Are You a Retirement Ant or Grasshopper?

Aesop’s Fable

Do you know Aesop’s fable about The Ant and The Grasshopper? Basically the ants work hard during the beautiful summer months while the grasshopper fiddles all the while making fun of the industrious ants. When the cold, harsh winter arrives the grasshopper is cold and hungry. When he asks the ants for some food they rebuff him. There are several morals to this story: it’s better to worry about tomorrow today; it pays in the long run to save; and those ants are a bunch of hard-asses!

Retirement Ants and Grasshoppers

Ants and grasshoppers plan and prepare for the approach of winter (retirement) much differently. Ants work hard and save ahead. Grasshoppers live in the moment, enjoy doing their own thing and don’t concern themselves with the future. Ants feel secure, confident and prepared. When winter arrives they can enjoy it because they’re prepared. Grasshoppers feel just the opposite when winter arrives for them. They’re anxious, worried and unprepared. They don’t know how they’re going make it through winter and they certainly won’t be having much fun!

What Grasshoppers Can Do

Is there any hope for grasshoppers?

There is and it will require living more like ants. Grasshoppers have to save (as much as possible), sacrifice and work (and work). It won’t be easy but there are a few things grasshoppers should get started on right away.

  • Build and use a budget to instill discipline.
  • Develop a retirement plan to find gaps, identify corrective actions and to set goals.
  • Increase contributions to a 401k or Roth IRA.
  • Maximize an employer 401k match.
  • Take advantage of the over 50 401k and Roth IRA catch up provisions.
  • Utilize tax sheltered programs such as a Health Care Savings Account or an Employee Stock Purchase Plan.
  • Look for ways to cut expenses. (That shouldn’t be too hard because up to 15% of household spending is wasteful.)
  • Pay down debt. This may be a more effective use of cash compared with today’s low yielding investments.
  • Look for opportunities to generate more income and increase savings.
  • Consider refinancing a mortgage given historically attractive rates.
  • Create retirement plan scenarios that factor in downsizing, relocating or working additional years.
  • Develop a Social Security strategy that maximizes benefits.
  • Work with a financial planner to allocate investments according to age, risk tolerance and that are tax optimized.

 Can Grasshoppers Become Ants?

Grasshoppers have many obstacles to overcome: age; low savings; health; family obligations; household income; and mindset (growth vs. fixed). Becoming more ant-like won’t happen overnight. Some may not bother to even try and some will give up early on (i.e. those who have a fixed mindset). For those grasshoppers who really, truly want to become ants (i.e. those who have a growth mindset), developing a support system will help. A support system can include a partner (or spouse), company resources, friends, a group of like-minded people (why not form a meetup group) and a financial professional. There are even life and retirement coaches available. Motivation shouldn’t be hard to come by because the stakes are high. Getting retirement right is too important to stay on the sidelines and keep fiddling!

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