Raising children means you must juggle priorities. It’s easy to put some things like saving for retirement at the bottom of your priority list. After all, why would you and your spouse worry about something so far away when there’s so much going on in the here and now? It might be difficult at first and requires balance, but there’s critical reasons why saving while you’re raising a family is important.
#1 Saving for Retirement is a Benefit to Your Children
You read that correctly. You are your spouse saving for retirement benefits your children. One day, your children will have families of their own and responsibilities. If your own needs are taken care of then your children don’t have to come bail you out. How often does that happen? If you’re ever heard a reference to the “sandwich generation” it’s a significant part of what folks are facing by caring for the older and younger generation at the same time. If you and your spouse save for your own future, then you’ll be doing a kindness for your children when they’re grown.
#2 The Earlier You Start to Save, the Easier It Is
Compound interest is the single most powerful force in finance. The longer money is allowed to grow and earn interest on interest the better off you are. The key ingredient here is time. If one family grows their money for 10 years and another for 20 years, who do you expect to be better off? The earlier you save; the more time compound interest can do the heavy lifting for you.
#3 You Could be Missing out on Extra Help like a 401k Match
Many Americans with a retirement plan at work leave money on the table. Retirement plans at work, like a 401k, can offer a match. What is a match? That’s when your employer puts in money alongside what you put in. To get the match, you must put in money yourself, generally. If you miss out on a 401k match while you’re raising children, then giving up the closest thing to free money that exists.
#4 Your Family Could Pay Less in Taxes
One of immediate possible benefits of saving for retirement is to your taxes. Saving for retirement can mean your family is eligible for credits and/or deductions that reduce your tax bill every year. Don’t underestimate the impact these tax provisions can have. It’s not uncommon for households to reduce their tax burden by thousands of dollars or more each year by saving for retirement. Owners of solo-businesses or small businesses have even more potential savings at stake.
#5 Making up Ground Later Could be More Difficult Than You Think
Some couples rationalize postponing retirement savings by saying they’ll make up for lost time later. What if that doesn’t happen? It can be easy to believe how “easy” like will be once your children are grown. Life doesn’t play out that way. There could be new challenges that are difficult to see right now. Banking on a future environment that’s easy might never materialize.
#6 You Could Have More Options Now vs. Later On
This might sound strange, but your options for how to save might be better now than in the future. How could that be? Let’s use the Roth IRA as an example. A Roth IRA is a type of retirement account you can set up and have tax-free money, as long you meet some IRS criteria, in retirement. The catch is you’re only allowed to put money into a Roth IRA when you meet certain rules. Some families find that by the time they’re “ready” to save they no longer qualify because of changes in their finances and situation. If you wait, that flexibility could evaporate over time.
#7 You Create More Flexibility for Later in Your Career
What would you like your work life to be down the road? What if there was an opportunity that was what you always wanted, but the pay was a little less? If your financial house is in order for retirement, then you might be able to spend more time doing what you want instead of focusing on what pays the most. By saving for retirement earlier you and your spouse will have more options on how to spend your time.
#8 No One Else Will Do This For You
Nobody is going to solve this problem for you. The government will not solve it. Your workplace, no matter how good the benefits, will not solve it. It’s up to you to ensure you and your spouse are taken care of in future years.
#9 Scripture Calls us to be Savers
The Bible calls us to be diligent savers. Proverbs, as an example, calls us to put away resources for future seasons and future needs. If you make this a habit throughout your life, the future will be much easier.
“Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest.” Proverbs 6:6-8 ESV
#10 Not Depending on the Government
Reasonable people can argue about the solvency of social security and other government programs. There’s also a wide range of opinions about how those sorts of programs might change in the future. Here’s the fundamental questions: Do you want to depend on the government for your care in the future? If you don’t then it’s up to you to act. It can’t wait.
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