Financial Tips: When It’s OK to Postpone Saving for Retirement

The earlier you start saving for retirement, the better off you will be in the long run. Sometimes though, it makes sense to delay making any investments. Check out this article for some financial tips that will help you get your priorities straight when it comes to financially securing your future.

I’ve read a lot of articles recently about how important it is to start planning for retirement as soon as you’re in your early twenties. They all made some very good points. The power of compound interest is on your side, you usually have fewer expenses when you’re fresh out of school, and building healthy money habits will help you get on the right path to financial security. I’m in my late twenties and I’m regularly contributing to a 401 (k) plan, so I’m off to a good start. However, while saving for retirement should be high on your list of long-term financial goals, sometimes it makes more sense to postpone making any investments.

My parents retired a couple of years ago and relocated to Quechee Lakes, Vermont. They both managed to grow a solid retirement fund that allowed them to leave the workforce a bit early and dedicate their golden years to some interesting personal projects. That’s mainly why I was so invested in jump-starting my retirement savings plan: I someday wish to follow in their footsteps. Plus, I was lucky enough to receive a well-rounded financial education while growing up, so I knew what to do once I’ve got my first paycheck.

My circumstances, however, could have been entirely different. Depending on how your life looks like when you’re entering the workforce, it may be more beneficial to focus on achieving other financial goals before you start to contribute to a 401 (k) or IRA. Here’s when it makes sense to postpone saving for retirement.

1.  You’re Investing in Yourself

Building a career can entail moving to another city or accepting an internship in order to secure full-time employment later on. Inconsistent income is often the norm for college post-grads, so saving for retirement will prove difficult. Also, you might be working for a small company and be required to purchase benefits like health insurance. Whatever it is, remember that pursuing your dream job is extremely important. After all, you will be doing it for a huge chunk of your life. If that means accepting a gig that doesn’t allow you to save for retirement yet, taking the job can still be a good investment in your future. This also applies if you’re trying to open your own business and want to invest your savings in seeing your goal come true, or if you want to go back to school to get one step closer to working in your chosen field.

2.  You’re Building an Emergency Fund

No matter how important saving for retirement may be, it doesn’t trump building an emergency fund. A solid one can keep you from accumulating debt and offer a safety net to cover you when the unexpected happens. You may lose your job, your car may break down, or you might need to deal with a pressing medical expense. Charging these costs will damage your credit score; plus, you will end up with a debt that’s difficult to repay when you’re living paycheck to paycheck. Ideally, your emergency fund should at least be equal to six months’ worth of income. Don’t get caught off-guard.

3.  You’re Starting a Family

Even with two incomes, the cost of raising a baby can be overwhelming. Factor in the costs of everyday items, doctor bills, clothes, school expenses – when you sum it up, it can really take a toll on your finances. Nonetheless, this should in no way keep you from starting a family. All these expenses decrease as the child gets older, so you will be able to save more later on. Until then though, taking care of your loved ones should be more important than saving for retirement.

While these are all legitimate reasons to defer savings for retirement, keep in mind that my financial tips are only meant to be taken as rough guidelines. Any delay will likely have an adverse impact on the fund balance you could potentially accumulate.

At the end of the day, it all comes down to your personal objectives. However, it can be difficult to determine how you’d like your life to look like when you’re just entering the “real world.” It’s often more helpful to concentrate on what you can do now to improve your chances at living a comfortable and financially secure life.