I have a secret…We’re rethinking retirement
But first, I want to prepare you for it, because it may change the way you think about me - as a financial advisor, as an American citizen, heck, maybe even as an intelligent human being.
But bear with me, engage your curiosity and leave your shameful judgment at home when I tell you that…
…in 2024, I saved $0 in my retirement accounts.
I did this on purpose. It wasn’t a mistake or an accident. It wasn’t an emotional pratfall or a poorly thought-out lapse in judgment. It wasn’t even a lack of financial stability, although at one point that was a part of it.
I intentionally decided not to put money into a retirement account last year, and I felt good about it.
I didn’t get the tax deduction. I didn’t get an employee match. I didn’t backdoor funds into a tax-free ROTH.
I took one of the most cherished pillars of personal finance and threw it out the window.
It’s a meaningful choice, and there’s no going back. Here’s how I got there.
As many of you know, in 2024, we left Ameriprise and launched this new and improved, fully independent version of CoFi Advisors. We may not have wanted to spend too much time thinking about it, but this was a risk, a leap of faith, and it came with the usual startup costs and income disruption you frequently see with new small businesses. I fully believed it would work out, because we were doing the right things for the right people, and I’m an optimist by nature. But it meant things were a little tight for a while.
So saving for retirement during this time, even when it became possible again, wasn’t really a priority. My priorities were liquidity and security, and this meant making sure we could pay the bills and continue living our daily lives without worrying about unnecessary disruption. I was focused on the now, followed by the soon.
Once things settled and the business was fully up and running, I had room to save in a retirement account.
I still chose not to.
There are many benefits to saving in a tax-advantaged retirement account. In traditional IRAs and 401ks, your contributions are tax-deductible now, and then grow tax-deferred for years to come.
For ROTH and after-tax accounts, you get the benefit of tax-free growth and distributions, which are powerful tools when planning for cashflow in retirement.
If you have access to an employer-sponsored 401k, you likely can benefit from an employer match. Contributing enough to get that match and max out your total compensation package is almost a no brainer.
Retirement accounts may offer some legal protections against creditors, and some may provide access to low-cost indexing opportunities.
Some (if not all) of these benefits applied to me last year.
But none of them were in alignment with my near-term priorities. And most weren’t in alignment with my financial plan.
So what did I do instead? I still saved, but did so in a non-qualified account (read: taxable). I built up an emergency reserve, then utilized a tax-loss harvesting strategy to gain exposure to long-term focused strategies. I also prioritized paying down some liabilities and helping my daughter kick-start her own retirement with a ROTH IRA.
Some of these things are outside the box ideas that deserve their own exploration. And I will never sit here and tell you that saving in a retirement account is a BAD idea.
But I will encourage you to take time to pause and think things through. How much you save, where to save, when to spend and when to borrow – the questions and decisions are frequent and deserve your active participation. I advocate that you don’t auto-pilot your way through your financial journey. If you pause to reflect and evaluate, to lead with curiosity and identify your “why,” I think you may find that some of your decisions will surprise you.
They may even relieve you.
We really enjoy talking through these decisions with you. Never hesitate to loop us in.
You can also find the podcast episode where we explore this decision and additional considerations more at length at The Compound Growth podcast.