Myth #14: Fund Your 401(k) No Matter What!

When people tell me their financial goals, one of the most frequent and automatic responses I hear is: “I have to fund my retirement every year, no matter what.”

A few years back, a couple came in with $5,000 in credit card debt. Both Doug and June worked, and together they earned a fair amount of money. They fund their 401(k) plans to the limit each year. But somehow, this $5,000 in credit card debt at a high interest rate seemed to hang around, gnawing at them constantly.

“For heaven’s sake,” I said, “Pay off the credit cards. Pull back a little on your retirement funding for six months and get all of that debt paid off.”

The thought had never crossed their minds. Doug told me, “My dad always said to me, “’Whatever you do, don’t you ever . . . ever . . . not fund your retirement!’”

He saw his dad’s long finger pointing at him whenever he thought otherwise. For fifteen years, Doug and June’s number one financial priority had been to fund their retirement plan.

Doug is a bright man. He’s forty-three, and is chairman of a local Chamber of Commerce, but has continued to do something that makes no financial sense—maximizing his retirement while carrying a load of costly short-term debt. By curtailing his retirement savings for a short time and paying off the debt, he got out from under their credit card debt once and for all.

Doug had been led to believe that funding his retirement was a sacred rule that was important above all else. He couldn’t bring himself to divert even a small amount of retirement funds toward something that was eroding his current quality of life.

Doug was actually relieved to hear that it was okay to reduce his retirement savings to pay off the debt. In six months, he paid it off and restored his retirement funding to its full contribution level.

If you only fund things that you think you should, and don’t fund the things you are passionate about—then what’s the point? Life comes filled with obligations, but enjoyment of life is something we tend to overlook, sometimes until it’s too late.

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