Myth #14: Fund Your 401(k) No Matter What! (part 3)

Many of my clients believe it is irresponsible to do things that would bring them the most satisfaction, a belief often carried over from childhood. They almost need permission to do things that they deeply yearn to do. Most of the time, their dreams are not only possible, but realizable.

Often, the key to unlocking the dream is to realize that funding their retirement plan does not always have to take precedence.

I want to be very clear on this. I’m not telling you to stop funding your retirement plan forever. I am saying it is okay to take a break from funding your 401(k) plan for one year, for a special circumstance, like the trip of a lifetime, the elimination of debt that is keeping you awake at night, or a maternity leave. These are special needs and events that call to you. It is appropriate and rational to temporarily divert some money from your retirement plan to fulfill these experiences.

A couple in their late twenties was committed to fully funding their 401(k) plans. The wife was pregnant and was planning to take six months off once the baby was born. They were concerned about how they were going to afford her time away from work. I told them not to fund their retirement plan that year.

They asked, “Is that okay?”

“Being home with your baby for the first six months of its life is certainly a special circumstance that warrants relaxing your annual savings goal. It’s a good reason to pull back a bit from fully funding your retirement for the year,” I told them.

This is not about diverting retirement funds in order to buy things. Wanting to buy a new car or a new big-screen TV are not good reasons. It is about life experiences that are precious and valuable and that will be lost if not capitalized on. It is about taking all aspects of your life, including the emotional and heartfelt parts, into account in your financial planning. I am simply telling you to invest in these special experiences when they beckon. If you don’t, you may lose the opportunity forever.

Yes, you need to fund your 401(k) plan. Yes, you need to plan for your eventual retirement. But just as importantly, you need to fund your dreams.

In reality, most people aren’t saving enough for retirement. I usually encourage my clients to save more—but not to the exclusion of a once in a lifetime experience that they are really passionate about, that will really feed their soul.

The important thing is to not let any one element of your financial plan become so overwhelmingly important that you exclude your dreams. If you allow yourself to enjoy these experiences fully, the memories and quality of life they bring will become a part of you that can never be taken away.

Is there a lifelong dream that you have never allowed yourself to consider because you didn’t think you had the money? Is there an opportunity that will be lost forever if you don’t do it in the next year or two? If you took $100 a month away from your retirement plan for one year, what would that allow you to do that you never thought was possible?

Maybe you don’t have to fully fund your 401(k) every year. Maybe you can bring to life the experience that calls to you most deeply. Then, when you finally do retire, you can do so with the memory and the peace of mind that you have invested not only in your retirement, but also in yourself and your loved ones along the way.

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