Bad Financial Advice: Skip Contributing to Retirement Savings to Save Money

I talk a lot about saving for retirement – because it’s one of the single-most important things you can do with your money throughout your life. But saving takes money — so could you save a little cash now by avoiding contributions toward your 401(k)?

In today’s episode of Your Money Minute with Tracy Stewart, CPA, I want to discuss “>why you should always contribute to your 401(k) retirement plan. Sure, the allure of saving money each month seems appealing… Just think of what you could do if you didn’t contribute that $1000 toward your 401(k) each month.

So, let’s talk dollars and cents first: If you didn’t contribute your $1000 monthly to your 401(k), you’d actually take home closer to $700 (not $1000) – if your tax rate is 30%.

Now, let’s talk about some of the practical pitfalls of this choice. If your employer matches contributions, you’re literally giving up free money. Plain and simple: That’s an awful idea! Also: Having a structured plan for saving for your future means it gets done. If you don’t make that contribution each month, you’ll get to retirement and sure wish you had.

If your employer’s 401(k) plan leaves a lot to be desired, find something else to supplement or another investment vehicle altogether. Skipping 401(k) and retirement savings contributions is a no-no and something you must avoid – even if it seems like a great idea in the moment.

Financial independence is unbelievably liberating. Saving for retirement takes money, effort and time – but when you can have peace of mind for your many, many tomorrows, it’s definitely worth it.

Remember: You can subscribe to my YouTube channel for even more practical advice on making the most of your money and life in daily episodes of Your Money Minute!