This year, the company I work for implemented a new Simple IRA program for employees. This was very well received among my co-workers as they have been asking for it for years now. The company is even matching the up to the maximum allowed percentage for the program. Do you know what the odd outcome was? I was the only one, out of 37 employees, that didn’t participate.

Senior couple on cycle ride

Weird, huh? Why didn’t I participate? My reason is very simple. I don’t want to lock my money up where I can’t get it for over 30 years. This is a better strategy for me, in my opinion:

  1. Pay cash for my first home
  2. Live cheap throughout my thirties and save like crazy
  3. Invest wisely
  4. Become financially independent by age 45-50
  5. Live financially smart and not have to stress out about “retirement”

Pay Cash for My First Home

I’ve mentioned this before, but my goal is to pay cash for my first home. If I am 32, debt free, own my house and car and college education outright, but don’t have a dime in retirement, “I’ll be a rockstar”. Looks like I would be able to “pocket” a mortgage payment every month toward “retirement”. Let’s just quickly plug in a mortgage payment size savings rate times 5 years into an investment calculator quick.

My pretend mortgage payment, were I to go buy the house I would buy today with 20% down: $974.28/month (Just went online and used a calculator.)

Number of months in 5 years: 60 months

$974.28 per month (x) 60 months, invested at:

  • 4% return = $64,809.08
  • 6% return = $68,315.42
  • 8% return = $72,064.28

So, that’s saving only my “would be” mortgage payment, and only for 5 years. My point? I would be able to pile up massive amounts of cash if I didn’t have any debt and no mortgage payment.

Live Cheap Throughout My Thirties and Save Like Crazy

Let’s assume I was 32 and had a paid for house. Let’s also assume I will make a decent living and therefore will be able to live below my means, like I am now. I will have to plan on potentially having a family to support as well. Even if I saved nothing other than my “would be” mortgage payment, I would be looking at having over $100,000 saved by my 40th birthday.

By 40, how many of those who started “investing in retirement” early, will have that kind of money saved? I bet not many. Why? Because they are not on a financial plan, don’t have financial goals and are spending everything they make. That’s why.

Even if by age 40, I don’t have a single dime “locked up” in retirement but I am debt free, own my house and have over $100,000 in savings, I will not be worrying about retirement.

Invest Wisely

What I’ve learned from Dave Ramsey is that if you may need the money within 5 years, you should be saving and not investing. In other words, do not put the money into the stock market. Do not put it at risk. Instead, keep it in a savings or money market account where it is safe. The markets have been a disaster recently and messing around with putting money in there could results in big losses short term.

I agree with Dave that investing wisely is investing for the long term. Investing wisely is investing in a very diversified portfolio, like mutual funds. Even diversifying your mutual funds is a good idea. Real estate is another wise investment, again, over the long term.

If I invest wisely throughout my thirties and forties, I will hopefully not lose any money, but instead make some over the long term.

Become Financially Independent by Age 45-50

Having goals, being on a plan and budget and living within my means for twenty years will, in my opinion, allow me to be financially independent by age 45-50. I think it can be done, regardless of whether I save for “retirement”, now or ever. Period.

Live Financially Smart and Not Have to Stress Out About “Retirement”

The point of all of this is that I honestly don’t think the key to a prosperous future has much, if anything to do with how much you put in your Simple IRA, Roth or Traditional IRA or 401K. I think it has everything to do with how financially smart you live your adult life and how well you live within your means and save. I agree with Dave Ramsey again, when he says that personal finance is 80% behavior and 20% head knowledge.

Those that would yell at me about not “saving for retirement” think this is all head knowledge. Guess what, they’re completely wrong.