I can almost hear the gasps. "What is going on here!? He's always harping on the need to save something for retirement; now he's going to tell us we shouldn't?"
The fact is that most people probably aren't saving as much as they should for retirement. Lots of recent studies bear that out. And if you have read this blog for any amount of time, you know that I encourage people to save. Not so that they can become wealthy or so that they have no dependence on God or anyone else, but so they will have something more than Social Security to live on so that they can retire with dignity.
But I also think that some people shouldn't save for retirement, at least not now, or shouldn't save so much. I know that sounds like a contradiction, but I will explain. Aside from the fortunate few who are independently wealthy, perhaps due to an inheritance or a trust fund, or the sale of a business, there are some good reasons not to save for retirement.
1. You have strong Biblical convictions against it.
Some people don't save for retirement or save very little because they have a sincere conviction that it is not Biblical. They believe that it is disobedient toward God and what the Bible teaches about money, usually citing Matt.6:19-20. Or they may think that it is morally wrong to save when so many others have so little, and they use their surplus to help those in need (James 2:15-16). And others sincerely believe it isn't necessary because God has promised to take care of them (Isaiah 46:4; Phil.4:19).
I highly respect the convictions of others even if I don't happen to share them. We all need biblical convictions; I have quite a few myself, and I suspect you do too. And I see how someone could hold this one. The Bible talks a lot about the dangers of greed, hoarding, and of becoming a "rich fool" in the context of wealth accumulation (Prov.1:19; Mark 8:36; Luke 12:15, 21).
My position on this is that you should NOT save for retirement in a way that makes you a rich fool. (I have discussed this at length in this article.) If you save to be self-sufficient and put your confidence in riches rather than God, then that is what you will become (1Tim.6:17). Of course, a person who lacks riches can just as easily make a God out of money. It's easy to think that all their problems would go away and they would be truly happy if they only had more money. It has much more to do with your heart than how much money you have. Although money can help with some of life's challenges, it is foolish to think that money can give you what only God can.
On the other hand, I think it is wise to save something for the future, at least for at a time when you may not be able to work for a living. And I think there is biblical support for that (Prov.21:20, 34:24-25). But if that is not your conviction, and you are willing to trust God and whatever provision he makes for you, I am certainly okay with that. Just make sure you have thought it through carefully and prayerfully. And be particularly certain you understand the full ramifications of that decision and what they might mean for your lifestyle in retirement and also how it might affect others in your life.
2. You aren't dealing with the present.
Some would say that you should start saving for retirement as soon as you can, regardless of whether you have debt or an emergency fund. The argument is that the earlier you start, the more time your money can grow through the "magic" of compounding, and it's a pretty good one. Plus, many people have a 401/k or 403/b plan at work and can get an employer match – you certainly don't want to miss out on that.
But if you are drowning in debt and haven't set aside anything for emergencies, I think you would do well to reduce or put off retirement savings altogether for a little while, at least until you get those things under control. In other words, pay off debt and save for the present before you do it for your future.
A recent survey found that over 60% of Americans have less than $1,000 in the bank. Even more concerning, a study by the Federal Reserve Board says that almost half of Americans would be unable to deal with a $400 emergency using their bank account. Not having an emergency fund can cause us to turn to other sources, either credit cards or even our retirement accounts when we hit hard times. Better to establish a solid foundation to ensure that you don't have to tap your retirement savings or go further into debt to deal with the unexpected (Prov.27:12). If you take money from your retirement accounts, you are borrowing money from your future self that you may not be able to repay.
Debt is debilitating. It doesn't just limit us in the present; it hobbles our financial future as well. Debt comes at a cost, sometimes referred to as an "opportunity cost." That just means that money used to service debt can't be used for other purposes, such as giving and saving. Debt can also cause a lot of stress and strain to the debtor their family (Prov.22:7). (My wife and I were having dinner recently with my son and his family, and to my surprise, one of our granddaughters, who is in second grade, had recently learned about "opportunity cost" in school. My confidence in the educational system went up a tick that night.)
Better to get your emergency fund in place and eliminate or significantly reduce your non-secured debt before you start saving for the long term. You'll have greater peace of mind and be in a much better position to save. Yes, you may be starting a little later, and you may need to save a little more than if you had started sooner. But by doing those things you'll be in a much better position to save, you may be able to save more and do it consistently.
3. You are saving but not giving.
If you came out of the gate saving for retirement but have not been giving in a way that is proportional to your income, you may want to take a look at your priorities (Prov.21:26b). You are at risk of becoming the "rich fool" I talked about earlier.
I happen to be someone who believes that everyone should give even if they are in debt and don't have an emergency fund. Sure, you may not be able to give a ten percent "tithe," but give something and then give more as you are able. If you can save for retirement, then you can give.
As disciples of Jesus Christ, our priority should always be to give for the furtherance of God's Kingdom. Yes, Christians should also save for retirement because we have no idea what the future will hold. Jesus could come back soon, or we may spend the rest of our lives waiting (Mark 13:32). We may go to heaven when we are 70 or we could live to be 100.
We should first spend our money to support our church, help others, and to spread the Message of the Gospel throughout the world. Then we should save for retirement.
I once heard that a good rule of thumb is to save for retirement the same amount you give to the church. If you give 10%, save 10%. That seems reasonable. But many people, especially those with higher incomes, would be okay saving 6% and giving 14% or more, especially if they are getting an employer match in their 401(k) or 403(b)-type plans.
4. You are "over-saving."
There is a financial "movement" known as "FIRE" (Financial Independence/Retire Early). It advocates saving as much as 80% of your salary so that you can retire very early, perhaps before age 40. Some people actually do it! Just because they are aggressively saving doesn't necessarily mean that they aren't giving anything away, but that would seem to be difficult without substantial incomes. It's possible that they will give generously after early retirement, but that would seem to be difficult unless they are very wealthy.
I have written previously about "early retirement," so I won't go into that here. I know that many people who "retire early" don't actually retire; they just spend their time doing something else, and most try to find productive ways to spend their time. That's because if you are fully retired – i.e., only engaged in leisure and recreational activities – you can end up isolated, bored, and even depressed. We all need a reason to get up in the morning; God created us that way. If your goal is to sit at home all day with nothing to do, you don't understand the purpose of work.
But I do want you to consider whether you might be "over-saving."
Fidelity Investments claims that the average person needs about ten times their income at age 67 to retire. There are a lot of assumptions baked into that number, but to illustrate, someone making $80,000/year would need $800,000 in retirement savings to maintain a similar standard of living. If you are in that salary range and are saving much more than you need to reach that target, you may want to reconsider.
Are you working too much, perhaps even taking on work on the side so that you can earn and save just a little more? Are you afraid that enough won't be enough and keep saving more and more? Are you over-saving in a way that makes it difficult to be generous to others? Most importantly are you saving so that you can achieve absolute financial security, no matter what may happen?
Many of the worst-case scenarios we imagine have about as much chance of happening as the odds of winning the lottery. But some people keep on saving, just in case the financial markets do much, much worse than they ever have before. Or, they do it because they believe that they will live longer than 95 when the reality is that most of us won't make it to 85 or 90. In fact, according to the Social Security Administration, there's a 20.7% chance that a 40-year old male won't see his 70th birthday. That's almost one in five. For women, there's a 14.5% chance. A lot of people think Social Security is going away, but that is highly unlikely for those who are ten years or less from retirement. Even younger people may still have the benefit, albeit an adjusted one.
Sure, some of these things could happen, but the chances of all of them happening to you are very slim.
5. Your saving is making you "cheap."
Most people find that they need to exercise some degree of frugality to save. But there's a big difference between frugal and cheap. If you save every extra dollar you can get your hands on; you are probably going too far. Do you haggle endlessly, or drive halfway across town, just to save a buck or two? Do you get angry with a spouse who spent a few extra dollars on some small indulgence? Do you always tip only 10% or less, regardless of the restaurant or the quality of service? You aren't frugal – you're cheap. Sorry, it is what it is.
You see, there's a big difference between cutting out unnecessary and wasteful expenses and relationship-damaging cheapness. Frugality is being wise and discerning about how we manage the resources God has given us. It can also be an inclination away from unnecessary luxuries. But cheapness is when we never grant ourselves or a loved one a small extravagance. It when we take all the fun out of actually buying something to enjoy because it's all about the price and not the enjoyment of the thing itself.
Money is a gift that can be saved for future needs, but it can also be used to bless and serve others. If you are saving so aggressively that you have nothing to spare when you have the opportunity to help someone, maybe you're saving too much (Matt.25:1-13). Or if you're unable to help family members or others who have legitimate needs because you are saving a lot, but already have a large retirement savings account balance, you may want to cut back or stop altogether so you can help others.
Maybe you just need to loosen up a bit. There is something to be said for living life in the present as well as preparing for your future. Sacrificing too much to save for the future can ultimately be as harmful as foolishly spending on things you don't need when the money could be better used elsewhere.
Most of us need to learn to do without certain things to better prepare for the future, but there are some who need to loosen their grip on their money and spend a little – maybe even a lot – to improve their family life and have a little fun.
Save, but do it well
None of this is meant to suggest that you should ignore saving for retirement altogether. If you have taken care of your emergency fund and your non-secured debt, then it's time to start saving for retirement. Good retirement stewardship involves a two-pronged strategy: First, get your financial house in order. Second, starting setting something aside for your future. And always pursue generosity, no matter what situation you're in.