Way back when, you may have learned this formula in a math or science class: P=F/A — pressure equals force divided by area.
Think of the difference between a garden-hose nozzle on the "shower" setting and a pressure washer used to clean your patio. One spreads the water over a wide area, the other is focused on a much smaller area.
I thought about the P=F/A formula when reading "Behind on Retirement Savings? It’s Not Too Late to Catch Up," an article (behind paywall) in the weekend Wall Street Journal:
For parents who have become retirement-savings laggards, recent research by Boston College’s Center for Retirement Research suggests another route to building a nest egg....
For many people, “the transition into the empty nest is the key moment for retirement savings,” says Michael Kitces, director of wealth management at Pinnacle Advisory Group Inc. in Columbia, Md.
These latecomers in theory can not only dedicate a greater share of their income toward retirement savings...they also have less at risk if the market declines, in comparison with those who save early and rely more heavily on compounding for gains.
The WSJ piece goes into specifics related to savings targets, but the article notes that no catch-up plan will work without a key ingredient: self-discipline.
The problem, once you've come up with your [retirement-savings] number, is adjusting spending to hit your amplified savings goal. Households don't generally increase their saving much when kids leave home, according to a recent study [PDF] by Boston College's Center for Retirement Research.
Instead...parents appear to take the opportunity to spend more on themselves. On average, after the departure of the last child, empty-nesters raise their saving in tax-deferred 401(k) accounts by slightly less than one percentage point of income.
Which brings me back to P=F/A. When parents are in the midst of those wonderful-yet-challenging child-raising years, their financial resources are spread over a wide area. It takes a lot to provide for the temporal needs of a family! But when the empty-nest years arrive, it is easier to "narrow the area" and exert greater positive pressure on a focused point — such as retirement savings. (Or better yet, on two points — the second being increased generosity.)
"Rather than assume it’s too late to make a difference," people in the empty-nest phase should recognize that "now is the time to take action," Mr. Kitces says.... "By saving 20% to 30% or more of your income, it's possible to bridge a retirement savings gap pretty fast."