While a 401(k) is a good way to save for retirement, for most people, this will not be enough to continue enjoying the lifestyle they have become accustomed to.
Are you shocked by this?
Although you may have been led to believe that a 401(k) is all you need for the future, when you consider factors such as IRS contributions limits, inflation, taxes, and other fees, you may be surprised at how little you are left with.
But fear not—there is still time to take action and find other ways to save for your retirement.
How much do you need in your 401(k) to retire?
How much money you need in your 401(k) to retire depends on the type of lifestyle that you want to be able to have. It is also dependent on whether or not you have any other income streams or assets that can help boost your retirement fund.
For example, if you have calculated that you need $50,000 per year to live on and you can expect an average return of 5% per year from your 401(k) assets, you would need around $1 million saved up.
Don’t forget to factor in the deferred tax liability in your retirement account, which will affect how much you need to save to enjoy the lifestyle you have become accustomed to.
What is a comfortable monthly retirement income?
This is a difficult question to answer as everyone’s circumstances are different. However, according to financial experts, you should aim to have a net income that is around 80% of your pre-retirement income.
Of course, several factors may affect this figure, such as whether you have paid off your mortgage in full, how many outgoings you have, and whether you are happy to live a moderate lifestyle or you want to be able to live life to the max.
How else can I save for my retirement?
If you have done the math and you have worked out that your 401(k) is not enough for you to retire on or you would like to have more disposable income to enjoy, there are lots of other ways that you can start saving.
First and foremost, you need to look into retirement planning advisors such as Prime Wealth Advisors. These advisors can assess your current savings and make bespoke recommendations based on your financial situation and plans for the future.
You also need to be consistent in your efforts to save for your retirement. Obviously, the sooner you start putting money aside, the better, but consistency is key, even if you start later in life.
Many people choose to buy real estate as an alternative investment, as most properties increase in value over time and can provide a reliable source of income. Alternatively, you may feel more comfortable opening a brokerage account, which is perfect for anyone who has maxed out their tax-advantaged options, such as a 401(k) and IRA.
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