Procrastinating on Retirement Saving Leads to Trouble

Mobile Share Email Facebook Twitter LinkedIn

This is a fun TED talk on a topic all of us can relate to: procrastination.

It is relevant to a central theme of this blog: retirement. Research shows that procrastination plays at least a small role in why so many U.S. workers haven’t saved enough to retire in the lifestyle they’re accustomed to. The urgency of saving early has never been truer than it is for Millennials and Gen-Z. More on that later.

First, let Tim Urban explain his theory about procrastination. He is a master procrastinator, demonstrated by his handling of his senior college thesis, a year-long project jammed into three days that included two all-nighters.

He argues that when a deadline is fast approaching, procrastinators panic and get the job done. He just made his thesis deadline. “In the end, it works,” he says in the TED talk.  

Retirement also has a deadline. It’s a somewhat fungible deadline. Some people retire as soon as they can get Social Security (at age 62) or Medicare (at 65). A few hang on until 70 or even later. But at some point, retirement will come.

Saving for that day, however, is not a project that can wait until the last minute. The Center for Retirement Research, which supports this blog, has estimated how much workers need to save, depending on the age they get started.

A 25-year-old who puts money in a retirement savings plan now and wants to retire at 65 would have to save 10 percent of his paycheck through a combination of his own and his employer’s contributions – if the employer has a 401(k). Delay, and that increases to 15 percent at age 35, and to 27 percent at age 45!

These are 2014 estimates and dated because the stock market returns on the 401(k) investments, interest rates and other factors that go into calculating them have changed. But you get the idea. Saving at the last minute doesn’t work when it comes to the deadline for having enough money to retire comfortably.

Pensions are disappearing and Social Security benefits are shrinking as the program’s age for receiving the full retirement benefit increases. That’s the reality of the 401(k) world young adults are living in.

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBCTo stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.  This blog is supported by the Center for Retirement Research at Boston College.   


Are the young really procrastinating? Where is the evidence? Maybe the young have taken Econ 101 and are postponing saving until their earnings are higher and their marginal utility of consumption is lower.

Dave Arey

Procrastination is one challenge. But so too is the paradox of choice.

I think current research shows that investing 15% of one’s earned income from day one of their first job will provide a decent chance of accumulating enough financial assets to retire by say age 65. Assuming one makes prudent investment decisions along the way, which is hardly a given.

Procrastinating is just math.

So, start early by doing what, exactly?

Do you have access to a 401(k) or 403(b) or 457 plan? What are the investment options? What are the investment costs? How much is the employer match? What is the vesting schedule? Are Roth deferrals better than pre-tax deferrals? If you don’t make an enrollment decision, does the plan have an default enrollment and investment option and if so, is that non-decision resulting in you to investing 15% of your pay?

If you don’t have an employer-sponsored qualified retirement plan at work, what are IRAs (after all, you studied to be a nurse or an engineer, or a data scientist, or a dental hygienist…how are you supposed to know)?

Should you go to you bank and set up an IRA? Or how about going to Fidelity, Vanguard, Schwab? Should you have a Roth IRA or Traditional IRA? If using an IRA isn’t enough (i.e. the maximum dollar limit is less than 15%) should you open a brokerage account?

Said another way, could the financial services industry, thanks to either an incoherent or nonexistent national retirement income policy (maybe that’ll be part of the SECURE Act 6.0?) be anymore convoluted?

It can and it will.

Comments are closed.