Saving for retirement and saving for emergencies are not the same. Since there are many people who are feeling the crunch and want to save money on basics, cutting back on your financial obligation to yourself is not a good thing to do, especially if you are reducing your contributions because of the declining stock market be aware that some companies are cutting their matching contributions for workers so that extra “bonus” money that you put into your 401(k) might not be there anymore.

True the savings rate may be considered by some to be an inadequate measure of how much savings a person has, a retirement account just like a Christmas savings account or a special fund that is going to pay for a specific goal or item, should not be considered the same as regular savings. If you spend the money that is supposed to be for your vacation or your child’s college fund, then you aren’t using the money for its intended purpose. The same is for retirement. So if you seem to be wealthy on paper because of your retirement account but rely heavily on plastic with no other savings in sight, then this could be very problematic if a pressing need arises.

Don’t give up on separate savings. Consider your retirement and goal savings accounts (college, vacation, house down payment, etc.) as separate bills that you have to pay each month. Retirement is a goal with different needs and requirements than saving for Christmas. When saving for Christmas or a short term goal, you aren’t looking for compounding interest to really do that much for you.  Compounding interest and time to let your money grow even in a downward economy will be beneficial when saving for retirement.