The Only Time You Should Stop Contributing to Your 401(K)

From student loans to medical bills to simply putting food on the table, much of managing your finances can seem like it all comes down to day-to-day existence. Meanwhile, retirement seems like a distant dream. How can you even think about maxing out your 401(k) or Roth IRA if you can barely afford rent?

However, the best thing you can do for your retirement funds is to start saving now . Even if you think there’s no need to worry about it just yet, any savings at all —even if you don’t add to your savings for years—can make a big difference. So how do you save for retirement when it seems like your lowest priority? Here’s what you need to know about when it might make sense to temporarily pause contributions to your pension funds and how you can still retire.

How to Know If You Can’t Afford to Contribute to Your Retirement

First, “take a long, hard look at this decision before you make it,” says Nathaniel Donohue, financial planner and partner at Consilio Wealth Advisors . From a lifestyle perspective, it is all too easy to suspend contributions for longer than is absolutely necessary. “Your level of consumption will always grow to match your available resources,” Donohue explains, meaning that even if you plan to only pause contributions to pay some bills, “something else will eat up those funds.” This is human nature.

While pausing contributions to a retirement account isn’t ideal, life happens. Extreme or unexpected financial situations may take precedence over investing in your future. For example, if you have a lot of high-interest credit card debt and you just got laid off from your job, it might be a good idea to pause your contributions and redirect that money toward paying off the debt first. In particular, Donohue says that if you have high-interest debt of 8% or more, paying it off should take priority over your pension.

So when you’re faced with significant debt or a decrease in income, it’s wise to consider temporarily reducing or suspending your contributions. However, this should be resorted to as a last resort and only after looking for other ways to reduce your expenses . Donohue offers some saving tips: Online budgeting tools , the ” envelope method ” and holding monthly personal finance meetings can be a good start.

And when it comes to your monthly financial meeting (which Donohue swears by ), focus your attention on creating realistic and achievable financial goals. Saving for a few hundred student loans a month will be easier than worrying about paying off thousands of debts. “Small steps add up to big results over time,” Donohue says.

What happens if you stop contributing to your retirement accounts?

Naturally, pausing contributions to your retirement accounts will delay your progress toward building the savings you need for retirement. When you pause contributions to your retirement account, you unfortunately expose yourself to a variety of risks, both short-term and long-term. For example, if you have an employer-matched 401(k) retirement account and you pause contributions, you could lose that “free” money. After all, if you fail to contribute, your employer will not be able to match it.

The real danger of deciding to suspend contributions is how easy it is to suspend them. Many of us feel like retirement is still a long way off and not worth worrying about, especially if you’re struggling right now. That’s why if you waited to invest in your retirement until you had other financial goals (like paying off your student loans ), you were denying yourself the key benefits that retirement accounts offer .

Of course, it’s never a good idea to go into huge debt at this time. If stopping your pension contributions for a few months becomes your lifeline, then by all means take advantage of that lifeline, but make good use of this time to pay off your debts and resume your contributions as soon as possible.

How to Stay on Track to Retirement if You Have to Stop Contributions

If you are in a situation where you feel you have no choice but to stop contributing to your retirement account, make a plan for when you will resume investing. “Your goal is to eliminate debt so you can get back to paying yourself before paying the bank,” Donohue says.

As you make your plan, consider when you will resume work and how you will make up for missed contributions. Consider factors such as your age and how long until retirement, whether you have debt or urgent expenses, your income and job security, and investment market conditions.

The key is to be strategic about when to pause and have a plan to resume contributions once the situation improves. The sooner you start saving for retirement, the more you’ll benefit from the compounding growth of your money over time. (Read more about how to be less afraid of retirement .)