[USER]

Male just turned 29 years old. I calculated that between my Roth IRA and 401(k) and assuming a 10% return, if I don’t contribute anything else to my Roth IRA and 401(k), I would have a few million by retirement. Is there any point to continue contributing to the retirement accounts, if my goal is to retire at 40 should I stop contributing and put that money into a brokerage account so I can use it before 59 1/2. Curious what other peoples thoughts are.

[Colin]

Use 7% to account for inflation.

[Nick]

Best is to overshoot. Life and shit happens. I never go for the minimum.

[Christopher]

I would keep contributing to the Roth as contributions are fully withdrawal not taxable. (Same for Roth conversion but needs 5 year seasoning period) And can be used to bridge some expenses before 59.5.

[Orianna]

Does your numbers still look good at 7% return? I personally like to be ultra conservative because who the heck knows what the future brings.

[Trevor]

Good thoughts. Unless you’ve converted significant amounts to your Roth, you won’t be able to access your retirement funds for a long time. Putting money into a brokerage account is a great strategy to bridge to full retirement age.

Depending on your risk tolerance, you might also want to build your cash reserves as you near retirement to serve as a buffer to market volatility.

Don’t miss: What is your Master Financial Plan which cover retirement, kid university fees, long term care whilst minimize Tax?

[Phillip]

I do both. I dropped my 401k contribution to the company match % and then put the rest into a brokerage account. I have a step plan when I retire.

So, I shouldn’t need to touch the 401k until after 59 1/2.

[Michael]

invest into a taxable account to use as a bridge from whenever you stop working until age 59.5. If we assume a 4% inflation rate average for 30 years, $1M in todays money (what you will have in 30 years), will be worth about $300,000ish in todays money. Can you retire with $300,000 today?

Because that’s how much you will have in 30 years in your ROTH/401k.

[Teresa]

If your goal is to retire at 40, I’d have enough in a taxable brokerage account to get you 5+ years. I would put as much as possible into the traditional 401k. This way, when you retire, you can immediately start a Roth conversion ladder, living on the brokerage funds until those conversions start becoming accessible. Don’t stop those tax advantaged funds just because you want to retire early, there are ways to access them, and it’s not like you lose the need for money at 59 1/2.

Also, be wary of calculations. Make sure you are throwing some worse-case numbers in there as well (calculate as if you lost 50% today, or 50% the day you want to retire. Not likely that will happen, but if your numbers still work out, you’ll know it’s more solid than if your assumptions are all “I’ll make this much every year”.)

[Julie]

I would keep maxing out my Roth IRA/401k and open a taxable brokerage account to fund. Like others have said- don’t count on a 10% return, as you get closer to retirement and start pulling money out, you will probably not be as risk tolerant as you are at 29 years old. Also, like others have said, you need to account for inflation.

I like to use 3% per year – to match the purchase power of $100,000 in 2024, in 2034, you will need about $134,000 and in 2044 you would need about $180,000.

I would also keep about 2 years of expenses in a high yield savings account just in case we go through a rough patch and you don’t want to withdraw anything.

Explore these too: Retirement calculator: 1M to 3M in 10 years?

[Sharon]

If you are planning to retire by 40, you’ll need to do both. You should be maxing out all retirement accounts then start saving in taxable brokerage accounts.

The way I think of it is, once I’ve saved enough for retiring then I get the privilege of saving for retiring early.

[Ro-Wag]

Yes, because taxes aren’t going to get lower and inflation isn’t going to stop. The more that you can store and not pay taxes on the better.

[Author]

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