise guy claiming we'll all be working until we die. It's funny because we can all relate to the dark financial comedy that is our lives.
I've thought about the retirement cluster(beep) many middle-class Americans are in, and in particular, the multiple reasons that have caused their unique situation. I came up with 8 lack of retirement savings culprits many middle-class Americans have in common. They are:
1. They refinance their home, and squander the equity they pulled out. The middle-class loves to deck out their home because they believe their home is an asset. They will do expensive projects, like kitchen remodels, adding a bathroom, an extra room, or even putting a pool in their backyard. Sure the value of their personal residence may increase, but now they are in at the start of a new 15 or 30-year mortgage.
2. They refinance their home, and use the cash to finance their adult kids' college expenses. The middle-class is notorious for going through walls for their children's education. Going to college is like a right of passage and making the children have to pay for anything would just be the biggest betrayal in all of parenting.
3. They sign on to a parent PLUS or other private loan to finance their kid's college expenses. Similar to number two above...anything to not upset the children, right?
4. They buy, and buy, and buy. The middle-class loves their shopping. And when they shop, they shop at the nice stores. The Baby Gap, Aeropostale, Macy's, Trader Joe's, and other "fine" retailers are where you will see many a middle-class consumer spending their retirement money away.
5. They have more than two children. You have more than two children? Well it's no wonder why you can't seem to put any money down for retirement each month. My man, if you're at three, do us all a favor and go get snipped!
6. Gotta have a yearly National Lampoon family vacation. Where are you taking the entire family this year, Mr. Griswold? Hawaii? Disney World? SeaWorld? You work hard every year only to save enough money for a week-long family vacation. It's good times, no doubt. Memories galore. But perhaps it would be best for you to have a staycation once in a while.
7. They buy vehicles that cost more than $30K. Listen here...if you're a member of the middle-class, like I am, you should not be buying a vehicle that will cost you more than one dollar past $30K. What are you thinking? Oh, you got a great financing deal...so what! That's years and years of payments (principal plus interest) you took on when you clearly did not have to. Suffer without the luxuries like responsible people do.
8. They are bad with their finances. This is an obvious one. To make it more meaningful, these are the questions about your finances you should be able to answer should anyone ever put a gun to your head: 1) How much do you keep (after all expenses) each month? 2) And what percentage of your income does #1 represent? Answering these two very basic questions will get you thinking about a slew of more. One of my favorites to ask is: Where's all the (spent or left over) money going?
To have saved enough for retirement these days, middle-class folks need to make adjustments, especially when it comes to our life expectations. The middle-class like we knew it to be peaked in the 20th century. The 21st century is a different beast altogether. So be on your fiscally best behavior out there!
What's preventing you from saving enough for retirement? Leave a comment.
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