Conventional wisdom has it that you should always max out 401(k) and IRA contributions so you can build up your retirement savings while reducing your tax burden at the same time.
For many of us, that strategy indeed makes sense — but not for everyone. Financial advisers say it may not make sense if, for example, you have:
- No emergency savings.
- No insurance.
- A big debt load.
- A large non-emergency spending need.
To be sure, if your company has a 401(k) plan in which the company matches, try at all costs to contribute up to the maximum matching level, because otherwise you’re turning down free money. “That’s the first level” of retirement savings, says Diane Pearson, a wealth adviser at Legend Financial Advisors in Pittsburgh.
But maxing out retirement accounts is not always the smartest move. Here are 8 good reasons to refrain from pouring everything into your retirement accounts.
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