At a high level, the 4% rule states a percentage that retirees are said to be able to withdraw annually and still have the funds last for 30 years. For example, someone could withdraw $20,000 a year with a $500,000 retirement fund balance.
But, here’s a question that the rule doesn’t address. Is $20,000 enough for someone to live the desired lifestyle during retirement years? Is $40,000 enough? $60,000? What is the right amount?
Different people have different dreams for retirement. Some want to travel the world, while others want to spend time with family at home. Some may have other financial responsibilities, like potentially helping a grandchild pay for college. What matters most is that each person plans for the retirement they expect and/or want to experience.
What about having a 401(k) and an IRA? Is that possible? If it’s possible, does it make sense?
Well, for people who have retirement plans through work that include matching funds, it can often make the most sense to take as much advantage of that matching benefit as possible. And, once the 401(k) is maxed out, if more funds are available, it may make sense to contribute to a traditional IRA.
Here’s something else to consider. Once investors reach their annual limits for retirement contributions, that doesn’t mean they need to stop investing money to enjoy during their retirement years.
This can happen through using brokerage accounts for retirement planning. Although they won’t have the same tax advantages as, say, a traditional IRA, this does allow people to keep investing and building wealth.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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