Why I haven’t saved for retirement in years and what am I doing instead

  • I stopped contributing to a 401(k) when I became self-employed and lost my employer contribution.
  • I think investing in a taxable brokerage account is smarter for me as it is more flexible.
  • My money is not locked up 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. And yet, I totally believe in planning ahead for retirement. I have even worked to help other people understand why investing is important. So if my lack of recent retirement account contributions sounds unthinkable, I’ll explain.

I started saving for retirement in my 20s through an employer’s 401(k) plan. I was working as a writer and editor, and retirement was decades away, but I knew the magic of compounding could help me shape my future. The company he had been working for offered matching funds with a staggered award schedule. It is true that it was not the best. But I still contributed before taxes, not knowing if I would ever get the full matching payment. (Spoiler alert: I didn’t.)

Fast forward to my next job, where I continued to contribute to a 401(k) with every paycheck. This employer had a more generous policy, with a company contribution of up to 5% of funds and immediate award. He was getting free money, and it was a great motivator. I was able to see my retirement accounts grow.

I’ll save you my entire career path, but eventually I ended up with an agency that matched up to 5% of my retirement contributions. There, I became fully grandfathered after three years, and even incorporated an earlier 401(k) plan to consolidate my investments with lower fees.

In this job, I regularly contributed the minimum required for the match and sometimes contributed more than 10% of my salary. My focus was on saving money, growing my retirement account, and reducing taxable income. But when I decided to leave that staff job to find the freedom to work for myself, I also left matching funds. And lost the ability to add more. So I stopped investing in workplace retirement accounts.

Being independent changed my perspective on retirement planning.

In this new stage, you could have started contributing to after-tax retirement accounts. But my perspective on retirement planning had changed.

You see, when I became independent, I decided that I needed to be more financially liquid. This would help me while building my business and give me a cushion in case of an emergency. Because there is no paid time off for consultants, unless you have mastered passive income, but that is other history, so it’s helpful to have funds on hand.

And while traditional retirement accounts can be helpful for long-term planning, especially when you’re an employee receiving a company matching contribution, circumstances do change. In my case, I absolutely did not want to face a penalty if I wanted to withdraw funds before retirement age. (Another thing I considered? While pre-tax retirement accounts can help employees reduce taxable income, business owners like me can reduce taxable income by deducting qualified business expenses ).

That said, my response to becoming more liquid, and more in control of my finances, was No channel all the money into a bank savings account and hope for the best. Because inflation is real. And fixed money kept in a savings account loses value over time, especially considering that the average national interest rate for savings accounts is just 0.06%, according to a May 2022 survey by Bankrate. (Yes, it is low.)

These days, as inflation rises, I now have more funds in investments like index funds, some stocks, and cryptocurrencies. And you know what? While my retirement accounts from previous jobs continue to grow and aren’t too bad, my after-tax investments aren’t too bad either. And I am grateful. Because as we continue to deal with economic uncertainty, I can move or withdraw my after-tax funds if I need to, without penalty.

I’m happy to adjust as needed

While I appreciate my old self for investing through employer plans, I am now in charge of my own destiny. And I’m glad I can control my after-tax account investments instead of relying on the potentially limited options of a 401(k).

As the markets continue to change, I am open to adjusting my investment strategy. For example, I may consider a bitcoin IRA at some point, as I appreciate the returns that cryptocurrencies (which are volatile) can bring. But for now, I am satisfied with my current plan.

Today I don’t have to work as much as I used to because of my investments. I have more time to see my family and dedicate myself to the media and speaking projects that I love. And I know that I have positioned myself well for my current situation and for my future.

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