Three Reasons to NOT Save for Retirement

Most people are vastly under saving, but no matter where you are at with your retirement investments, it never really will hurt to save more. Life is spontaneous and will sometimes throw you in different directions, so there will likely be times when it is more important to allocate your money to other important costs rather than saving for your retirement. Here is a list of three reasons that you may NOT want to save for retirement at the time:

Silver CascadeCredit Card Debt

If you are in a significant amount of credit card debt it is probably a good idea to put a hold on your retirement investments. High interest rates on your credit card debt puts a drain on your finances and unless your investments are making more in interest than you are paying on your debts you are effectively losing money. It’s important to pay off, or at least minimize your credit card debt as a priority over retirement savings.

Have an Emergency Fund

Life can always go differently than you expect it to. By having an emergency fund you will be able to protect yourself financially if you suddenly lose your job or encounter any unexpected medical costs. It’s a good idea to have at least 6 months of living expenses saved up. Once your emergency fund is stocked you should then allocate those funds to your retirement savings.

Student Loans

If you are young, you likely have significant student loans. While you might think that it makes the most sense to direct some money to retirement investments and some to your loans. But if the interest rates on your loans are higher than the interest that you accumulate on your retirement investment, you are losing money. It’s wiser to pay off your debt as quickly as possible and then invest in your retirement.

An exception to this, however, is a low interest student loan where your interest rates are less than the interest that you make on your retirement investments. If this is the case it’s smart to allocate funds to both.

Retirement investments are important and should always be part of a healthy financial plan, but there will be times in your life where it makes more sense to prioritize other expenses over your retirement plan. If diverting money from your retirement investments can help you with current financial burdens, don’t be afraid to deviate from the plan. Finding a balance is important when allocating money to your expenses and to your savings.

 

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