Why it’s so hard to save for life’s most important financial goal
Sanjib Saha
29 June 2026
If you struggle to save up for a short-term financial goal – buying a new car in a couple of years or owning a home in five – wait until you think about retirement savings, arguably the most important financial goal in your life.
In our early/mid-career years, we aren’t so good at picturizing “retirement”. Career, family and day-to-day challenges understandably grab all our attention. As such, I couldn’t even imagine a life without work until my 40s. Thankfully, it wasn’t too late before I internalized a few facts of life and started paying attention to the topic.
As confident as I was about my ability to keep working indefinitely, I knew I’d eventually wear out, losing the paycheck that I depended on so much. After that, I’d be on my own, probably for a good few decades. No one was going to sponsor my post-work life. Unless I planned ahead, I risked becoming dependent on others and living miserably.
My other financial goals at that time were mostly met or on track. They were simple, but nonetheless difficult. Simple because the goals were well defined and the path was clear. Difficult because staying disciplined and resisting instant gratifications never come easy.
Take my first home purchase, for example. I was renting a spacious duplex and helping the landlord pay-off his mortgage. It dawned on me that owning a small condo or townhome may save me a few hundred dollars each month while building an asset. I have many years to recover from any unexpected loss. I decided to buy a house within the next year and ran some numbers to determine what I could afford.
Once I had a target downpayment range and the time-horizon, I started setting aside a portion of my monthly paycheck in a designating savings account. There was always the risk that home prices would rise faster than I planned for, but it wasn’t such a big deal. Worst-case, I’d have to wait longer and save more. Nobody was holding a gun to my head that’d go off if I don’t buy it next year.
In other words, I had a target, a flexible timeline, a secure income, and a safe place to park the downpayment. The only difficult part was setting money aside each month.
Contrast that with retirement saving. It’s literally on the opposite end of the complexity spectrum. Most people don’t even know where to start. Sadly, the “guaranteed retirement income” in form of Social Security or pension is too little. Yet people don’t realize that the burden to bridge the gap is on them.
Why is retirement saving so hard? Conceptually, it sounds straightforward if viewed through a useful financial concept – the annuity. No, I’m not talking about the insurance products named “annuity” that have deservedly earned a terrible reputation. I’m referring to the math to compute the lumpsum equivalent of a stream of periodic cashflows over a time-period.
Annuity math helps answer questions like: how much can I withdraw each month for 10 years from an initial investment of $10,000, earning 5% interest? Or, how much my portfolio would be in 20 years if I save $200 each month, earning 10% annual return.
Naïve planners may try to solve the retirement savings problem by breaking it into these two problems. The thinking goes like this.
First, how much is needed to retire? (This is basically the first annuity problem above). The answer comes by plugging in the expected length of retirement, annual retirement spending amount and the rate of return. Say the answer is $1 million to retire at age 65.
Second, how much to save annually between now and 65 – this is basically the second problem in the annuity math. Say the answer is, $15000. Keep saving this amount each year until 65 and voilà – the retirement saving problem is solved!
Alas, if only it were that simple.
To appreciate the complexity of the retirement saving problem, we need to peel the layers of uncertainty and risk.
First, it’s nearly impossible to accurately answer “how much do I need to retire?” For starters, we don’t choose how long we live. People misread the life expectancy table by focusing on the “average expectancy”, without realizing that the expectancy increases as we survive each year. Therefore, we must use a much larger number. Even planning for age 100 isn’t unreasonable.
Of course, there’s the risk of dying sooner, but that’s much better than living longer than what your finances might support.
Second, retirement spendings uneven – typically high in the beginning, dipping midway through, and picking up again later. Unexpected expenses like medical and living support can ruin the remainder of retirement. A fixed annual spending estimate doesn’t reflect reality.
Third, unexpected inflation can wreak havoc on retirement living standards. Handling this requires some reliable inflation-protection income, and exposure to risky investments such as global diversified stocks. But that introduces more uncertainty in investment returns and heightened exposure to bad market outcomes.
Investment returns, especially the sequence of returns, deserve special attention. Simulation-based planning tools can give a false sense of security by showing high probability of success. However, real life is not a simulation. You get only one shot – one iteration in perhaps 100,000 simulation runs. Harsh consequences await the unlucky retirees who experienced sustained poor market returns.
Perhaps the biggest challenge in retirement savings is the limited fallback options if things go wrong. Without the ability to earn meaningful income, the capacity to absorb financial shock is greatly diminished. That’s very different from the financial goals in working years.
What does this mean to us investors?
We absolutely do not want to “under-save” for retirement. The larger the retirement portfolio, the greater our ability to navigate through decades of uncertainty and challenges. That said, extreme oversaving isn’t ideal either if it comes at the expense of enjoying life in working years.
So, what should we do? To start with, don’t wait to have a plan. You simply can’t afford to.
If you are many decades away from retirement, the minimum you should do is to max out your contributions to retirement accounts and then save some more into your secondary accounts if you can. How much? Use our financial freedom calculator for a rough estimate.
If you are within 15-20 years of your planned retirement, start modeling your retirement plan using your actual numbers. If you use commercial tools, free or paid, be sure to check all the assumptions. You are welcome to use our in-house spreadsheet; contact us for an overview and tutorial. All our resources are free with no strings attached.
If your retirement is just a few years away, it’s time for serious planning. A fiduciary financial planner charging a reasonable one-time fee can be valuable if you’re open to professional help. Otherwise, you can reach out to us to learn how to approach it. We’ll gladly share what we’ve learnt through research and lived experience.