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The reality of retirement savings in America is starkly different from the ideal. While Americans envision needing a substantial $1.25 million for a comfortable retirement, the truth is that a significant number of older individuals are approaching their golden years without any retirement savings at all. According to a survey by financial services firm Credit Karma, about 27% of people aged 59 or older have no retirement savings.
For many, the standard retirement timeline looks like this: Work hard at your career until around age 65, then finally stop working and start enjoying life. But some are challenging this narrative by pursuing FIRE – Financial Independence, Retire Early.
A 401k and an IRA are both tax-advantaged accounts that incentivize saving/investing for retirement. They both restrict withdrawals from the account in exchange for deferring or excluding taxes.
The quick rundown of the differences are the following: you have more flexibility investing in an IRA, you have a higher contribution limit for a 401k, and your employer potentially matches contributions in your 401k (basically gives you free money in the account). But let’s go into some more detail.
I semi-retired in my early 40s, meaning I can be more selective about the work I perform or not work at all. I can spend weeks working only 10 hours per week just keeping tabs on my investments, or I could work 40 to 50 hours per week as a consultant.
I have a net worth of $5M+, and it’s a lot of work just to maintain and grow it. I sometimes dream about cashing in my chips and living off of an annuity, dividends or rental income.
(photo: @vladsargu)
Imagine this:
You’re 25 years old. You have a great job making great money and you are making so much money, you buy yourself a car, a house, you take lavish vacations, buy lavish things — you have to have the best of everything. It’s an amazing life, right? Some of us get to have that while others don’t.
40 years later, you’re now 65 years old. You put nothing away for retirement at all.
The house you have is your greatest asset. It’s market value went up around $200,000.
The car(s) you bought — well, they’re antiques now. Some work, some don’t.
All those lavish things you bought? Over the years, it’s just stuff. Not that important.
[democracy id=”134″]
