Why I haven’t saved for retirement in years and what to do instead

  • I stopped contributing to my 401(k) when I started piecework and lost my employer match.
  • I think investing in a taxable brokerage account is smarter for me, because it’s more flexible.
  • My money hasn’t been locked in for decades, and I can use it to expand my business as needed.

Confession: I haven’t really contributed to my retirement accounts since 2019. However, I totally believe in advance retirement planning. I’ve even worked to help others understand why investing is so important. So if my lack of recent contributions to a retirement account seems out of the question, I’ll explain.

I started saving for retirement in my twenties with my employer’s 401(k) plan. I was working as a writer and editor, and retirement was a long way off, but I knew the magic of composition could help build my future. The company I worked for offered matching funds with a back-to-back vesting schedule. Admittedly, it wasn’t the best. But I’m still contributing before taxes, and I don’t know if I’ll get the full matching return. (Spoiler: I didn’t.)

Fast forward to my next job, where I continued to contribute to my 401(k) with every paycheck. This employer had a more generous policy, with the company matching up to 5% of the money and immediate vesting. I was getting free money, oh my god, and that was a huge incentive. I could see my retirement accounts grow.

I’m going to save you all my workplace trip, but I end up in an agency that’s 5% of my retirement contributions. There, I was fully commissioned three years later, and even entered into an earlier 401(k) plan to consolidate my investments with lower fees.

In this job, I have been regularly contributing the minimum required to match, and on occasion, I will contribute more than 10% of my salary. My focus was on saving money, growing a retirement account, and reducing taxable income. But when I decided Leave the staff job to find freedom And working for myself, I also left matching funds. The ability to add more is lost. So I stopped investing in workplace retirement accounts.

Going freelance changed my view of retirement planning

In this new phase, I could start contributing to after-tax retirement accounts. But my view on retirement planning has changed.

You see, when I started working independently, I decided I needed to be more financially liquid. This will help while ramping up my work and giving me a pillow in case of emergency. Because there is no paid time off for consultants – unless you master passive income, but this else Story – So it pays to have money on hand.

And while traditional retirement accounts can be useful for long-term planning, especially when you’re an employee receiving a vesting company match, circumstances change. In my case, I never wanted to face a penalty if I wanted to withdraw money before retirement age. (Another thing I thought was that while pre-tax retirement accounts can help employees reduce taxable income, business owners, like me, can reduce taxable income by Deduction of eligible business expenses.)

Having said that, my answer to being more liquid – and more in control of my finances – was Not To channel all the money into a savings bank account and hope for the best. Because inflation is real. And the flat money Stocking in a savings account loses its value over time, especially given that The national average interest rate on savings accounts It is only 0.06%, according to a May 2022 survey from Bankrate. (Yes, it’s low.)

These days, With rising inflationI now have more money in investments like index fundsAnd a few stocks and cryptocurrencies. And you know what? While my retirement accounts from previous employee jobs continue to grow, which isn’t too shoddy, my after-tax investments aren’t too shoddy either. I am grateful. Because as we continue to deal with economic uncertainty, I can move or withdraw my after-tax money if I need to — without penalty.

I am happy to edit as needed

Although I appreciate my past for my investment via my employer’s plans, I am now responsible for my own destiny. I am happy that I control my investments in post-tax accounts as opposed to relying on limited 401(k) options.

As the markets continue to shift, I am open to adjusting my investment strategy. For example, I might consider a file bitcoin ira At some point, because I appreciate the returns that (volatile) cryptocurrency can bring. But for now, I’m satisfied with my current plan.

Today I no longer have to work as much as I used to because of my investments. I have more time to see my family and pursue media and speaking projects that I love. And I know I put myself well in my current situation and my future.