When It Makes Sense to Scale Back Retirement Savings

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A lot of financial advice is laser-focused on retirement. You hear it in commercials. You hear it on the news. You read about it on blogs and in books.

You need to be saving for retirement. Actually, you need to be saving more. What you’re doing now isn’t enough. You need to save more money and invest it smarter. Retirement is the ultimate financial goal and you can only reach it if you step up your game.

It’s been this way for a long time, but in the past few years there’s been a new trend that’s only added to the urgency: FIRE, which stands for “financial independence/retiring early.” This idea has gained steam as more and more people have started sharing their stories and strategies that have either allowed them to retire early – sometimes as early as 30 or 40 – or put them on the path to do so.

And while all of this focus on retirement and financial independence comes from a good place, sometimes we get so caught up in the rush to save more that we lose sight of the fact that scaling back is occasionally the right thing to do.

Here’s the thing: This isn’t a race. There’s no trophy for retiring early. There’s nothing inherently good about reaching financial independence sooner rather than later. “Retirement” in of itself is a bit of an empty goal.

What does matter is the life you want to live, both now and in the future. The things you want to do. The people you want to be with. The places you want to go.

Your financial plan should be geared toward making those things possible. And while that absolutely includes saving for the future, it should also include a focus on your present needs and aspirations.

With that in mind, here are a few situations in which it makes sense to scale back your retirement savings.

Starting a Family

Many of us, myself included, view starting and raising a family as one of their highest priorities. It’s a source of pride, joy, love, and fun.

It’s also hard. And expensive. And for many families some of the biggest expenses, like childcare, come at a time when you’re still early in your career and therefore haven’t yet reached your full earning potential. Or, if you or your spouse or partner decides to stay home with your children, you may be living on significantly less income than you’re used to.

Quite simply, starting a family is a big financial challenge. It’s just the reality of the situation. Financial sacrifices often have to be made.

Now, you can obviously cut back on discretionary spending like eating out, shopping, and traveling. And some of that is often a good idea.

But sometimes there still isn’t enough money to go around, and in that case it may make sense to temporarily scale back your retirement savings. Because again, the goal isn’t to retire. The goal is to create a life you enjoy both now and in the future.

And if having a family is a part of what that life means to you, making room for it is absolutely worthwhile.

Pursuing Meaningful Work

One of my pet peeves with the whole idea of retirement is the focus on quitting your job.

Look, I understand that not every job can be enjoyable. I also understand the responsibility to provide for your family and that sometimes that means taking a job you’d rather not have to do.

But you shouldn’t aspire to work just as long as you have to in order to stop doing a job you hate. You should aspire to do work you love. Because work that’s fulfilling, work that aligns with your values, is an incredibly enjoyable way to spend your life.

Unfortunately, pursuing that kind of work often means taking a financial step backwards. Whether it’s going back to school, changing careers, or starting a business, there’s often a loss of income and/or an increase in expenses that comes with it.

Which means that, sometimes, pursuing work you love now might require some kind of compromise on your ability to retire later.

It’s up to you how much of that tradeoff you’re willing to accept. Maybe the idea of retiring sooner is more appealing than the idea of doing work you enjoy.

But I wouldn’t assume that staying in a job you hate is the smart move simply because it allows you to save more for retirement right now. There are many situations in which taking a step back to do something you love is the right thing to do.

You Can Afford to Save Less

I’ve had clients who came to me because they were worried about their retirement savings, only to run the numbers and find out that they were actually ahead of where they needed to be. That they could, if they wanted to, save a little less and still be on track.

This is obviously a good place to be, but it’s not always an easy situation to adapt to. Because again, we’re so conditioned to save more, more, more, that the idea of voluntarily saving less feels weird.

And saving less isn’t always the right move. Life can change quickly and saving more money gives you more room to weather whatever storms come your way.

But if you do find yourself in this situation, it’s worth considering what you would do with the extra cash flow if it wasn’t going toward retirement savings. Would you travel more? Work less? Spend more time with your friends and family? Take up a hobby?

Sure, continuing on the path you’re on now might allow you to retire sooner. But scaling back might allow you to enjoy more of your life in the meantime.

Planning for a Lifetime

None of this is to say that you should neglect saving for retirement. Whatever your goals are, there will come a point at which you are either no longer able to work for money or no longer want to, and it’s important to prepare for that.

But retirement should never be the only goal. You have a lot of life to live before retirement and lot of life to live after it, and your biggest financial goal should be filling all of those years with as much happiness as possible.

Sometimes that means saving a little less for retirement, at least for a little while. If you do it right, both your present and future selves will thank you for it.

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.

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