How You Might Lose a Retirement Fortune to Procrastination

Nancy B. Alston

“Procrastination is like a credit card: it’s a lot of fun until you get the bill.”

Christopher Parker, Actor

As human beings, we love to procrastinate; let it be that healthy diet plan, gym sessions or even sorting out our finances. Being in the retirement savings industry, I come across several people who have excellent intentions to save for future, but not just today.

One of the latest interactions with a college friend motivated me to cover the impact of procrastination on our financial lives. For a better understanding, we will consider two different approaches towards retirement savings.

Steve and Bob, 25 years old, work in a technology firm, bagging an annual income of $80,000 each.

Scenario I: Steve decides to contribute $5,000 annually to his retirement fund and did so for the next 10 years, until age 35. In order to qualify for eligible distributions, he left the money invested until retirement.

With an average annual interest of 6%, Steve accumulated approximately $68,000 at the end of 10 years. For the next 25 years, this money grew 6% annually without any further contributions to $291,847.

Scenario II: Bob started contributing $5,000 annually to his retirement fund starting at age 35 for the next 10 years, and left the money invested until retirement age.

With the same investment terms, Bob too accumulated $68,000 at the age of 45. For the next 15 years, this money grew 6% annually, resulting in net retirement savings of $162,965.

Bob lost nearly $129,000 to procrastination!

After reading these two examples, you might understand how Bob lost out on the magic of compound interest but believe it or not, Bob is the reality of our society. When it comes to financial planning, phrases like ‘I am too busy,’ ‘I am too late,’ ‘It’s too soon’ or ‘I don’t know how’ are quite common.

How to use procrastination to build your retirement savings

Our team decided to take a different approach to retirement savings. Let’s see how procrastination can actually help you, of course with a little supplemental action.

Enroll in your company 401k plan

A little action towards retirement planning can generate tremendous results over a long period. Start by enrolling in your company’s 401k plan. A lot of companies have employees sign these during onboarding but if yours didn’t, make sure to ask for it. Most of the companies offer a matching contribution of up to 3% of the annual income of the employee, although their employer matching formulas might vary.

Thanks to procrastination, you’re not likely to pay these contributions enough attention or even stop it in future; hence, accumulating a sizeable retirement fund. When you change jobs, all it takes is a couple of applications to rollover the plan to your new employer, and the same cycle continues further.

Open an auto-debit checking account

It’s smart to have an auto-debit checking account. We suggest having two checking accounts to make it work. Open a new checking account with an auto-debit feature, and ask your employer to deposit your salary in this account.

Find out your recurring expenses, along with a margin to splurge, and the amount you can afford to save. The next time your salary credits into the account, the auto-debit feature will automatically send this set amount to your secondary checking account, hence helping you save more.

Everyone understands that procrastination rarely does any good to the average Joe’s life, so if it’s going to exist anyway, why not use it towards your advantage.

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