8 Reasons I Don’t Save My Money for Retirement

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I understand saving for retirement is something I should do, but there are lots of things I should do that I somehow survive not doing. Watching Star Wars comes to mind…

The first time someone asked me what my goals for retirement were, I just laughed. I was 25 years old and couldn't decide what to do that weekend, let alone where I would be at 35. You're asking about my life at 65? Next question, please!

When I was first offered a retirement account at age 25 through my job, I contributed. As the years went on, however, the more I learned, the less I liked what Traditional IRAs and 401(k)s had to offer. I stopped contributing at age 28 and have not since (I'm just shy of 33). I have no plans to start contributing again in the future and below are 8 reasons why. This is strictly an opinion piece and not a reflection on Investor Junkie as a whole.

>>Further Reading: How to Invest for Retirement 

8 Reasons for Not Saving Your Money

1. Common Sense

The government penalizes you for touching your money before the age of 59½. That is enough for me to be wary of retirement accounts. It's my life, my money, and if I want to access it, I should be able to. The insinuation that I can't handle having money to my name without spending it is insulting. To boot, Wall Street makes out like thieves under the IRS rules. They get to play with your money for decades and never have to worry about you coming to ask for even a dime.

2. The Tax Lie

We hear all the time about the great tax benefits that come with retirement accounts (investing pre-tax dollars). What we don't hear about is that you pay taxes at 59½ when you withdraw. Do you know what the income tax brackets will be 20, 30 or 40 years from now? Me neither. And neither does the government. Considering the direction of our country's debt, I'm not willing to assume taxes will be lower.

3. Principle

We need a better system. Ten thousand baby boomers retire every day, and they are the 401(k) and IRA guinea pigs. At any moment their portfolios could drop to zero. In my opinion, the government — not Wall Street — needs to come up with a plan. Social Security hasn't worked, and the current system is too precarious since it could leave millions of Americans with nothing at anytime. Not that the current system is even working. The Insured Retirement Institute says 35 million baby boomers have zero saved for retirement, Fidelity says over half of Americans won't be able to cover basic expenses in retirement, and Vanguard says boomers over the age of 65 have an average 401(k) balance of $196k.

4. Hypocrisy

We are told not to time the market, but that is precisely what retirement accounts force us to do. Every eight to ten years, there is a bear market. During that time, many retirees will have no choice but to sell (yes, you are actually forced to sell at a certain age or else you are penalized by the IRS). And if the time you have to sell the market is at bottom lows? Or if the bear market lasts ten years? Oops, guess you better start looking for a job. This is quintessential market timing that the government and Wall Street are encouraging.

5. The Winner Is Always Wall Street

Today, everyone is expected to learn to invest if they want to retire. If you don't learn? You pay someone on Wall Street to do it for you. If you do learn? You still pay Wall Street: Every time you buy a stock, mutual fund or exchange-traded fund (ETF), someone on Wall Street gets paid. This is whether you make money or lose money. Wall Street is the house, and we are the gamblers. The government watches from the sidelines and hopes the market keeps going up.

6. We Are Set Up to Fail

Not only is the government supporting a system that largely enriches Wall Street, but it isn't even leveling the playing field for the rest of us. Investing 101 and financial education should be required in schools. Retirement accounts came to life in the '80s, and last time I checked, there has been no reflection of this type of education required in public schools. Of course, the financial services industry is grateful for our ignorance.

7. It's Not Always a Good Time to Buy

I'm writing this in August 2018. The stock market could be considered expensive. A problem I have with retirement accounts is that Americans contribute to the stock market regardless of price. This statement is aimed largely at the increasing popularity of index funds that buy the entire stock market. It's possible the stock market could go up forever, but according to most measures, we are nearing the top or are already there. Americans are encouraged to make contributing to their retirement accounts a habit, when is not always sound advice.

8. I Have Bigger Plans

A friend of mine is 25 and doesn't invest in retirement accounts. One day I asked him why. His response? If by the time I'm 60 years old I am relying on a 401(k) or IRA account to fund my life — it means I failed. He articulated my sentiments exactly. I have aggressive net-worth goals and plenty of ideas for how to get there. Putting aside 10% of a salary for 30 years and hoping it's enough to support me when I'm old is setting low life standards. Every dollar in a retirement account is a dollar not being used to invest in myself, in real estate, in my business, etc.

So Do I Not Save for the Future?

When I was first heard about retirement accounts at age 25, they seemed like a great deal (company match! pre-tax investing!). However, as I mentioned, the more I learned, the less sense they made to me. Plainly speaking, I think they are a giant marketing scam created by the financial services industry that the government went along with because it lacked any better plan.

The idea of putting all our eggs in a stock market basket is asinine. What happened to saving cash? Owning physical assets? Starting a business? Yes, cash isn't ideal in the long run, but having a pile of cash on hand comes in handy when a good opportunity comes along. People who put all their money into retirement accounts miss out on seizing many opportunities because they aren't liquid. I also just can't make sense of the fact that everyone is encouraged to invest in the stock market when so few people actually understand it. Why would you trust something you don't understand?

So do I not save for the future? Of course I do. And yes, I even invest in stocks. I buy individual companies that I have researched and believe am buying at a good price. This can be done through taxable accounts, and I pay a capital gains tax of 15%, which is lower than I have any chance of paying through retirement accounts. I also own real estate and have my own business. I have plenty of plans for my money, but none of them will involve locking it up with Wall Street and hoping it's more valuable and taxes will be lower 30 years from now.

Elizabeth Shutty

Elizabeth Shutty is a New York City-based digital marketer and finance enthusiast. Her background includes guerrilla marketing for Clif Bar, affiliate marketing at LinkShare and, most recently, sales for an international performance agency that executed SEO and PPC campaigns for multinationals.

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  1. An economics major who just got my first job. You are absolutely correct I can’t speak for the others above even though I saw one comment of someone was investing since they were 28 and now they’re 64 and they have more than 500k. Unfortunately, that person could be a multi-millionaire had they put that money into some real cash flowing assets or invested it themselves.

    1. As another datapoint, I’ve consistently used retirement accounts since my first job out of college. I’m mid-40s now and have $3.2M in those accounts today. Have another $1.2M equity in real estate, cash, etc. I think this article gives pretty bad advice and would tell the 25 year old version of myself to disregard the information here. I will say that if you are saving early and consistently you’ve won most of the battle, regardless of what vehicle you put it in.

    2. Economics doesn’t mean you know investing. I’m a Finance major with 26 years in the industry. I didn’t learn investing in college. I learned on-the-job and by watching my advice turn friends, family and clients into wealth builders. This article is bad. So much is wrong or missing context. My suggestion to anyone viewing this reply is to start putting away 10% in your company’s 401(k) or in a Roth IRA if your employer doesn’t offer matching. If you’re not sure how to invest, your plan probably offers a time-based strategy such as target date funds. Just put it there and walk away for a while. Good luck!

  2. Over the past few days, the stock market has experiened its 3rd worst crash in history. I’m glad most of my retirement funds weren’t in there. I agree, and have agreed since 2008, with the author of this fine piece. What the stock market giveth, the stock market taketh away.

  3. It will be a sad day when you wake up at age 65 and find yourself with no funds. The stock market has averaged like almost 11% since the 1920’s. Yes there are ups and downs but the people that get hurt are the ones that jump off of the roller coaster. They buy high and sell low. My advice to anyone is learn as much as you can about finance and how money works. One question to ask yourself is, do you think things will actually be cheaper in the future? If not then why would your stocks be cheaper in the future? What a waste of the opportunity for compounding.

  4. Let’s see if any of you can answer this question. Let’s say, you are over age 65 and retired. The Global Markets and US experience a Bear Market that lasts 10 years. I am talking both the bond and stock markets. How will you survive? Can you recover? This can and will happen. History is on my side.

  5. At 25 my first choice would be to invest the maximum into 401K/IRA. At 55, I have ridden the rise and fall of the market for 30 years. Cashing out to pay off mortgage. Killing off all DEBT and SAVING is a must in ANY scenario. Savings can be in the form of silver, gold, debt free real estate, or cash. Better yet a small business to supplement a current job. But… there must be savings! Savers will win in the end no matter the path or paths taken. Some will have more than others, but peace of mind is most welcome.

  6. Just dumb. I’m 64, have saved in retirement accounts since 28, and have over 500k there. I’ve had very big ups and downs in my career, and gaps when I couldn’t contribute. I’ve never had a pension. Yet, with social security coming up in a couple of years, will be able to sustainably have income of 4k a month. That’s an extremely good feeling. I have my own house, own a business I can keep working in, but don’t have to. If I didn’t have that 500k in IRA/401k instruments, it would not be in another account. A lot of that money came from not being taxed on capital appreciation while in a 401k. So, it would be far less, though post-tax. And, during retirement that money can keep growing tax deferred.

  7. Damn I could have wrote this article. Ive been talking about this for 2 years. I figured out the scam 2 years go at 27 after buying my first house. It was pretty obvious it was all a scam when the banker said “Money in retirement accounts doesn’t count as part of your net worth to us because we can’t access it if you default.”

    This knowledge need to get out there. I’ve spread it to a few folks along the way, but it really needs to be on cable tv so people will listen.

  8. This is unfortunately a click-batey type article with little actionable information. History doesn’t repeat itself, but it certainly rhymes. Everyone’s circumstances are different, though some may be similar to yours, and by not providing specifics as to why this is not the best choice for YOU (income, employee/business owner/IC, etc…)., your readers miss out on the application of the reasoning.

    1. This one comes off rather demeaning to your readers. There are plenty of common sense reasons to invest in a 401K. I’m in a fortunate situation where I am in the upper tax brackets as an employee. If I am unable to touch the money until 59.5 (see above) I plan to have other savings/business vehicles to spend from until I can touch the money without penalty (you can have access to the funds, but you have to pay to do so). Not to mention, once debts are paid and the nest egg is built and my need for higher income decreases, I can reduce my position to part-time IC, and have different tax benefits, more free time, and enough income to live off of in the mean time.

    2. Depends. I am in the 32-35% tax bracket as an employee. If I use “common sense,” I shelter the money from marginal rates of 35% and 32%, to later take it out at 10, 12, 22 or 24. Whatever the futures rates are, I get to utilize lower marginal brackets, which are unlikely to add up to 32% or 35%. I save a considerable amount and live off less than I earn. In retirement (or pre-retirement), I will be personal-debt free, AND have the benefit of not needing to put away money for retirement. I will require considerably less than my income. My needs will decline, and it is highly unlikely my total tax will be higher than my current marginal tax.

    3. It’s an ok system, but it is geared for high income earners (the tax lie, isn’t a lie so much as it is of no benefit to the majority of people), so I won’t argue with you much there.

    4. Most accounts are funded over a lifetime and provide for dollar-cost-averaging which helps to defray bear markets (as you are buying both the highs and the lows). When you near retirement you should shift towards more dividends and bonds to help defray market volatility.

    5. No doubt much of the profits go to Wall Street. It’s not a loser’s game, entirely, but the financial people often see more benefit than the average investor. It’s why most of us should buy and hold index funds or low cost ETFs with infrequent readjustments of funds (I would bet most of the readers of this site do just that.) I totally agree that you have to pay wall street, but you have to do that with your individual stocks in taxable accounts, right?!?

    6. No arguments here. My kids get very little information from school, and what they get, I supplement at home.

    7. Meh. Again, dollar-cost-averaging. If beating the market regularly were easy, then most mutual funds wouldn’t lag the market. I mean, they hire geniuses, don’t they?!? People were yelling the market was too expensive in 2016 (me included), and here we are, yet higher. It will drop at some point, and I have some dry powder on hand when stocks go on sale.

    8. Sorry, but this one was written to be as vague and antagonistic as possible. What is worse is that you made it non-actionable. Why just put away 10%. Why just a 401k? What happens if he has both no 401k and no funds come retirement? Has he failed then, or just riding hope for the better gub’ment plan you mention in point 3?
    In all seriousness, good on you for having big goals. But why have a tone that pretends others are less than? You can have a 401k and rental properties, too. You can be an employee, with a side-hustle and a few rentals. Maybe a franchisee in a chain restaurant. Perhaps a freelance writer with deductible expenses. Different people have different tax circumstances and different ways to increase income and be more tax efficient. Rather than being down on the person reading an investment blog for only having a 401k, encourage them to explore other avenues by giving more specific details into your explorations.

    You poo-poo the stock market, then mention you invest in stocks. You put in a taxable account where you then pay dividends. So…you are taxed on the money you put in, and then on the gains. My backdoor Roth-IRA allows me to be taxed only on the money that is put in. My 401k (solo and employed) allows me to pay tax only at the time of withdrawal. Which is better? Again, circumstances are different for different people. What makes sense for me, may not make sense for you. We all have to pay the tax man, but we get some choice in how much or how often. Corporations (small or large business, public or private) have specific tax advantages over the employee.

    At the end you state: “However, as I mentioned, the more I learned, the less sense they made to me.” Perhaps the better phrasing would have been “*for* me.” 401ks and IRAs do not benefit everyone. By not providing circumstantial information, you lost an opportunity to have a teaching moment for readers of this site.

  9. Elizabeth – Our education system has issues and no financial planning classes is a big one. I am a proponent of classes in middle school and high school. We can’t control that, any more than taxes. On this point, we agree.
    There are others that I take issue with. Your 25-year old friend is missing the boat. If invests in his 401k at work, there may be a company match, and that’s free money. Time for compounding must also be considered. Missing those years can’t be made up. Investing in individual stocks is great – I do it, too. However, if education is poor – as we agree – how can individuals choose appropriate stocks? I’d argue that investors should use a hub and spokes plan, where the hub are broad-based ETFs or mutual funds and the spokes augment a portfolio with individual stocks, bonds, commodities, etc. Overall diversification is important and that includes cash, bonds, real estate, a business, etc. I think your view should be more balanced instead of attacking the system. Explain to your readers how to work with the system instead of against it.

    1. Hey ddshaw, thanks for commenting. What’s funny about this article and the individuals who comment is that we aren’t the ones who should avoid the stock market. Meaning if you came across this article you probably have a decent grasp on the macro and micro factors affecting it. So even though this was a personal explanation for why I don’t invest in tax-sheltered retirement accounts, my point is that most people don’t have a clue where their money goes once it’s invested in a tax-sheltered account for them. There are options to securing a retirement and building wealth but our country has led people to believe that if you’re not investing in the stock market then you are 100% screwed. That’s just not true. Hate to say it but it’s not that different from the financial services industry insisting that every American own a home and “here, just sign this paper here and you will be a homeowner!” That person had no clue what was happening on a macro level and was sold a dream by a mortgage banker. That lack of education didn’t work out for them (referring to the subprime mortgage crisis). The stock market doesn’t go up 8% every year just because it has in the past and I’m tired of the financial services industry telling Americans that they will be doomed if they don’t participate. Our international monetary system is so incredibly different today than it was even 15 years ago. If you understand the risks and aren’t comfortable with them and choose to secure your retirement through other mediums – good for you! People who freak out and criticize such a personal decision are weird sheep who for some reason are offended by another person’s life choices. Also, my 25 year old friend is an entrepreneur so no 401k option, if a free match were available I’m sure he’d take it because I agree with you that there’s no reason not to. But I hope you see my bigger point otherwise. Cheers, Elizabeth

      1. Through my research I have come to a similar conclusion.
        A million will not be enough in 2050 plus, when we are retiring. The goal post to Social security could be moved to 69 or 70.
        The earth could be in shambles from pollution.
        I research and read everyday and I am making my positions.
        I dont want my money tied up and getting lost for me by a retirement fund.
        I want to enter the market after it crashes and reap amazing wealth.
        I am doing it with crypto now and will move those profits to stocks post crash.
        I plan on outright owning by multiple properties and having multiple ventures.
        Timing a market post crash is simple. But you cant do anything because all your capital is in retirement funds that crush you when you want that money.
        Being a millenial showed me how little the government cares to prosecute wall street crooks and how much they will bail out greedy wall street crooks.
        That all you worked for can be wiped out in a couple of months.
        No thank you, I can do this myself.

  10. what a stupid article !!!
    putting aside maybe 5-10% (including company match) is not wasting your money.
    If you cannot put 18500 bucks (about 13500 from myself and company match is 5000) per year,
    then you are a failure. 13500 is not a lot of money at all!!!
    Your logic is flaw and unreasonable. You can still invest in personal stocks and real estate while you are putting 13500 dollars aside.

    1. Hey Jamison, that’s true anyone can put away 18,500 a year and then take what’s left and invest in real estate or in a taxable account. I could do that for 30 years and hope that the stock market does amazing over that time period and that future tax brackets remain the same or go lower. The problem is neither taxes nor the stock market are in my control. What I outline in my personal explanation for why I don’t invest for retirement in tax-sheltered accounts, is that I like having a sense of control over my future. So in my case I can take that 18,500 and invest it in my business or in private investment deals where I have a clear understanding of the risks and growth opportunities. Don’t be offended, this is not advice for you to follow. You don’t have to say that my logic is flawed just because my risk tolerance is different than yours. Cheers, Elizabeth

  11. I agree about retirement plans. I stopped contributing years ago and I am 39 now. I had a bout $50,000 in my IRA and instead of keep it in mutual funds. I converted to a self directed IRA and bought a rental property with it.

    I love real estate for retirement. My 20 rentals produce $12,000 a month after all expenses including mortgage. An IRA would be nice for more real estate except it is really hard to get a loan in an IRA (must be non recourse and increases chances of an audit).

    You also loose some of the amazing tax advantages of real estate in an IRA that they come without a retirement account.

    1. Nice! Thanks for commenting, Mark. Yeah I think I’m going to convert my IRA to an SDIRA and do the very same thing. I’ve been planning on it for a while just haven’t got around to pulling the trigger. It makes so much more sense to me. Cheers, Elizabeth

      1. I currently have an employer match and I think I will let it stack and use it as a down payment. After that, I plan on keeping as much money to use as possible.

        Here’s a thought, how many people on wall street use their own retirement products?
        How many get filthy rich off them and do not need them?
        I bet a lot of independently wealthy people have accounts with money but they’re not IRA’s or 401ks

      2. I am retired age 60 and do not work so i have no earned income. I get military retirement about $3,400 per month and veterans disability pay about $1800.00 per month, plus a small annuity from TIAA Cref that will pay me about $400 per month at age 65 and I expect to get Social security retirement of about 12000 per month at age 62. I am not elgible for IR or 401k plan. I invest in a vanguard mutual fund and get zero tax benefits I get taxed for capital gain every year.

    2. Brilliant Mark! If I was to make a bet I would say you will be very wealthy in the next 10-15 years. Good luck!

  12. This may be one of the most irresponsible articles I’ve read. None of the reasons “why not” are really relevant. There are ways to use retirement accounts so that a person’s tax bill is reduced exponentially over keeping money in taxable accounts or other non-traditional vehicles. (The HSA is one of the greatest retirement account hacks of the 21st century, with all the benefits of a trad IRA going in, and ROTH coming out, barring a few caveats). And what of a 401K Where one can invest 6% of their salary and the employer will match it 100%? I’m guessing this article is a “precursor” to some sort of sales pitch, but the “alternatives” the author mentioned are not fleshed out in the least. They might as well have said “I invest in BETTER stuff than retirement accounts”. Why was this sort of article allowed?

  13. I see your point on some of the stuff but there are so many logic errors here I don’t know where to start. A big one is the “you don’t know what’s going to happen” argument that flows throughout. If I offered you a choice between either (A.) $1 or (B.) somewhere between $2 and $3, you should still choose the latter even if you’re less certain of the outcome. Another one is the “wall street is going to make lots of money” line. That’s kind of like saying “grocery stores are run by sketchy business types so I’m going to grow all my own food so they don’t get any of my money.” Its true in a sense, but it’s a lot more efficient and less time consuming to pay for stuff sometimes, even if it allows sketchy people to get rich.

    1. Hey Ian, Elizabeth here. Thanks for reading/commenting. So yeah if someone offered me $1 or somewhere between $2 or $3 dollars (possibly) – I would also choose the latter. I’m not sure where in the article I said otherwise. Meaning, with my money I have started a business and invested in real estate that I am uncertain of the outcome. More is under my control, which I like, but I am still on board with your logic that risking $1 to make $2 or $3 is better. As far as the Wall Street line, I’m actually quite political about that. I’m 100% a capitalist and have no problem with a business making money in exchange for a service. The problem in the retirement industry, in my mind, is the government involvement. The tax incentives from the government to support X industry. Then the government turns around and through QE, makes sure that X industry is wildly successful so more and more Americans will buy into it. Which keep in mind many Americans do NOT participate which the government has nicely left them out in the cold (social security is ineffective)

      1. I don’t understand most of your reply to Ian. Mostly because there doesn’t seem to be a conclusion. What do you mean “SS is ineffective?” The alternatives you mention are simply part of an all-round wealth building and preservation strategy, not a replacement. Sure you may have more control, owing a business and a few apartment buildings (I own both myself) but I have both trad IRAs and ROTH Iras so that I can withdraw a blend of them upon retiring depending on my tax situation (i.e. big potential tax bill means I draw more from the ROTH, lower or zero potential bill, I take advantage and take some taxable distributions from the TRAD.

  14. I’m net positive with rolling over my 401K when switching jobs and investing in individual stocks (0% now and 22% when I retire in 5 years) compared to being taxed now at 24% and then again at 15% on those profits. And if I make a short term killing, I don’t pay any more.

    So there is a indirect positive about 401Ks.

  15. You make some good points, but I don’t see why contributing to tax advantaged retirement accounts like 401Ks and IRAs has to be mutually exclusive with all of the other forms of investment that you mentioned. It seems to me to be just an additional dimension of diversification. At least contributing enough to get the employer match has always appeared to me to be a guaranteed 100% return. So I personally would not rule out these savings vehicles, as part of a broader balanced long term plan.

  16. Sounds like you ARE investing for retirement- by virtue of step 8. You just aren’t interested in using a classic retirement plan. Most of the “logic” in this article seems off. Yes, nobody knows what tax rates will be in 30 years. You don’t know what they will be in 5 years. So how does paying capital gains every time you balance your portfolio better than tax -free growth until you want the money later in life? And who says you can’t combine classic retirement accounts with other methods and getting the best of both? The Market Timing issue is silly. You put money in cash for that purpose. You think selling real estate in a down market is a good solution? You can buy a stock for 5 bucks online. That’s an unfair price The only thing I’d agree with in this article is kids should learn more about finance in school

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