Pete the Planner: Doing what’s right isn’t always popular when planning for retirement
Pete: I have not always made the greatest financial decisions in the world (student loans for graduate school were a big mistake). But our cars are paid off, credit card debt is retired every month, and we contribute to our kids' 529 (education funding) plans. I also contribute 10 percent of income (counting employer match) toward retirement. Friends chide me for saving for retirement, saying "you won't be able to use that money ... you will be too old" and "live for now." I know you have probably plowed this ground before, but how do I respond to that kind of thinking? All I can ever think of is "I do not want to HAVE to work" in retirement. — Joshua
On the night before my first day of middle school, my dad walked into my bedroom. Seeing him, I pressed stop on my boombox, thus silencing Milli Vanilli for a brief moment. “Good luck tomorrow, Pete-boy. You’ll do great. Just remember, doing what’s right isn’t always popular and doing what’s popular isn’t always right,” he offered.
“Thanks, Dad,” I squeaked, like someone stepped on a dog toy.
Making poor financial decisions is very popular in 2018. In fact, unbelievably, it’s the standard. A vast – and I mean a vast – majority of Americans are unprepared for tomorrow, whether you choose to take tomorrow literally or figuratively. Being financially prepared is unusual. And it's a definite change in attitude from previous generations, like my Dad's.
One way to illustrate how weird things have gotten is to consider the history of the tobacco industry over the past few generations. At one point, say the mid-1950s, lots and lots of people smoked, and you were out of the norm if you didn’t smoke. Now, far fewer people smoke cigarettes and you are considered out of the norm for lighting up. Smoking is bad for you. Not saving for the future is bad for you. How in the world can those two bad choices be on two totally opposite trajectories? Smoking is getting less popular, and financial instability is getting more popular.
Learn more: Best personal loans
More:Pete the Planner: I just got a big inheritance. What should I do with it?
More:Starting a retirement plan at age 50 with only a $30K salary? Success possible, if lucky
More:Pete the Planner: How to retire successfully when starting from scratch at age 50
How do you feel when you see someone smoking, even if it's one of those vaping rigs? Do you feel peer pressure to join them? Of course you don’t. Because in your mind, just like most people, you’ve decided the peer pressure isn’t more powerful than the future negative consequence that comes from smoking.
Joshua, in your financial life, you’ve done a decent job of coming to this same conclusion about the negative consequences of being financially irresponsible. But it also appears as though peer pressure is testing your resolve.
The “live for now” movement is shortsighted. Your friends will only be proven right if they die before achieving the traditional retirement age. If they're only proven right in their early demise, that’s bad. They won't even be around to get in an “I told you so” comment.
As to how to respond to the pressure, just know that logic is on your side. Let’s say we collected 100 top personal finance experts in a room and asked them to side with your thinking or your friends’ thinking. How many out of 100 would side with you? I’d say at least 98. Primarily because the other two are distracted by bitcoin and Canadian cannabis stocks.
Logic says you are right. Math says you are right. And when you stare back at the wrinklier version of you in the mirror someday, it will awkwardly fist bump you and tell you that you were right, too.
Doing the right thing is hard. It's OK to acknowledge this from time to time, but don't go so far as to talk yourself out of continuing to do the right thing. Try to align yourself with like-minded people.
By answering your question, I hope to instill some confidence to use to fuel your defense with your friends. But I also need to be honest with you, Joshua, and say that, even though you are ahead of your friends in preparing for retirement, you’re actually not doing enough to prepare for the future. Ten percent isn’t enough.
I need you to help me help you. Increase your total contributions to 15 percent as soon as you reasonably can. If you don’t, I fear you won’t have the desired outcome you’re working so hard to achieve.
Peter Dunn is an author, speaker and radio host, and he has a free podcast: "Million Dollar Plan." Have a question for Pete the Planner? Email him at AskPete@petetheplanner.com. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.