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Stop Putting Money in Your Retirement Plans

By: Dr. Cory Fawcett | DrCorySFawcett.com

We have been trained from the day we started earning money to put some of it away for the future. For most of us, the lion’s share of this is saving for retirement. The government has given us many helpful vehicles to do this: Traditional IRA, Roth IRA, SEPP IRA, 401(k), 403(b), HSA and others.

We hear phrases like, “pay yourself first,” “put away at least 10% of your income,” “automate your savings and you won’t miss it,” among others. I have done all of this for many years. At times I was saving as much as 50% of my income. But there comes a time to say enough is enough and stop this behavior.

After many years of following this advice, we get to a place where we have a significant amount of savings. The reward for following this advice is to become wealthy. But once you make it to your “number,” what then? Do you keep on saving? If so, what are you saving for? Do you stop saving and start spending the money now? Can you give more away to causes you are passionate about?

At a recent conference, I was talking with my friend WealthyDoc (another doctor financial blogger) and this concept came up. I told him about a recent question in a group I follow, asking people what they did with their company 401(k) money when they left the company. I stated I rolled it into my IRA.

This comment generated some interesting discussion. The first talking point was, if you roll it into your IRA, then you can’t do backdoor Roth IRA contributions. But I pointed out that I don’t make any more contributions to any retirement fund. That generated some more comments. Even though I retired from medicine, I still earn money from speaking, selling books, financial coaching, and rental income. So I should be using that earned income to contribute to a retirement plan such as an IRA or 401(k).

Yes, I do still earn money. Yes, I can still make contributions to retirement plans. But, I’m financially independent now and don’t need any more money in my retirement plans. Should I just keep up the same old thing and keep contributing anyway?

WealthyDoc and I discussed this late into the night, long after the conference was done for the day. He too was in such a position that he could choose to contribute or stop contributing to his retirement plans and it will not make any difference in his retirement anymore. He and I both had passed the point of enough. When you have enough, should you keep adding more?

John D. Rockefeller was at one point thought to be the richest man in the world. He was asked how much is enough? His reply was, “just a little bit more.” If the richest man in the world didn’t think he had enough, what does that say for the rest of us? Can one ever reach the status of “enough?”

Charles Dickens wrote about this issue and used his character Ebenezer Scrooge as the object lesson. Scrooge was saving way too much money for the future. He didn’t use enough of it for his present needs. He kept his office too cold to save money on coal so he could put more money away. He paid his staff too little so he could put more money away. He did not give to charity so he could put more money away. Yet he already had enough.

We can look at a character like Scrooge and laugh at his decisions. But when we make the same decisions, somehow it seems different. We are not like Scrooge. Or are we?

I retired from my 20-year surgical practice in 2013.  I continued to work as a locum surgeon for another three years. I still work as a financial coach and author. I still bring in earned income so I could still be contributing to my retirement plans. But I already have enough in those plans to take care of me for the rest of my life. That is why I had the ability to leave medicine in the first place. So should I keep pouring in more money?

My choice was to stop putting anything else into my retirement plans. I already have enough. By not putting it in these vehicles, I do pay a little more tax. I also have a little more money available for my use now. Since I already have the future taken care of, I would like to spend the rest of the money in the present and not continue to stockpile it for the future. For me, the future is now.

I discussed the issue of determining your finish line at the end of my book The Doctors Guide to Eliminating Debt. But what good is figuring out your finish line, if you don’t do anything differently when you reach it? When you finish running a marathon, you stop running after crossing the finish line. How silly would it be if some of the runners kept going because they wanted to get in another couple of miles? When they wave the checkered flag at a stock car race, the racers head to the pits because they know the race is now over.

Why are we unable to use the same mentality when we cross the finish line of our retirement savings? The finish line means you can stop racing. When you hit your retirement number, you can stop saving.

Just because I stopped putting money into my retirement plan, doesn’t mean it stops growing. I picked out one of my accounts to see what happened to it since I retired. That account is up 44%. It won’t be long before the retirement money has grown to double the value it was when I stopped working. So once you cross the finish line, if you still are working, but not contributing anymore, the account will continue to grow.  It’s like you stop racing when you cross the finish line, but your money keeps on going.

This same thing applies to disability and life insurance. Once you cross the finish line of needed wealth accumulation, you do not need those insurance policies anymore. You are self-insured once you are financially independent. But I have a hard time convincing people to drop those policies, for the same reason I have a hard time convincing people to stop adding to their retirement plans. Old habits die hard.

Will you be able to stop saving once you reach that point? If not, what will be holding you back? Think of all the other things you can do with the money now that you don’t need to save it for the future. You wouldn’t keep sending money to the bank once your mortgage is paid off, would you? Isn’t that almost the same thing?

There are so many good things you can do with your money once your stockpile is large enough to cover your future. You can go on more expensive and longer vacations. You can take more time off. You can see fewer patients. You can take less call.  You can work fewer shifts. You can make donations to causes you feel passionate about. You can help out other less fortunate family members. You can pay for your kids’ college education. You can contribute to your grandchildren’s’ college fund. There are so many good things to do with the money you used to put into your retirement accounts.

I hope this will plant a seed in your mind to consider what you will do when you cross the finish line of retirement savings. Make those plans now. I stopped racing when I crossed the finish line and headed for the clubhouse for a drink. If you want more information on retirement, pick up a copy of my book The Doctors Guide to Smart Career Alternatives and Retirement. See you in the clubhouse.

Republished with the permission of drcorysfawcett.com.

10 replies on “Stop Putting Money in Your Retirement Plans”

I’m in the same place. I earn enough at fun side gigs that I do not withdraw any from savings or investments. But I don’t save either. I spend exactly what I make, which is a wierd coincidence because it is the same amount my wife and I have always spent. We gave all along the journey, liberally, and still do. Our kids are grown and don’t need our financial help, at all. We have no grandkids. We own everything we want, it’s almost Christmas and neither of us can think of anything we want as a present. Like you our untouched investments keep growing though they are conservatively invested because who needs growth? But we are happy and life is good. I came to the point additional money meant little so I stopped my 9 to 5. And have turned down three amazing job offers that are unsolicited because what good is more money? And yes, my wife still has life insurance on me and we have long term care insurance when we don’t need either policy.

I am in a similar situation. Retired in 2015 from 23 years in pediatrics. Enough saved to maintain our typical spending, plus eventually ss and a pension.
My take is if the focus is on continuing to grow my portfolio value, then that is really what I’m living for.
Rather I have developed a portfolio of affordable rentals, I take a return that matches inflation, and reinvest the rest in maintaining/improving the properties.
I belong to boards/organizations that serve community economic needs.
And I do help my kids with IRA contributions, family trips, specific individual needs. Why wait til I’m gone and they are in their 60s?
Seeking to use whatever exceeds our needs for others is more meaningful for me.
And as you shared, despite these efforts my portfolio has grown.

Stephen, great story. Many doctors use pediatrics as an example of a specialty that doesn’t get paid enough to get ahead, let alone retire in 23 years. I often hear people tell me the reason I did well was that was a surgeon and they can’t do it because they are a “x” and they don’t make as much as me. “I don’t make enough,” is never the reason for not getting ahead. The specialty you practice is not the reason you do or do not get ahead. (There are a lot of high paid specialty doctors who live paycheck to paycheck) It is the difference between what you make and what you spend that matters. Thanks for providing a pediatric example of a doctor who played the money game well. Congratulations on your retirement, after 23 years you earned it.

Dr. Cory S. Fawcett
Prescription for Financial Success

That’s awesome that you saved enough for retirement, and that you don’t need to put anymore money in the retirement “bucket”. In my personal circumstances, I don’t feel like I will ever save enough for retirement though. I don’t have any passive income besides my investments, additionally, I do not know how long my retirement will be. Is it going to be 5 years? Or is it going to be 40 years? I feel like there are too many unknowns for me to personally stop funding my retirement accounts completely.

Dave, unless you die first, you will retire someday. You will also get some social security payments. Just keep saving in your retirement plans and whatever you do have when you retire, will be much more than you would have had if you did not keep saving. Time and interest will be your good friend. Just your IRA at $5,500 put away every year for 40 years with an average of 6% return will exceed $1,000,000. Following the 4% rule, that would give you an additional $40,000 a year to spend in retirement. You got this!

Dr. Cory S. Fawcett
Prescription for Financial Success

I guess if you rather give to Uncle Sam vs your heirs, don’t contribute to retirement anymore. But I’d rather give my excess to my heirs as interest/dividends in retirement accounts are tax advantaged even if cost basis are adjusted for heirs upon death.

Agree the point is knowing when you have enough for the future, and then shifting your focus to live fully in the present. We’re not guaranteed anything, so for me this sounds like a perfect balance.

I think you should make it clear in your article, this advice only pertains to the wealthy. For 99% of Americans, stopping contributions to a tax-advantaged retirement account is bad advice. The average 401k balance in America just crossed $100k. To say a large portion of Americans are not financially ready for retirement is an understatement, my own parents included.
I fear the average person reads an article like this and thinks they can cut back on contributions to a 401k or stop altogether.

However, for those Americans who have high incomes, I will agree that there is a point where enough is enough. Thanks for your point of view.

Shawn,
The article was originally published on my web site, for physicians. But the average Joe can also save enough to retire, but they usually don’t, they spend it all. Just like the average physician can save enough, but they usually don’t, they also just spend it all. That is also why you see the supper rich going bankrupt. If you spend it all, you don’t save any. If you save some of your money for many years, you accumulate a lot. The article was originally to address the physicians who have saved enough, but keep on saving anyway. Like Scrooge did in Dickens’ novel.

The average American has an under saving problem, or more correctly, an over spending problem, and they don’t fit into the issues of this article. But for those who do fit, I hope it will help them see the light.

Thanks for your comments.

Dr. Cory S. Fawcett
Prescription for Financial Success

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