If you ask most people why they’re not saving for retirement, generally they’ll come up with a plethora of reasons why they can’t: they need to buy a house, pay off debt, or “how could I possibly save for that; I don’t have enough to live on as it is!”
Whether these are valid reasons or not, the fact is that most of us can’t imagine retirement. Although we know we’ll get older, for many of us, it just isn’t real. This behavior even has a name: “cognitive short-sightedness.” It’s part of being human and, because of it, we tend
to prioritize our current needs over our future needs.
A result of this type of thinking is that we make flawed predictions about our future needs, procrastinate about funding retirement savings, don’t plan for the lifestyle we expect to experience in retirement, and don’t put any strategy into effect.
Getting started is often the hardest step of any strategy; time can help you reach your retirement objectives — the more time, the better! The younger you start funding your retirement, the smaller the amount of money you must set aside each month to reach your financial retirement goals. This is because compound interest does lots of the hard work.
Compound interest is the interest on savings calculated on both the initial sum invested as well as the accumulated interest from previous periods. “Interest on interest,” or the power of compound interest, will make a sum grow faster than simple interest, which is calculated only on the principal amount.
According to our Financial Wellbeing Survey, only six percent of crew have an employer who contributes towards their pension. This means that the majority of crew need to self-fund their pension — so save for your pension now, because your employer is not!
Not everyone likes to think about the future. And not surprisingly, Covid-19 has certainly sparked a “Yolo” attitude in a lot of people. There is nothing wrong with wanting to enjoy the now. However, it’s just as important to recognize (and accept) that this may present some challenges in the future. For example, if you’ve been offshore for a number of years, you may not qualify for a state pension. So, with no employer pension and no government support, you may find yourself a little high and dry (perhaps less of a challenge if you only spend two or three years in the industry). The most important thing is that you need to plan for your future.
This article was originally published in the May 2023 issue of Dockwalk.