Question 1

How much do I need to retire comfortably?

Accepted Answer

Financial advisors typically recommend saving 10-12 times your annual salary by retirement age. For example, if you earn $75,000, aim for $750,000-$900,000. The exact amount depends on desired lifestyle, retirement age, life expectancy, and other income sources like Social Security.

Question 2

What is the difference between a 401(k) and Roth IRA?

Accepted Answer

401(k) contributions are pre-tax (reducing current taxable income) with withdrawals taxed in retirement. Roth IRA contributions are after-tax with tax-free withdrawals in retirement. 401(k)s have higher contribution limits ($23,000 in 2024) while Roth IRAs have income limits but offer more flexibility.

Question 3

How much should I contribute to my 401(k)?

Accepted Answer

At minimum, contribute enough to get the full employer match (typically 3-6% of salary) - it's free money. Ideally, contribute 15-20% of gross income including the match. The 2024 limit is $23,000 ($30,500 if 50+). Maximize contributions to benefit from tax advantages and compound growth.

Question 4

When can I start withdrawing from my retirement accounts?

Accepted Answer

You can withdraw from 401(k)s and traditional IRAs penalty-free at 59½. Earlier withdrawals incur a 10% penalty plus income tax (with some exceptions). Roth IRA contributions can be withdrawn anytime tax and penalty-free, but earnings follow the 59½ rule. Required Minimum Distributions (RMDs) start at 73.

Question 5

What is the 4% retirement withdrawal rule?

Accepted Answer

The 4% rule suggests withdrawing 4% of your retirement savings in the first year, then adjusting for inflation annually. This strategy aims to make savings last 30+ years. For example, with $1 million saved, you'd withdraw $40,000 the first year. However, adjust based on market conditions and personal needs.

Question 6

Should I max out my 401(k) or pay off my mortgage?

Accepted Answer

First, contribute enough to get the full employer match. Then compare your mortgage interest rate to expected investment returns. If your mortgage rate is below 5%, prioritize retirement contributions. If above 6%, consider accelerating mortgage payoff. Many experts recommend doing both: get the match, then split extra funds between mortgage and retirement.

Retirement Planning FAQs

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Retirement Planning FAQs

Quick Links

Frequently Asked Questions

Ready to Plan Your Retirement?