The Biggest Mistake Young People Make
Saving too much…in retirement accounts.
Investing in yourself
When you’re young, your greatest financial asset often times isn’t your assets—it’s your human capital: the sum of your future income potential.
It’s natural to think saving as much as possible is best. But when you’re young, investing in yourself may yield a greater long-term payoff by boosting your career value.
Early in your career, every dollar you put toward developing your skills, education, or network has the potential to multiply your long-term earning power. And beyond career, many young people have more freedom today—before family and career commitments grow—to invest in experiences that may bring lasting value.
In Die with Zero (a book I plan to detail more in a future letter), Bill Perkins makes the case that you should consider not saving aggressively when you’re young but spend more on experiences and save more as your earning power grows.
Obviously, we shouldn’t see this as blanket advice for everyone, but his point is that we should place value on the enjoyment of our lives, especially when we are young and able.
The trap of over-saving in retirement accounts
Retirement accounts offer important tax advantages, but they also come with one big drawback: limited access.
• Roughly one-third of people leaving jobs cash out their 401(k)s.
• About 9% of active participants make early withdrawals—often with penalties.
When major life events come up—buying a home, starting a family, or changing careers—funds locked away in retirement accounts can be costly to access.
How to save when you’re young
[1] https://www.investopedia.com/a-third-of-americans-are-withdrawing-their-401-k-balances-after-leaving-jobs-11786085?utm
The answer isn’t to avoid saving. It’s to consider balancing savings with liquidity.
Liquid assets are those that you can convert to cash, at market value, in just a few days. Cash is fully liquid; a home is an asset but illiquid.
Here is an example of a savings blueprint to consider:
• Capture employer match first — don’t leave free money on the table.
• Build liquid wealth next — savings accounts, taxable investment accounts, or other assets that can be accessed without penalties.
• Establish an emergency fund — 3–6 months of expenses in a savings account
• Work toward a “Liquid Term Score” of 1 — one year’s worth of expenses in liquid assets.
Saving is essential, but where and how you save matters just as much as how much. For young people, building liquidity alongside retirement savings could create flexibility and may reduce the risk of regret later.
We help clients design financial plans that balance long-term growth with short-term freedom. If you’d like to review your liquidity plan, I’d be glad to walk through it with you.
Schedule some time today. www.calendly.com/andreweppes/meeting
Andrew Eppes, CFP®
The views and opinions expressed are of Andrew Eppes only. They are not necessarily those of MML Investor Services, LLC Andrew Eppes is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. www.SIPC.org. Nexus Advisors, LLC is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. 14241 Dallas Parkway Suite 1200 Dallas, TX 75254 972-348-6300. Neither MML Investors Services, LLC nor any of its subsidiaries, employees or representatives are authorized to give legal or tax advice. Consult your own personal attorney legal or tax counsel for advice on specific legal and tax matters. CRN202809-9371869