Retirement and the Credit Crisis

Posted by: Sophie H. | Jan 18,2008


I was listening to Barack Obama speak on NPR yesterday.  His stump speech mentions how people have to sacrifice saving for retirement because they’re too caught up with paying for a mortgage, credit card, and daily expenses.  It is not surprising that a retirement account is the first thing to go if you’re running a tight budget.  If you need the money today, it’s not like you can start putting the money into a  retirement count instead of paying your credit card bill or other pressing needs.  

This is a real problem, and I don’t feel like I’ve spent enough time addressing people who face this kind of quandary.  I’ve written about the best way to use a 401(k), when you should save and when you should invest, and the importance of paying down debt, as well as other issues facing retirees who may have surplus money that they’re unsure what to do with.  What about those who just can’t make ends meet if they put money into a retirement account?  

The answer is that you need to run a tighter ship if at all possible.  Saving for retirement is important and shouldn’t just be cast aside.  Even if you’re only able to deposit $50 into a retirement account one month, you should still do it.  But what about those people who don’t even have $50 to spare?  Really go through your budget and see if there is any way to cut unneeded expenses.  The trouble is that when people are really living close to the bone they start spending on credit, which takes away money that could be used to be put in a retirement fund.  Sometimes you just have to bite the bullet and not buy everything  that you or your family desires.  I’m not talking about necessities, but gifts and toys and the like that are not entirely necessarily.  

The problem is that many people use credit to live above their means.  It can be demoralizing to not bring in a stellar paycheck every month, so credit is a way to take up the slack.  If you’re really serious about saving money and saving for retirement than you may have to change the way you use credit.  If you aren’t one who abuses credit, then you will need to budget with a fine tooth comb and determine everywhere your money is going.  By all means, pay off debt before saving for retirement, especially if it means avoiding a default, but keep on track with those debt payments.  The sooner your out of the woods with your credit card debt, the sooner you can put that money towards your personal savings.   

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