How Much Should I Have In My 401(k) Before Slowing Down?
Jump start your journey with our FREE financial resources:
Reach your goals faster with our products:
Subscribe on YouTube for early access and go beyond the podcast:
Connect with us on social media for more content:
Take the relationship to the next level and become a client:
Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life….(read more)
LEARN MORE ABOUT: 401k Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
How Much Should I Have In My 401(k) Before Slowing Down?
Planning for retirement can be a daunting task, but it is crucial to ensure financial security in your golden years. One of the primary retirement savings vehicles for many individuals is a 401(k) account. However, determining the right amount to have in your 401(k) before considering a slowdown in work can be challenging. While there is no magic number that fits everyone, several factors can help guide your decision-making process.
First and foremost, it’s essential to determine your desired retirement lifestyle. What kind of activities do you plan to pursue? Will you travel extensively, or would you prefer a quieter, more relaxed lifestyle? Knowing what you want your retirement to look like can help you estimate the income you will need.
Financial experts often recommend aiming for a retirement income replacement rate of 70-80% of your pre-retirement income. This estimate takes into account the assumption that some expenses, such as commuting costs or work-related expenses, will decrease in retirement. While this replacement rate can act as a starting point, it is essential to consider your unique circumstances, such as debt, healthcare costs, and potential inflation rates.
Another key factor to consider is your expected retirement duration. With increased life expectancy, many people are spending 20 or more years in retirement. Therefore, it’s important to ensure your savings will last throughout your golden years. While there is no way to predict the exact length of your retirement, reviewing historical averages and considering your health, family history, and lifestyle choices can provide some guidance.
Once you have an estimate of your retirement income needs, it’s time to evaluate your current 401(k) balance. As a general rule, financial advisors recommend having at least one year’s worth of income saved by the time you reach age 35. By age 45, aim for three years of income, and by age 55, experts suggest having five years’ worth of income saved. These benchmarks are just rough guidelines, and individual circumstances can vary. However, they can help you gauge whether you are on track to meet your retirement goals.
Additionally, take advantage of any employer matching contributions offered through your 401(k) plan. Employer matches can provide a substantial boost to your retirement savings and are essentially free money. Contribute enough to maximize the match, as failing to do so means leaving potential retirement savings on the table.
It’s important to remember that while your 401(k) is a crucial component of retirement planning, it shouldn’t be the sole source of income. Consider diversifying your retirement savings by looking into other investment options, such as individual retirement accounts (IRAs), stocks, bonds, and real estate. Diversification helps spread risk and can provide more significant returns over time.
Lastly, as retirement approaches, periodically reassess your retirement plan. Life circumstances, such as marriage, children, or housing changes, can alter your financial goals. Review your plan annually, or when significant life events occur, to ensure you are still on track to achieve the retirement you desire.
Ultimately, the amount you should have in your 401(k) before slowing down largely depends on your individual circumstances, desired retirement lifestyle, and financial goals. By considering these factors, seeking advice from financial professionals, and regularly reviewing and adjusting your plan, you can make informed decisions about when it’s time to take that well-deserved step back and enjoy the fruits of your labor.
I would think you can consider slowing down at coastFI. Your (smaller) additional contributions provide safety net, but the main work is done. You would need to have closely analyzed your goal nest egg for this to work.
The pun at the end lol
Never slow down. Thee first critical mass is 100k, which can quickly become 200k if you continue to max out retirement accounts and invest wisely. From there 400k comes even quicker. Focus and keep grinding away. Time passes quickly and you'll one day reach that coveted $1,000,000 mark!
I know basic retirement advice is to have 3x income at 40. 2.2 at 37 doesn't seem like you're super on course to hit that rough goal.
Surprised to not hear them mention just doing the calculation? Take your balance, assume 6-10% annual growth over X years left to retirement and see what you get. Not the most precise answer but you'll have a better idea of what you need to do.
I have always gone ahead and done as much as I can in investing. I had an ESPP that I invested in as well. I couldn’t ever put the full amounts in anything because I never made enough to do that. You are lucky if you can. Don’t ever let off the gas because you don’t know when life will happen like the loss of a spouse and the loss of your job. Unfortunately both happened to me but I came out ok since I always made it a priority to invest. I even put my son fully through college after those events.
Impossible to know your number with 30% actual inflation. The number is too high to actually provide an accounting for.
These are fantastic takes, I'm wondering if folks who went through the 2008 financial crisis had it easier than me right now. The market conditions these days are really causing me a lot of stress. I'm worried that this could put a wrench in my retirement plans. what's the best way to take advantage of this present market?
Know your numbers!
Nearly half your 401k will goto the gov in taxes…
Why slow down? Especially in your 30s. 401k money is still your money just in a different account. You consistently save and lower your taxes in the long run. I don’t get it.