Today’s article is from Mr. Utopia. You can find his bio at the end of the article.
I started saving for retirement when I was still in high school. No, that’s not a misprint. I landed my first job during the summer before my senior year and promptly opened a Roth IRA account at 18 years of age. Now, I’d like to take all of the credit for being a financially savvy teenager who had the foresight to begin retirement planning before even voting in an election. The truth is, my parents urged me to set up the Roth IRA and I went along with it because I knew it was a good idea even if retirement seemed eons away.
While I don’t have any statistics to back me up, I’m willing to venture I began saving for retirement before 98% of the population. If I got off to such a fantastic start, then surely now that 15 years have elapsed, I should be miles ahead of peers in my demographic, right? Unfortunately, things haven’t quite unfolded that way.
Hit Hard by Financial Setbacks
I’ve endured successive financial hardships over the years that have done their best to derail my retirement savings momentum. These tribulations varied in degree of harshness. Also, some of them were more within my control than the others. Nonetheless, they served to throw a serious wrench into what was once a promising retirement savings trajectory. Here’s what happened:
- Lost my house – I became a proud, first-time home owner in 2006. What ensued was an absolute disaster that I’d wish upon no one and resulted in a nightmare foreclosure. Long story short, despite all the normal precautions any home purchaser would make (like paying for a thorough home inspection), I bought a “lemon” house unbeknownst to me. In fact, later investigation revealed obvious signs of the sellers covering up numerous leaking problems and then, illegally not disclosing them during the purchase process. What I ended up with was a property infested with toxic mold and needing $125,000 worth of repairs! I pursued legal action, but really couldn’t afford the prohibitive legal fees to carry out any litigation. In the end, I had to walk away and lost the house to foreclosure. The whole saga was a significant blow to my ability to continue making retirement savings contributions.
- Was laid off – The same month the foreclosure became official in 2008, I was greeted with a “pink slip” at work (on my birthday!). It wasn’t a complete shock (well, the birthday part was) because I was working in the banking industry as a small business loan underwriter and the signs of the impending banking collapse were just starting to reveal themselves. While not totally unexpected, there hadn’t been any time to make a preemptive job change. Thus, I was left unemployed and dealing with all of the accompanying stress that situation induces. Retirement savings were obviously one of the last things on my mind at the time. Fortunately, I was blessed to get hired for a new job only a few months later right at the time when the rest of the economy was tanking. In the end, being laid off did not have as severe an impact on retirement savings as it could have. However, it did cause some damage especially since I was still reeling from the foreclosure.
- Lots of debt – The last event in the financial setback “trifecta” was debt…lots and lots of it! Now, this wasn’t something that necessarily came out of the blue and I did have a choice in the matter. That said, it was still something I had never really expected. Before I met her, my future wife had incurred over $100k of school loans. I had taken out another $40,000 to fund my MBA. Needing to repay $140,000 in combined school loan debt is quite the obstacle to saving for retirement. We tackled the debt head on though even if it meant having to assign a lesser priority to retirement savings. In the end, we paid off this debt in less than 3 years!
Financial Setbacks and Retirement Planning
All of these tormenting trials helped me learn some valuable lessons. Don’t get me wrong, if I was able to turn back the hands of time and avoid these setbacks – I would. That said, it’s definitely made me a stronger person. If you find yourself in the midst of a horrendous financial hardship, then perhaps you will find solace in my story and knowing that you can get back on track. Here are some things to keep in mind:
- Continue on even through crisis – Despite all that I went through, I never fully ceased contributing at least something to my retirement savings vehicles. Sure, it wasn’t at the amounts I wanted to be funding, but continuing to make contributions through the bad times will at least give you some peace of mind that you haven’t completely lost all hope of ever retiring!
- After the tough times are over: refocus – When you’re in the middle of the storm, it feels like it’ll never end. But know the adversity will pass eventually. When that happens, get back on track. Refocus your efforts on retirement savings. You can’t make up for lost time in the sense that you can still only contribute the max yearly limits into traditional retirement accounts. However, make sure you achieve those contribution limits if you can do so going forward. If not, do your best to progress to those goals.
- Find other ways – You don’t have to just fund retirement accounts to save for retirement. Explore other methods to invest or increase your income potential. There’s a multitude of ways out there whether it’s pushing vigorously for a promotion or searching for ways to earn side income. You’ve just got find the right opportunities and then work hard at it.
What My Retirement Savings Situation is Now
My wife and I are still in Phase I of Mr. RB40’s 7 phases of retirement, but we are taking the steps to enter Phase II. Even though we are making decent progress nowadays, I’ll admit, oftentimes retirement feels like it’s still a million miles away. When those feelings of doubt creep up, I remind myself how far my wife and I have come. I also take comfort in knowing we are doing what we can to further enhance our retirement savings efforts and gain momentum to make up for lost time.
I’ll leave you with this:
Financial hardships hit everyone, some worse than others. If you find yourself in such a situation, know that is possible to keep your eye towards retirement during the crisis and then to get back on track once life has returned to normal. If you ever doubt it, let me know and I’ll help talk you down off the ledge!
Have you experienced financial difficulties that derailed your retirement savings efforts? How did you persevere? What steps did you take to get back on track? Any particular lessons learned?
JC, also known as Mr. Utopia in the blogosphere, is a senior financial analyst at a Fortune 50 company. A devoted husband and father, JC uses his “free” time to run Personal Finance Utopia where he chronicles his family’s journey to get their personal finances to an ideal place.
Photo credit: Flickr The U.S. Army
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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