Help! I’m Not Investing For Retirement!

not-investingHere’s a secret of mine: I’m not investing, and I’ve added almost nothing to my investment/retirement accounts since 2008.

It’s been hard to do this while hearing common financial advice like “max out your Roth IRA” and “take advantage of compounding returns.” I know those are the things that I should be doing, but I have reasons why I’m “investing” in myself in other ways.

Making the decision I have has been tough, and I’ve wondered lately: Is it okay that I’m not investing even when you I afford to?

Why I’m not investing

Simply put, I’m not investing so I can save to support myself while making my switch from working to freelancing and blogging full time.

While I don’t need to invest a whole lot of money directly into my business right now (as compared to a brick and mortar business, for instance), I do need to provide living exposes for myself while I get my self-employed income rolling, which really starts in May. By doing this I’m essentially paying into the idea that I can run a business on my own, and I can eventually earn enough money to replace a job.

The tradeoff of this approach: I’m working to save $10,000 to finance this transition, and I won’t be able to put any money into investment accounts during the months it takes to save this money. I probably won’t be able to invest for some time after going self-employed, either.

I don’t have a whole lot of knowledge about what other people do to start their own business. In my mind, a lot of people just lay it all on the line, take out loans with their personal property as collateral, and then put their heart, soul, and all their time into giving it all they’ve got. I don’t think this quite applies to my situation.

My goals for this year are to smooth the transition by increasing my side income while I have my job. I don’t have the facts, but I’m assuming this is one of the better strategies that people take. Of course, it would be best to completely replace my job income before quitting (which I’m not on target to do by May), but it’s not always the most practical to do it this way.

Why it’s not okay I’m not investing

I’m not 100% sold that what I’m attempting is a great idea. For going this route, here are the potential consequences if it doesn’t work out.

Falling further behind and lose out on compound interest. As I said, I’m not investing much of anything now, I probably won’t be in 2012 either, and I’m putting $10,000 more or less on the line with this plan. If it fails, I’ll definitely be worse off financially than I am now.

Stock market returns are more stable, reliable, and easier to predict. I feel like this is about one-half myth at this point as nothing is guaranteed with stocks, but I feel like I can at least point to the stock market and say that I can predict around 8% annual return over a long period. That’s obviously not true in every year, but it’s probably still more predictable than any amount of benefit I can expect to receive from working on my own.

Why it’s okay I’m not investing

Even though there’s some uncertainty, I think there are some good reasons for doing this.

Returns could be many, many times greater than the stock market. Not that my goal is to get super rich, but investing a bit in the stock market here and there while I work a job isn’t going to get me anything outside of mediocrity. I’m technically “investing” in something, although it’s not a traditional investment like a house or the stock market. While the returns are unpredictable, success could mean a ROI a lot larger than the stock market produces even in its best of years.

I’m trying to create a better life for myself. Making this decision comes down to more than just the money itself. Investing in the stock market for retirement always feels like I’m deferring a “good” life until I’m 65. Investing with this mindset may never be sexy, and I’d argue that it’s simply going to lead to a pretty good and maybe not great life.

I have some side income, and I’ve put a lot of thought and planning into this. This is anything but a snap decision. I planned to quit and try this nine months before I would actually put it into action. I haven’t planned for everything, but it’s not like I just decided to quit my job one day.

I’ll know if I can pull off working for myself. Working for myself is something that I feel is meant to be for me, and I know that I’ll never be content with a job until I try out the self-employed life. If I fail, my life is far from over and I can just go back to the working world relatively unscathed.

I’ll put a time limit on my experiment. Just because I’m quitting my job doesn’t mean that I’ll never consider going back. I haven’t decided on a hard deadline yet, but I think it’s fair to give it 6 months of solid effort and then reasses where I’m at. $10k is about 6 months of living expenses for me (and don’t forget I’ll be starting with at least $1k in monthly self-employed income, too). Although I can see it would be hard to go back to getting a job, the lack of money will either make me work harder or will force to me to back to the world of cubicles.

I’m really excited about the situation I’m in, and I think it’s going to be a fun and life-changing experiment no matter what. To me, the consequences of not investing right now seem very small compared to the rewards from investing in my business instead.

Is this a strategy you have considered or would consider? I’d definitely appreciate any advice.

$ $ $ $

photo by: CarbonNYC


  1. In my opinion, investing shouldn’t be at the cost of not having sufficient living expenses and emergency funds.

    You are the best judge as to what amounts to a comfortable living expense or emergency fund. Some say 6 months, some 1 year – I shrug. For them maybe, not for me. You decide, don’t let Dave Ramsay or Suze Orman decide for you.

    Also, the amount you invest matters. If you invest $100 every month and pay $7.95 in commissions, that’s not smart! You are better off putting that money in a bank account.

    If you have the above bases covered and if you are young, you probably should at least consider indexing.

    The effects of not investing when you are young will be felt when you are old.

    • Thanks, MC. It’s all pretty hard for judge having never been down this road before, but I feel the best thing on my side is that I can live relatively cheaply.

      Don’t worry: Even when I do invest, I don’t pay $8 every month in fees.

      I know that I could be in more trouble later for not investing now, but that’s a chance I’m willing to take to be happy with life both now and in retirement. @moneycone

  2. prairieecothrif says

    MC makes a good point. You know your situation and what risks you can take. I think you have good justification for what you are doing and I really hope it works out for you. In fact, building income streams seems to be more stable than the market these days. Plus your young; you have a bit of leeway.

    • Yes, I know jobs are even less stable and that it’s important to have many income streams. Since I’m young, I feel like this is the best chance I will ever have to make this work. @prairieecothrif

      • prairieecothrif says

        @Jeffrey Trull There is some wisdom with that. You are only young once. However we have to balance that with foresight for the future. We can only do so much in the present before we start sacrificing the future. Making sure to have a plan in place and resources accounted for can be huge in minimizing risk and regret.

  3. Well, it’s definitely a risk. While you’re younger the risk is more “not enough by retirement-time” than “lost money in the stock market”. If you can build your business into a legitimate money maker, maybe it’s not as much of a problem… but if you can do it, you should try to at least get money into a Roth or something.

    Maybe you can live off the $10k and invest the rest?

    • I like the idea, PK. It’s all so unpredictable it’s hard to commit to anything right now. But I hope that after a few months I’ll be able to sock some money away for retirement. I know it’s not the easiest financial path, but I want to give this a try. @PKamp3

  4. realTourIstria says

    I am also not investing, but that is because I’d rather pay off my student loans (avg 4% interest). That is a guaranteed return on my investment. If I had high interest credit card debt, it’d be an even bigger return. Once I’m debt free (except house), I’ll have a large cash flow to build up an e-fund and then look into an IRA. I think it is smart that you are using the money to finance your transition.

    • That’s a good point, and is also why I chose to pay off debt first. I think this strategy is fine as long as you’re putting your all into paying off your debt and not just making minimum payments for the next 20 years (which it sounds like isn’t your strategy) @realTourIstria

    • @realTourIstria Interesting.. I have 17k in student loan debt at a interest rate of 3.5%. The loans cost me 184 per month and I am foregoing on paying them off. My reason is the opportunity cost giving up 17k. I could use that money to pay down my mortgage, invest in the stock market or invest in my real estate properties.

      I’m curious, what is your mortgage interest rate? Would it make since for you to pay the minimum on your student loans and pay more towards your mortgage? How much monthly cash flow would paying your student loans free up for you? Last but not least.. when you say not investing are you referring to all forms of investment?

      • realTourIstria says

        @YFS My minimum payments on two student loans total about $270/month. I currently put an extra $1500/month towards that debt. To me, paying off debt is a certainty, while investing in stocks is a risk.

        To go back to the “personal” finance angle, I get a greater satisfaction knowing that the debt payoff will give me flexibility (once it’s gone, I don’t have to worry about always having a job that makes $XXXXX; I could take a lower-paying job if it were more personally rewarding).

        My mortgage interest rate is 4.7% (compared to 4.25% for my student loans), so it is almost a wash. Plus, these loans are not bankrupt-able.

        While the math might favor another strategy, I believe the psychology matters. Like Dave Ramsey always says to those who question his Debt Snowball strategy, “If you are such a math genius, how’d you get so far in debt?”

        Once the SL debt is gone,I’ll have about $1700-1800/month available to meet my next goals, which would be an e-fund and saving for retirement. I guess I just view debt payoff as the logical first step in preparing for retirement. If I had an employee-match 401, I might take advantage of that.

        I have a government pension, but I am not yet vested and am not sure if I will become vested before leaving government service. If not, I get my contributions back to do what I want with.

        This debt-before-investing strategy works better when it’s more clear cut: if one has $40,000 in credit card debt at 20% interest, what the heck are they doing trying to eke out 8% playing with stocks?

        • @realTourIstria I agree with your point on if you have 20% in credit card debt you should just pay it off. There is no way you can invest to match your return by paying off the credit card. I also agree with you on your point of personal finance being behavioral and personal so you have to do what makes sense for your specific situation.

          One thing that takes me back when reading your reply is that one of your goals after you pay your student loan debt is to establish an E-Fund. I take it you’re following the Dave Ramsey strategy to a T and only have 1k in emergency funds. When I followed Dave’s strategy that was the first rule I broke.. I had to have 1 year or more in emergency funds just to feel safe for some reason.

          My only debt are a 15 year mortgage at 3.375% and my student loans (17k) at 3.5%. The reason why I’m having trouble paying my student loans is that I make so much more with my rental properties.

          Isn’t personal finance grand.. so many solutions to the same problem.

        • realTourIstria says

          @YFS I guess I am living on the edge a bit. I do have about $3,000 that I can access quickly for an emergency, though. If I were to lose my job, I’d also get about $7,500 in cash from pension contributions returned and cashing in unused vacation days.

          In a big emergency, I could sell one of our paid-for vehicles for another quick $10k, and if worst-came-to-worst, we could cash out the money in my wife’s public teacher pension (to which she no longer contributes) and get another $10k.

          I’m assuming your rental properties are paid for?

          Great conversation – that’s why personal finance is so much fun, and such an important topic to bounce off others to see what they have done.

        • @realTourIstria My wife wasn’t going for a plan like that she was a bit more risk adverse than I but I did see her point. It made sense for us to have a large emergency fund.

          My rental properties were paid for in cash and then we pulled the money via a HELOC via our business. The HELOC are in our LLC’s name and are not tied to us personally. The debt obligation is 260 a month and we receive 1775 in rent.

  5. OMG I love that pic. too funny. Personal finance is PERSONAL. You feel good about what you are doing and wouldn’t feel good about maxing out your IRA right now. So there’s your answer. You’ve given it lots of thought and came to this decision. It’s not like you just got lazy about retirement. You have a plan. That plan may work or it may not work. But it’s YOUR plan and you’ve got to see it through. I think you are going to be great no matte what happens with your business. 🙂

    • Thanks, Ashley, I appreciate the encouragement! I guess this was kind of my way of admitting that I’m not making the best financial move on paper, but I think there’s always something to be said for taking risks. You’re right, I’m not just being lazy, so there’s definitely something to that.

  6. I’ll go ahead and assume for my own sanity that your company doesn’t do any 401(k) matching. If they do, you’re throwing away perfectly good free money and that makes me sad–but I won’t entertain that.

    I know that the whole lifestyle design community shuns the idea of a “normal” retirement, but have you thought about investing for other life events like a wedding, babies, home ownership, furniture, college funds for your babies, getting out of the workforce eventually (even the lifestyle designers with tons of passive income don’t count on JUST passive income in “retirement”) etc.? These are things that you will STILL need to save (and preferably invest) for, even if you start raking in even $10,000 bucks a month (which will be taxed at about half, mind you).

    Absolutely, positively, pursue your entrepreneurial path. But also be SUPER realistic about all the savings and compound interest that you are sacrificing by turning down the opportunity to invest tax-free and with a company match. You’re not less of a person for having a cubicle job, especially if you’re using it to fund a lifestyle you will eventually be proud of.

    • Leah, thanks for the very thoughtful response!

      No, I do not receive a 401(k) match. I work at a nonprofit that does not offer any kind of matching due to a drop in funding. My job is fairly low-paying, which is another reason it’s not so hard to give up.

      Yes, I have thought about those other things, but I don’t see myself spending on any of those things in the near future. Perhaps I’m not being realistic, but I still feel like there’s a lot I need to do before getting to those points.

      I don’t think it’s so much that I feel less of a person for working in a cubicle. I just don’t enjoy it, and I have a hard time imagining I ever will. I will go back to working if the entrepreneurial path doesn’t work out.

  7. I’m not investing like I should either. I’m putting $100 a month into a Roth IRA, but I can’t wait till I can max it out one day. Right now I’m focusing on paying off the last of my debt, before I do anything else.

    I like how you’ve thought about your decision and what’s best for your situation. While skipping out on compound interest/returns is something I feel I’m missing too, I still think it’s the best decision for now. Quitting your job and creating a new career is a great way to “invest” in my opinion.

    • I’d love to max my Roth out, too, but it’s just not my top priority. I hate to let the PF world down, but it just isn’t. @Carrie

      • @Jeffrey Trull Jeff, you of all people know that personal finance is well… personal. Every situation is different. You’re a head of the game by at least knowing what you’re supposed to be doing.

    • @Carrie Many would think other wise in your situation. How long until you pay off your debt? Would the 1200 a month that is going towards your IRA benefit you more if you paid down debt?

      • @YFS I only have about 6-8 more months of debt repayment. I’ve only paused my contributions since starting 2012. If I had a long distance debt pay-off I would definitely contribute towards retirement.

        • @Carrie@YFS

          In that case I definitely would have suspend my contributions. I’m pretty sure you’re excited to see the light at the end of the tunnel

        • @YFS Oh yes, this is the last leg of my 2 year journey and the light at the end of the tunnel is getting pretty bright!

  8. Does it makes sense to invest in an IRA while you still have student loan debt?

    • That’s a tough question to answer, and it depends on several factors. For me, I like paying off debt as fast as possible, so I didn’t do much investing during that time. But if you have a lot of loan debt (I’m thinking $20k+), it seems reasonable to want to save some for retirement.

      I believe the tax benefits for funding a Roth IRA are similar to that of the deduction for paying student loan interest, but that’s something you’d have to look into further as I’m not sure how it works out exactly.

      As one of the other commenters pointed out, you should always take full advantage of a 401(k) match since that’s basically free money.


    • @mbmosher Yes! and No!. It depends on what apr you’re paying on your student loan debt. My student loans are 3.25% and are 170 per month. I am forgoing paying off my student loans in order to invest in other avenues.

  9. Two suggestions – penny stock or DRIP accounts. If you can afford to place a specific dollar amount (small amount) into a DRIP account directly towards purchasing portions of shares you can still invest while moving forward. Sharebuilder does this.

  10. There is nothing wrong with temporary suspending your investing while you’re raising capital for your business adventure. The only thing I will have a problem with is if you were not taking advantage of your employer match aka free money. Not investing is better than investing your money and taking out a loan

    • I don’t have access to an employer match, and I would take advantage of it if I did. You’re right – I think it’s better to raise capital myself than take out loans or go into debt on credit cards. @YFS

    • I don’t have access to an employer match, and I would take advantage of it if I did. You’re right – I think it’s better to raise capital myself than take out loans or go into debt on credit cards. @YFS

  11. Wow, good luck on saving 10 grand. That is no small feat.

  12. In your situation, I wouldn’t invest in retirement either. You need to make sure you have enough liquidity to last at least a year before quitting the job. With the 1k income and 10k saving, you should be ok. Of course things could look much better once the income increase with more time investment. Good luck!

    • Yeah, I’m going to definitely have projects where I can earn short-term cash to sustain myself while I build up the larger projects. I’d be a little more nervous with zero cash flow, but I know that won’t be the case. @retirebyforty

  13. There was a period in my life when I stopped investing too. Sometimes it just isn’t ideal and other things take higher priority. Best of luck in your savings goal!

  14. CentsToSave says

    I need to start adding to my Roth again….. but there is a huge amount of debt to pay off first.

    • I always found it frustrating that I couldn’t save and add to a Roth while I was paying off debt, but that motivated me to work even harder to pay down debt, too! @CentsToSave

  15. Have you heard of the book, “Don’t Quit Your Day Job,” by Jon Acuff? I got it for Christmas and am in the middle of reading it right now. It speaks directly to your situation and is full of great advice. If you don’t know about the author, he too started blogging part-time while working day jobs that he didn’t like very much.

    • Oh do you mean “Quitter”? I haven’t gotten a chance to check that out yet, but I’ll have to do it now. Thanks for the suggestion! @matt76allen

      • @Jeffrey Trull I’m sorry. Yes, I meant “Quitter.” I blame my error on staying up past my bedtime to comment on blogs last night! “Don’t Quit Your Day Job,” is actually the title of Chapter 1, which I just finished. Ironically, it is also the title of one of the blogs I regularly read. Quitter, though, is a must-read for somebody like you.

  16. I agree with a lot of what has already been posted here, but I mostly agree with your idea of why you’re pursuing this venture in the way that you are–because it’s what works best for you! Best of luck to you; I’ll be following along as I find this all very inspirational and I love seeing other bloggers become even more successful.

  17. 101centavos says

    At least you’re thinking about this decision in perspective. Best of luck and best wishes for your efforts.

  18. A traditional career path isn’t for everyone. You are absolutely correct that your entrepreneurial actions could make you several more times more money than if you just worked a regular job and stashed away the traditional 10%. However, if you’re going to do it, I’d say you have to go all in and tell yourself that you’re not going to accept failure what-so-ever. Best of luck!

  19. I’m excited for you! I feel like we are figuring out this journey together. Yes, you should be putting money aside every month, but if you have a plan to become independent, and you can tell yourself you will stay frugal and make up for some of the lost investing about 1 year from now, I think you’ll be fine. Besides, some people stay at the same job for years and never save anything anyways, so I think you’re ahead of the game. I like your time limit. Although I think you will make it BIG!

  20. I don’t think there is any better investment than investing in yourself for the long run.  You are at an early stage in life where you should invest like crazy in yourself!  Sam

  21. I like this strategy. Bet on yourself!

  22. You’ve obviously thought this through with great care. In my opinion, there’s no harm at all in delaying a bit of that retirement savings, so long as you have a time (or an age) down the road  at which you’ll reconsider. Many of us who have started our own businesses have underestimated the amount of time it might take before we’re on solid financial ground again.

  23. Hi Guys, I’ve found this interesting! Check it out!

Speak Your Mind


Read previous post:
Spruced Up: Playoffs Edition

Now that we're post-holidays, I'm glad I can sit back, relax, and enjoy some football! (while reading my favorite PF...