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

  • I stopped contributing to a 401(k) when I went freelance and lost my employer match.
  • I think investing in a taxable brokerage account is smarter for me because it’s more flexible.
  • My money hasn’t been locked in for decades and I can use it to expand my business if I need to.

Confession: I haven’t really contributed to my retirement accounts since 2019. And yet I fully believe in planning ahead for retirement. I’ve even worked to help other people understand why investing is important. So if my lack of recent retirement contributions sounds unthinkable, I’ll explain.

I started saving for retirement when I was in my 20s through an employer’s 401(k) plan. I worked as a writer and editor, and my retirement was still decades away, but I knew the magic of compounding could help set my future. The company I worked for offered matching funds with a staggered fundraising schedule. Admittedly, it wasn’t the best. But I still contributed before taxes, not knowing if I would ever get the full matching payout. (Spoiler: I don’t.)

Fast forward to my next job where I continued to contribute to a 401(k) at every paycheck. This employer had a more generous policy, with a company match of up to 5% of the funds and immediate acquisition. I got free money, mind you, and it was a great motivator. I watched my retirement accounts grow.

I’ll spare you my entire work trip, but in the end I ended up with an agency that matched up to 5% of my retirement contributions. There I was fully vested after three years and I even entered an earlier 401(k) plan to consolidate my investments with lower fees.

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

Going freelance changed my view on retirement planning

In this new phase, I could have contributed to after-tax retirement accounts. But my view of retirement planning had changed.

You see, when I went freelance, I decided I needed to be more liquid financially. This would help as I ramped up my business and provide me with a pillow in case of an emergency. Because there is no paid leave for consultants – unless you have mastered passive income, but that is another story – so it’s helpful to have money on hand.

And while traditional retirement accounts can be helpful for long-term planning, especially when you’re an employee receiving an established company match, circumstances are changing. In my case, I absolutely did not want to be fined if I wanted to withdraw money before retirement age. (Another thing I’ve 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 answer to being more liquid — and more in control of my finances — was: not to funnel all the money into a bank savings account and hope for the best. Because inflation is real. And fixed money in a savings account loses value over time, especially given that the national average interest rate for savings accounts is just 0.06%, according to a May 2022 study by Bankrate. (Yes, it’s low.)

Today, with inflation rising, I now have more money in investments such as index funds, a few stocks, and cryptocurrencies. And you know what? While my retirement accounts from previous employee jobs continue to grow and are not too shabby, my after-tax investments aren’t too shabby either. And I am grateful. Because as we continue to deal with economic uncertainty, I can move or withdraw my after-tax money as needed — without penalty.

I like to adapt where necessary

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

As the markets continue to shift, I am open to adjusting my investment strategy. For example, I may consider a bitcoin IRA at some point, as I appreciate the returns cryptocurrency (which is volatile) can bring. But for now I’m happy 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 pursue the media and speaking projects I love. And I know that I have positioned myself well for my current situation and for my future.

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