Blog - When You Should Stop Putting Money Into A Retirement Account

When You Should Stop Putting Money Into A Retirement Account

I recently had a conversation with a friend about his finances.  He approached me with a few questions and said he wanted to sit down and dive in deeper.

One of the first comments he made was the fact that he and his wife have recently taken on some credit card debt.  They have been contributing a good amount to their 401(k)’s and IRA’s, and with some increased expenses that they have recently incurred (new baby!), it has caused them to dip into debt.

Let’s be clear here, they aren’t in a bad situation.  They currently have well into six-figures in their retirement accounts and they make good incomes.  But their expenses have been adding up.


The easy thing to say is that they need to cut down on their expenses.

I’m sure this would be possible because almost everyone has some room to improve in this area.  But this is a growing family with a recent second child, so that can make it tough to cut back.

Another way for them to cut down on their debt is to simply pull back on their contributions to their retirement accounts.

I know, you are probably floored that I’d recommend this, considering I’m a Certified Financial Planner.

This wouldn’t be my first choice for them, but it has to be an option to consider.

If they are taking on more and more credit card debt, it means they are living outside of their means.  And with the national average for credit card interest rates hovering around 14.14%, it’s unlikely the money they are putting into their retirement accounts is going to earn a return that will offset that interest rate.


In a previous post, I wrote about how people can save more money.

In the post, I recommended that you can simply keep increasing your savings rate on a monthly basis until you start to feel the “squeeze.”  It’s that simple.

This strategy is designed to simplify the savings process so you don’t have to constantly do a ton of math.  Eventually, you’ll find a place where it begins to get difficult to save more.

For my friends, it would appear that they’ve gone past this point.

I’m all for being aggressive with savings goals, but when they are causing you to take on credit card debt, there is an issue.


It’s nice to imagine a scenario where someone is saving the absolute most they can – their expenses are cut to the bone, and they are maximizing the use of all of the products at their disposal.

As a financial planner, this is a dream client.  But almost no one fits this profile.

One of the things that I try and focus on with people is how to make smart money decisions in different situations.  It’s not about doing it “all” at once, and getting yourself to that place of “perfection.”  It’s about looking at your current situation and making a smart decision that will help you move in a positive path toward financial freedom.

In this example, for my friend, the smart thing just might be to lower, if not, stop his contributions to his retirement accounts in order to get himself out of credit card debt.

At the end of the day not all personal finance advice fits everyone’s needs.  Each situation is unique and has its own nuances.  Keeping that in mind, make sure you aren’t taking certain pieces of advice as “rules.”

In this case, maybe it isn’t so bad to stop putting money in a retirement account…

Capably Yours,


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