Saving for financial goals outside retirement is very important for young adults.
First, relying on credit cards is an expensive way to fund emergencies, and no one wants to live off family for too long into adulthood. Second, withdrawing early from retirement accounts is costly due to tax and penalties and the chance that money may need to be withdrawn during a market downturn, locking in losses.
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Those who have very little savings should cut back on retirement contributions, except for anything that meets the company match, and boost saving in high-yield savings accounts for short-term goals and investment accounts for longer-term goals. How much to allocate to retirement, paying down debt and saving for goals will depend on individual circumstances and the amount of after-tax income.
The key point is to create a balanced saving and debt pay-down plan because not only will the personal balance sheet be healthier, but the psychological benefits of watching loan balances get to zero, while savings balances add more zeroes, are hard to beat.