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3 Reasons Not to Contribute to an IRA or 410k

By Edited Jan 4, 2016 2 2

It's considered common knowledge that everyone would benefit from contributing to a retirement plan invested in a well-diversified portfolio of mutual funds. This article explores 3 reasons why you may want to consider alternate investments which may provide an improved quality of life.

1. 401k and IRA returns can plummet when you need them most

As this video from the CBS television show 60 minutes highlights, millions of people near retirement lost 30-50% of their savings in 2009. The massive loss in savings caused some to delay retirement. Several American workers foresee working the rest of their lives to sustain a living.

401k Fallout

2. Pay Off Your Mortgage Faster

Paying off your mortgage or eliminating monthly housing costs will provide a 34.1% reduction in monthly expenses based on a recent US World and News survey. [1]

Making extra payments towards principle can provide significant cost savings. For example, with a 30 yr mortgate and 5% interest rate, an extra $50 a month towards principal will allow you to pay off the mortgage nearly 3 years earlier resulting in $20,000 of interest savings assuming a $150,000 loan.  

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In addition to paying down your mortgage, this book highlights other investment alternatives to standard mutual funds.

3. Invest in your health

Health care costs are increasing much faster than wages. Over the last 50 years health costs have grown over 818% while wages are relatively constant and the US Gross Domestic Product (GDP), a metric for a country's standard of living, only increased 168%. [2]

As health care costs rise, investing spare cash into preventative measures to improve health and reduce the need for health care expenses another key investment for retirement which should be prioritized over 401k contributions. Examples include investing in higher quality source of food, supplements exercise, in addition to minimizing stress and enabling sufficient sleep.

Personally, our family has prioritized purchasing the highest quality food sources we can afford. We buy as much of our food locally and organic as possible. Physical activity and sleep are high priorities as well.

Dr. Fred's Healthcare Rescue: The Real Solution to Healthcare
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A great overview of several alternative healthcare options written by an 84 year old with lots of wisdom.

Disclaimer: I'm not a financial professional. My advice is based on personal experience and research. Any investment carries an inherent risk. Please educate yourself before following anyone's financial advice.



Aug 23, 2014 2:09pm
It's always a good idea to get out of debt as fast as you can. However, if your 401k is increasing at a rate of 7% and your paying 5% interest on a house loan, you come out ahead 2% ahead if you keep putting money in the 401k instead of paying off your house. However, as you pointed out, you can't always count on your 401k to keep making you money. To each his/her own.
Aug 24, 2014 9:27am
I definitely agree -- each person has to make their own decisions based on their personal circumstance. Personally, I like the certainty of the return from paying down debt more quickly. I'm also concerned about not fully understanding how a mutual fund invests 401k funds to generate the rate of return. You could be financing activities that don't align with your ethics.
Aug 24, 2014 9:28am
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  1. "The Average American Consumer: Over 30 Percent of Income Spent on Housing." US News and World Report. 2/08/2014 <Web >
  2. "Why U.S. Health Care Is Obscenely Expensive, In 12 Charts ." Huffington Post. 2/08/2014 <Web >

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