My retirement – what to do?

As many of you may remember, my school recently suspended our matching retirement for 6 months.

I have been debating over what to do with this.

I contribute 6% of my salary to retirement. Previously my job matched that 6%. Also, they give 3% non-matched (that hasn’t been canceled). So for every 6% I was giving – my work was giving 9% (3% + 6%) – so in total a value of 15% of my income was being invested to my retirement. Not too shabby!

Obviously I have a few options:

  • Keep my contribution the same. If I keep my current retirement contributions, then for the next 6 months a total of 9% of my salary will be put towards retirement (3% by my job, 6% by me). I won’t have to worry about paperwork. But I also won’t be getting any free money from the matching deal.
  • Eliminate my contributions. I’ve considered eliminating my contributions for the next 6 months to 0%. I’ll still have the 3% that my employer will contribute, so I won’t be pulling out entirely from the retirement game. The end result will be I’ll have an extra $250/month (approx) that I’ll be able to put towards whatever I want. In 6 months this would mean $1,500 that I could be putting towards my debt.
  • Reduce my contributions. Another option is a half way point. I could essentially match my employer and put 3% of my salary towards retirement and the other 3% towards debt. A pro of this is that if I forget to change my contribution level in 6 months I’ll still be getting SOME match.

Honestly, I don’t know what the best thing is to do. I usually have some inkling for the “correct path”. I don’t want to “sneeze” at $1,500 towards my debt. But it feels like retirement money contributed NOW will increase in value a lot more in 30 years than just the $1,500. But then again, eliminating $1,500 worth of debt will save me a lot of money in interest. Can you see I’m torn?

I’m also afraid that I’ll get used to having that extra money and forget to change my contribution levels when the 6 months is over. Or worse – that they’ll make the change permanent. Which, if they do, I’ll wish that I had left my contribution levels the same.

Does anyone else feel like retirement is just some acceptable form of gambling?

I get that I need to contribute to retirement. But without knowing what the stock market will do in the future, without knowing how inflation will occur, without knowing if I’ll even need retirement or I’ll work till I die, without knowing THE FUTURE – it is impossible to know how much I’ll need to save.

I feel like every time I contribute to my retirement I’m buying a lottery ticket and hoping that I’ve picked the magical amount that will allow me to be safe and secure when I reach 70 (apparently my new retirement age according to social security).

Maybe 3% savings would be enough. Maybe 20% savings to retirement still won’t get me to a comfortable level of retirement living. Maybe I’ll die next Thursday and this entire debate is pointless. Maybe I’ll live to be 134 years old and run out of retirement money at age 95.

It all seems like a big gamble – and one that you really can’t win it. Can you?

14 thoughts on “My retirement – what to do?

  1. I totally agree. It is hard to know what to do in this situtation…debt or retirement. I would say do option B where you look after them both. That way you don’t have to sacrifice one for the other. It is about balance, at least in my mind. It is only for 6 months which means that at that point when your debt is paid off you can start putting your money back into your retirement while being debt free. Being debt free affords you a lot of opportunities. In my opinion it is worth getting there as quick as you can.

  2. I would do #3, going halfway. Also I would make a note to change it back to 6% contributions in 6 months if they change it back to the original contribution amount of 6%. I currently only get 3% from my company but I contribute 5%. I don’t think that by investing more in your retirement than what you actually get from your company is a bad idea since like you said, the interest in 30-50 years will be much more than the current price of your contribution.

    I’ve always thought of investing as gambling, especially those that do day-trading with stocks. It drives me crazy watching my roth IRA and 401k go up and down everyday.

  3. Do you qualify for RothIRA or are you at an income level too high to qualify? If you still qualify, I think a better option would be to withdraw retirement altogether from your company’s plan (aside from that 3% automatic investment by your school, of course) and put that $3000/year to your Roth.

    Btw, I do not really blog regularly but I follow a lot of PF blogs. I don’t remember how I found your blog but I enjoy your writing style and your approach to money. 🙂

    1. Bree – Thanks for stopping by! I’m glad you found me. =)

      I definitely qualify for a RothIRA. I haven’t done it in the past because I was taking advantage of the free money match by my employer. My plan was to exploit the match until I got out of debt and then to start contributing my $5,000/yr to the Roth IRA after I was debt free

      I like free money. A lot. And if my employer is going to match, I’m going to exploit that. If they stop matching I’ll most likely switch to a RothIRA and some non-retirement investments.

  4. I’d throw the entirety of the money at the debt. The pro is that you won’t get used to the lifestyle creep because you won’t see it at all, you’ll get rid of the debt faster. If they change the matching back, they’ll notify you, right? When you get that notification, then you just have to use that as a catalyst to remember to put it back. Get rid of the debt faster!

  5. I agree with Bree on opening a Roth IRA. I think that would be the best option. If you know that you won’t do a Roth, I would keep it at Option 1.

  6. I agree with me in millions on her suggestion. I would add that it is easiest for me when I focus on one goal at once (i.e. debt elimination) and not try to save for 50 different funds, save for retirement, worry about stocks and mutual funds, AND try to dig myself out of debt. Just wanted to explain where I am coming from and why I recommend just letting your employer do the 3% and you going to 0% until they bring matching back.

  7. I operate better if the money is automatically pulled out of my pay check. That wy it is guaranteed to go towards my retirement. All extra money I have leftover each month will go towards paying off debt. I would keep the 6% going into retirement and find other ways to pay off debt.

  8. I decided to stop my retirement contributions and put that money towards debt. It didn’t make sense to be putting money away when I had this stagnant pile of debt sitting there. I just need to remember to start putting money away when I’m out of debt again.

  9. If you like the choices your employer gives you I’d probably just keep with that. I’m totally bad at remembering to make changes so chances are I’d forget to make the contributions if I changed anything and I’d lose time. If you don’t like your employer choices, then definitely put the money toward a Roth IRA instead until they reinstate matching. Tax advantage is better than no tax advantage.

    I wouldn’t just throw it at debt because it’s easy to never remember to start contributing again, and it’s nice having regular diversified retirement savings… you’re paying your future self no matter what today’s self is doing with spending.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s