First Person: I Was Saving Too Much for Retirement

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Having money set aside for the future is great, but not at the expense of paying the bills in the present. That's the predicament I found myself in about 7 years ago.

Since I was self-employed for a number of years, I didn't have access to a company-sponsored 401(k) plan in my 20s. As soon as I began working for a company that offered a 401(k), I jumped on board with extreme enthusiasm. I was a little too excited.

I began saving too much for my retirement. I was having 30 percent of my salary withheld from my paycheck so it could be invested into my 401(k) plan. I was also contributing to my Roth IRA account that I had opened when I was an independent contractor. After just a few months, I started to notice a few signs that I had made a major financial goof that would cost me.

Although I did have a lot saved for retirement, I didn't have a lot saved for other things. And I was having trouble paying the monthly bills.

I didn't save a car fund

Because I didn't have a car fund, I decided to take a loan from my 401(k) to buy a car. I could have left my money in my retirement account so it could grow. Instead, I was panicked when my car broke down. I realized I was saving too much for retirement at the expense of having money saved for car repairs and a new car.

I didn't have a house down payment

Even though I knew I wanted to purchase my first house, I didn't save for the down payment. When it was time to come up with the three percent I needed to purchase my townhouse, I tapped my Roth IRA. Since it was my first home purchase, I was able to withdrawal money from my IRA without any penalties. Still, the fact that I had no other place to turn for the money was a warning sign.

I didn't have an emergency fund

When my hot water heater broke down, I needed to spent $600 for a new one. I should have been able to tap an emergency fund, but my emergency fund was set to zero. I started to feel the heat of my own embarrassment since I had to resort to using a credit card. Fortunately, I was able to pay the $600 bill within a month. But I realized I needed a 6-month emergency fund more than I needed a huge retirement fund in my 30s.

As I approach my 40s, I know saving for retirement will become a major priority. However, I don't save for retirement at the expense of my more pressing concerns. I now just put aside 10 to 20 percent for retirement, depending on my bills. I personally don't live an extravagant lifestyle so I won't need more than $750,000 to $1 million by age 70 when I retire, but I still have more than 30 years to get there.

In the meantime, I make sure I have enough money put aside for my car and house expenses as well as for my sons' college expenses.

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