Retirement Savers, What's Holding You Back from Saving All You Can?

Have you ever heard a young person say, "Save for retirement? Are you crazy? I have to make student loan payments."

Older workers held themselves back, too: "Am I in the right investments? It's all so confusing. I'll put it off for another week or so." And then that week turns into a month, that month turns into a year...

When it comes to the ways in which humans hold themselves back from just about all things in life, you can point to a plethora of psychological principles that comes along with doing so.

However, it begs the basic question: What's holding you back from achieving specific goals and dreams, especially when it comes to maxing out your 401(k) or another retirement plan? And what can you do to avoid sabotaging your future self?

Fidelity suggests saving at least 15% of your pre-tax income each year for retirement, which includes the employer match. What's holding you back from going whole hog and contributing the maximum amount in your 401(k) — $19,500 if you're under age 50 or $26,000 for those 50 or older?

Let's walk through a few thought traps that might prevent you from contributing the max and how to squash them.

Possible Ways You Hold Yourself Back from Max Contributions

Have you found yourself falling into a few of these pits? Check out some of the ways you might talk yourself out of maxing out your retirement plan.

Thought Trap 1: You don't think you can afford it.

Let's say you're already saving for retirement but you worry that you don't make enough to max out your retirement plan.

Why not turn this thought on its head? Try saying, "I can't afford not to max out my retirement plan." It might do wonders for you. Let's walk through a quick scenario:

Let's say you're 30 years old and so is a friend of yours. Both of you work for the same company and you both make $60,000 per year. You contribute 15%, or $9,000, of your salary toward your company 401(k) each year. Your friend contributes 32.5% of his pay, or $19,500 per year. To keep it simple, let's say you don't get an employee match, you don't have any other money saved and you both keep the same retirement percentage each year. To keep it extra simple, let's also say you never get another raise. (All of these factors probably wouldn't occur at a regular company.)

Let's say you both invest for 37 years. By age 67, you'll have $1.47 million saved — a significant amount — but your friend will have a whopping $3.15 million on hand by the time he turns 67.

Furthermore, remember that your 401(k) and many other retirement accounts come with tax benefits. For example, let's use the same $60,000 annual salary; let's say you choose a pre-tax 401(k) plan. You lower your taxable income every year that you contribute to your account. Lowering your tax bracket can save you thousands of dollars on taxes.

See? Maxing out your retirement actually saves you money and lifts your retirement amount. Again, you might reason that you can't afford not to max out your retirement plan.

Trap 2: You worry about having enough money for monthly expenses.

Don't think you can afford to save the maximum in your retirement account? Why not try it for a month or two and see? Ratchet your savings up to that $19,500 threshold, and if it's too much, you can always back it down.

If you have to back down to a lower percentage of your salary, you could put yourself on a plan to incrementally increase your retirement contribution. You might surprise yourself and realize that you don't even notice the difference. Even if you can't start big, it still puts you in a mindset that doing something will put you on the path to financial freedom.

Make a list of some of the things you spend money on that you can give up. Going out to eat once a week, buying new clothes for work every month, fancy vanilla soy lattes, dog toys and fancy collars for your dog — the list is probably endless.

Trap 3: It's hard to envision what it will look like on the back end.

One of the biggest traps might involve not knowing what your savings will look like on the back end. More specifically, this means you don't know how much you'll end up having in savings when you finally do decide to retire.

The cliche "hindsight is always 20/20" comes to mind — it's a simple matter of not knowing. You may just not realize how much you'd have if you max out your 401(k). That's why it's vital to use a retirement calculator and take a look at the projections each year.

Playing around with a retirement calculator can help you see clearly. See what happens if you were to add an additional $200 to your retirement per month. An additional $200 per month could mean the difference between having $1 million and $2 million or more when you retire. It's amazing what compounding can do.

Trap 4: Saying, "I'll do it tomorrow." Then actually believing your words.

If that isn't the trap of all traps. In terms of retirement savings, it's the worst you can imagine because it puts the onus on yourself to be more responsible tomorrow or the next day or the next. And at the same time, if you don't actually do something about it, that leaves you with less in your account for your golden years.

You don't want to find yourself in a situation where, at age 55, you're still saying, "I'll do it tomorrow."

Max Out Your Retirement Today

Go for it. Try it. You can always change it later. What's the worst that could happen? Maybe you have to dip into your savings to pay for your groceries one month. You can always change it back. However, you at least get bragging rights — you can say you maxed out your retirement, even if just for a month.

The best case scenario: You keep your retirement savings maxed out because you realize, "Hey, it's not so bad after all. I can do this!"

Wouldn't that be excellent?