When is it Time to Reduce Retirement Plan Contributions?

July 30, 2007

How do you know how much to contribute to your retirment plan?  Of course the more you put into your 401k, 403b, or IRA now the more you should have later in life when it is time to retire; but can you invest too much?

Investing Decisions
I’ve always taken the approach of putting in as much as possible, maxing out contributions to our 401k and IRA and almost the max for my wife’s 403b.  At least until now.  The addition of a baby boy to our family means that my wife is staying home from work and we have some decisions to make.

Before she decided to stay at home I sat down and looked over our expenses to determine where we could cut enough money to make up for the loss in income.  One of our biggest “expenses” has always been the money we put away for retirement.  For about seven years now we’ve put away over 20% of our income into our retirement plans.  We decided that we could afford for her to stop working if we cut expenses and reduced the amount we save for retirement.

Cutting Retirement Savings
With her last paycheck on the way next month, I put the plan into effect this weekend.  Since her 403b investments will stop with her last paycheck InvestLess401k I didn’t have to mess with that investment.  I logged into her Vanguard account and canceled her automatic contributions to her Roth IRA.  Then I cut my 401k contributions in half, reducing it from 20% of my salary down to 10%.

Balancing the Present & the Future
It was a strange feeling for someone that has always invested as much as they could but I think we’re making the right decision.  What’s the point of putting all our money away for the future if my wife can’t be around our VanguardAutomaticInvestinglittle guy in the present? The fact that we invested so much for the last seven years actually made the decision easier.  We got a good head start on saving for later in life that will hopefully compound and grow over time.  The balances won’t stop increasing, we only cut our contributions, not eliminated them all together.  I’m glad we’ve decided to invest less in our retirement account and more in our family and that our past financial decisions have made it possible.


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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6 Responses to When is it Time to Reduce Retirement Plan Contributions?

  • plonkee

    Don’t forget to check that you individually have good retirement coverage – because they are individual accounts, you need to make sure that reducing your wife’s contributions won’t adversely affect her if she outlives you.

  • Ben

    Thanks for the support guys! I know you’re right, family is more important than the money. It’s just kind of an adjustment when you’ve spent your entire working life throwing as much money as you can into retirement accounts to suddenly cut way back.

  • limeade

    You’ve got to live according to your priorities. More money in a retirement account isn’t necessarily going to make anyone happier.

  • MoneyNing

    Good for you! It’s often hard to make an important decision but the fact that you have “made” one is already a good move.

    The best of luck with your new family situation and hopefully you will still find time to blog!

  • KMC

    Thanks for posting this. We did a similar thing when my wife stayed home – we contributed less or nothing to Roth IRAs for those years.

    It takes guts to reject (if only temporarily) the mantra to max out retirement savings to the exclusion of everything else.


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