Updated Nov 24, 2014

Retirement Planning and Savings

Retirement planning and savings are a factor in one’s future financial stability. In planning, you need to analyze risks and obstacles, and the suitability of your savings. You could opt for voluntary savings or employer-provided pension plans, which could be better than planning for voluntary savings.

Key Risks to Anyone Planning to Save for Retirement

There are risks involved in planning your retirement savings. These are the most important risks:

  • Risk 1: In planning, think of the risk of uncertainty of your future income. This risk means possible future changes in your capacity to save for retirement.
  • Risk 2: When planning, consider changes in the value of money. Recession and crises contribute to this risk.
  • Risk 3: Your savings decrease in value because of inflation. In planning for your retirement savings, this risk means a sudden inflation rise could drastically reduce the value of your retirement savings.

Obstacles to Overcome to Ensure a Satisfactory “Nest Egg”

There are obstacles one could encounter in ensuring sufficient retirement savings for actual future needs:

  • Obstacle 1: Consistency of savings. This obstacle is based on changes in the economy and one’s needs, which could make it difficult to adhere to what you set via retirement planning. This obstacle highlights the advantages of employer-provided pension plans.
  • Obstacle 2: Technical decision-making for investment in planning to save for retirement. You need to have the right knowledge to invest to optimize your retirement savings.

Behavioral Approach to the Economics of Retirement: Employees’ Savings Practices often Undermine Their Best Interests

The behavioral approach to economics says that your assumptions and actual savings practices could be unsuitable for retirement savings needs. Your retirement savings practices might lead to too little savings. In planning for retirement, think of the risks, obstacles and the declining value of savings.

Advantages of Employer-Provided Pension Plans

Employer-provided pension plans are beneficial because they take the saving activity out of your head. Employer-provided pension plans are good if you’re having difficulties in saving consistently. Another advantage is that employer-provided pension plans reduce your tax remittance. These are the biggest advantages of employer-provided pension plans:

  • Advantage 1: Easy automated deductions for your retirement savings.
  • Advantage 2: Contributions in employer-provided pension plans are tax-exempt. This advantage means that you pay lower total taxes from your income.
  • Advantage 3: Employer-provided pension plans free up your mind from thinking about when and how much to save. A great advantage!

Conclusion: What does this all mean for your retirement plan and savings?

Retirement planning requires that you consider risks and obstacles. These risks and obstacles make it difficult to save for retirement. If you’re really having a hard time saving up, employer-provided pension plans could give you major advantages.


  • Adams, G. A., & Rau, B. L. (2011). Putting off tomorrow to do what you want today: planning for retirement. American Psychologist, 66(3), 180.
  • Nathan, S. (2013). Retirement savings tips the industry doesn’t want you to know: retirement planning. Personal Finance Newsletter, (391), 7-9.
First published Nov 24, 2014. Updated Nov 24, 2014.