Source: A new law would require employees to save for retirement – MarketWatch

The law would mandate automatic payroll deductions of 3%, rising 1% per year until 10% is reached – unless the employee intentionally opts out. (Some businesses already implement this on their own.)

I argue that a younger person just out of college, especially in a professional track job, should be saving money to buy a home and other necessary life expenses at this young age – and not saving for retirement.

There is now research that backs this up – most college educated workers will have dramatic pay increases over the first 10-15 years of their work life. Saving will be easier with higher incomes (if they do not expand spending). This may be a time to spend money on enjoying life too – the future is not predictable and health problems and even death may eliminate future plans.

A side effect of the traditional view to start saving for retirement, immediately as a young person is that many will, surprisingly, save too much for retirement – and be unable to spend that money in retirement to do the things they then wish they had done when younger.

While many do not save adequately for future retirement, there are many, the research says, who save too much for retirement. That sounds paradoxical but research indicates its probably true. And while doing that, gave up much of what life had to offer – at a time when they could have had benefits from engaging in life. As one person put it, she chose at age 30 to take time out and travel around North America – because she saw that her parents, now in their late 60s, were unable to do much of the travel they dreamed of now because of sore knees and hips. Yet they had saved and invested more than they needed for retirement – but were not unable to do the things they had intended to do.

This new thinking is contrary to what I believed and how I lived my life. My parents were in the 40s when I was born – and they lived their lives based on their having grown up during the Great Depression: Save as much as you can for the future, re-use, repair and recycle goods, avoid spending money. I remember my Dad standing by the car instead of paying 50 cents for a parking meter – and sending the rest of us in to do business.

I now agree with these researchers – there is a time and place to live life before health problems intrude. I concluded that holding my parents’ Depression era values was not the right strategy for the past several decades. The world has changed.

Coldstreams Skeptic