You Should Probably Stop Saving for Retirement

Retirement isn't the ultimate goal - a good life is.

The concept of traditional retirement is dying, and traditional retirement accounts should die with it.

Even when they work as intended (encouraging people to sock away money toward a long-term goal that they ultimately achieve), and even when the tax deferral bet pays off (your tax rate ends up being lower in retirement), there are downsides to using retirement accounts that deserve more consideration than they usually get.

You may never actually retire.

Many successful professionals - the kind who can afford to max out 401ks in the first place - never quite jump off the addictive hamster wheel of a high status job and fat paycheck. Plenty of people in their 70s are still happily employed as bankers, lawyers, doctors, and professors. And it makes sense - many white collar careers get easier as you rise and can become part of a balanced, engaging lifestyle.

Plenty more who try to retire stumble into ongoing earnings as part time consultants, writers, real estate investors, or entrepreneurs. “Portfolio careers” are the new retirement, in case you haven’t heard.

More to the point, you may take long breaks from paid work that require funding throughout your life: having babies, self-employment experiments, layoffs, midlife re-training or education, sabbaticals to recover from burnout or divorce, caring for aging parents, starting or buying a business with no initial paycheck.

You’re going to want to access some of your wealth before you turn 59.5.

You don’t have enough cash.

This is reason #1 to let your foot off the retirement gas. Here’s how much cash you should have on hand if you’re living off earned income:

• Six months of expenses at least. If you are the primary/only earner in your household, if your industry is ripe for disruption, or if your income would be hard to replace, aim for a year. If all of the above applies to you, it wouldn’t be crazy to aim even higher.

• Add sinking funds for short-/mid- term purchases you can’t cash flow, like a car or major home repair.

• Add the total of all your insurance deductibles (disasters tend to strike together).

Yes, it might take years to save that much. You should do it anyway. This foundation of security should come before you start saving for your kids and before you ramp up retirement contributions (as long as you don’t have expensive debt, I do endorse getting your 401k match and funding a Roth IRA¹).

Not only is it prudent, a fat savings cushion provides a sense of safety that almost no 401k balance can.

I can’t tell you how many clients I’ve worked with who are constantly stressed about money and bicker with their spouses over minor expenses while shoveling thousands of dollars a month into retirement accounts. A refusal to actually save cash is how you get millionaires who feel broke and take on debt for every major purchase.

You might have overfunded retirement already.

Do the math and see what your current retirement balances are likely to be worth by the time you reach traditional retirement age. You might be surprised by how on track you are.

If you’re 45 and have $600K in retirement, that could grow to over $4 million by the time you are 65 without you investing another dime.² If inflation averages 3% a year it will only feel like $2.2 million in today’s dollars, but that’s still a nice little nest egg that can provide a comfortable lifestyle in most of the country.³

And that’s not factoring in social security or other income, non-retirement assets, an inheritance, or the fact that your expenses will likely be lower than ever by the time you’re in 70s, especially if you have a paid off house.⁴

Maxing out retirement accounts has evolved into a baseline rule in the financial planning community. As the contribution limits have risen though, achieving that goal can require a large percentage of income and create unnecessary budget strain.

One client was shocked when I advised her to cut 401k contributions to the employer match. She was proud of contributing 20% since her first job. She and her husband had nearly $1M invested, but they struggled to pay off the credit card each month and had expensive home repairs looming. With that balance in their early 40s though, they can effectively check retirement off the list and focus on other priorities.

Due to the magic of compound growth, investors who got an early start may be able to stop retirement contributions well before they actually retire. And if you’re already wealthy but stuck in One More Year Syndrome, it’s a great first step toward actually spending the money you’ve amassed.

You won’t feel rich until you have liquidity.

It’s a viral internet tale as old as time: many multi-millionaires don’t feel rich. They insist they are just regular, middle class folks. This isn’t (just) because they are out of touch. It’s because their money is “tied up” in retirement accounts, businesses, real estate, and other illiquid assets.

I can explain that Roth accounts are always accessible, that the 72T rule lets you avoid early withdrawal penalties, and that hardship exemptions exist. But it’s hard to resist the bucket mentality. It works well to get you to save, and then it backfires: psychologically you will never want to tap those funds.

Most people would rather borrow than make retirement distributions. We just don’t “count” retirement assets the same as cash or brokerage assets, even after reaching retirement age.

Funneling huge chunks of your wealth into retirement accounts may actually delay or diminish your retirement - the exact opposite of their stated goal. After decades of conditioning, that money often feels “off limits” (especially when distributions will incur taxes - more on that below).

By comparison, I’ve worked with people with just a few hundred grand in cash, and they feel like they’ve won the lottery. The sense of freedom and opportunity is palpable with many fewer dollars when they are readily available.

You’re just deferring a growing tax bomb.

One thing working with retirees has taught me is that three things are actually inevitable: death, taxes, and older people being irrationally aggravated by their taxes. Watching this play out on repeat has convinced me that deferring income taxes may not be ideal even when it makes mathematical sense on paper.

Part of the cause is inflation. Like any expense, taxes seem egregiously higher than they “should” be when you can remember paying a fraction of that amount just a few (read: forty) years ago. It’s somehow easier ignore the fact that your income and assets have also grown exponentially.

Taxes also stand out because they’re often the biggest line item in a retiree’s budget. This is especially glaring after other big bills like mortgages and tuition have disappeared. Plus they have to be manually, consciously paid in chunks without the bi-weekly smoothing of employer withholding.

The simple fact is that all expenses, including taxes, are easier to absorb and accept when you’re earning a good income. So think twice before deferring them; your crotchety older self may not thank you.

If you’re bothering to read this, you are probably the type that is going to spend countless hours trying to optimize Roth conversions and fretting about your RMDs. Paying taxes as you go is a lot simpler and could save you untold mental bandwidth and stress later. Plus, when your kids inherit they will get a step up in basis on taxable assets versus owing taxes on inherited IRA distributions.

Also keep in mind that deferring taxes (the whole point of investing in a traditional 401k or IRA) doesn’t always pay off. Your tax rate may not actually be lower in retirement, especially if you’re married during your high earning years but spend a meaningful portion of retirement in an individual tax bracket. You also may have more retirement income than you think (especially if you actually spend down your investments - as you should!)

In a taxable account, you’ll generally pay a 15% capital gains rate on any growth when you sell.⁵ Traditional retirement distributions are taxed at your ordinary income tax rate - which may well be higher - even though the growth in that account is also comprised of capital gains.

Consider your goals.

Retirement accounts are ubiquitous for a reason. Roth accounts in particular offer huge tax benefits over time, allowing you to avoid taxes on investment growth for the rest of your life. The ability to automate participation in workplace plans incentivizes millions of people to invest more than they otherwise probably would. And some retirement plans offer protection from creditors which can vary by state.

But be aware of the downsides before prioritizing retirement accounts above all else. Many investors debate “Traditional versus Roth” as though there isn’t a third option that deserves at least equal consideration.

Taxable savings and brokerage accounts offer many overlooked advantages beyond easy accessibility:

• Simplicity - having one login, one tax form, one place for all your money - is a big one.

• It’s easier to know and manage your asset allocation; even if you and your spouse have various accounts they can usually be viewed together with one login.

• The investment options are endless; fees are nearly nonexistent; and you remain fully in control without having to go through your employer.

• They can be owned jointly with a spouse, creating a sense of marital cohesion and momentum toward shared goals.

• They are easy to divide in a divorce, gift partially or in full to charities or others, and transfer to other providers.

• The website and reporting are almost certain to be a lot better that what your employer offers.

Many savers default to retirement investing and never really re-evaluate. “Set it and forget it” has its advantages, but it pays to be aware of the tradeoffs - as well as the advantages of alternatives like health savings accounts and 529 plans.

When in doubt though, the financial and psychological benefits of plain old liquid savings are hard to overstate.

Traditional life phases are dissolving, and old-age retirement is no longer the ultimate life transition. You need a LIFE plan, not just a retirement plan. Invest accordingly.

1. A Roth IRA can technically double as a savings account since contributions can be withdrawn tax and penalty free at any time.

2. Assumes a 10% rate of return, compounded annually. At 10% your investment will double every 7.2 years; with a 7.2% return it will double every decade.

3. $2.2M can safely provide $88,000 - $110,000 per year of income (4-5% of the principal), depending on asset allocation, budget flexibility, and other factors.

4. Research shows that most retirees see spending decline as they age, even after accounting for increased medical costs (after an initial bump in early retirement while they presumably run through the bucket list).

5. There’s actually a 0% capital gains bracket if you’re lucky / savvy (under $49.5K of taxable income in 2026 if single), and also a 20% one if you’re super rich ($545K+).

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I help people get organized and use wealth to design a life that feels secure and aligned. A former Wall Street banker and CERTIFIED FINANCIAL PLANNER™, I act as an unbiased advocate without selling products or managing investments. To learn more, visit my website.

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DISCLAIMER: I love writing about the personal, emotional, and practical sides of money, but please remember that my Substack is strictly for educational and coaching purposes. The insights shared here are general in nature and do not constitute specific investment, tax, or legal advice. While I am a CFP® certificant, reading this does not create an official advisory relationship, and any comments or likes should not be interpreted as client testimonials. For personalized investment advice, please consult a registered financial professional.