Retirement Planning
Build a retirement plan that actually lets you retire on your terms.
Retirement Planning: It's Never Too Early (or Too Late)
Whether you're 25 or 55, this hub helps you build a realistic retirement plan. We cover account types, contribution strategies, withdrawal planning, and the specific numbers you need to hit based on your lifestyle and timeline.
Key Accounts
- 401(k)/403(b): Employer-sponsored, tax-deferred, often with matching
- Roth IRA: After-tax contributions, tax-free growth and withdrawals
- HSA: The stealth retirement account with triple tax benefits
- Taxable Brokerage: For savings beyond retirement account limits
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Common Questions
How much should I save from each paycheck?
The 50/30/20 rule is a solid starting framework: 50% needs, 30% wants, 20% savings and debt repayment. Even saving 10% consistently builds significant wealth through compound interest.
Should I pay off debt or start investing?
Pay off high-interest debt (credit cards above 7%) first. For low-interest debt (mortgage, student loans under 5%), you can invest simultaneously since market returns historically exceed these rates.
What's the best savings account right now?
High-yield savings accounts at online banks offer 4-5% APY, far more than traditional banks. Look for FDIC insurance, no monthly fees, and easy transfers.
How do I start investing with no experience?
Start with a diversified index fund through a brokerage account or Roth IRA. Invest consistently regardless of market conditions (dollar-cost averaging). As you learn, diversify further.
Key Terms
Compound Interest
Interest calculated on both the principal and previously earned interest — "interest on interest." The engine behind long-term wealth building. $10,000 at 7% for 30 years grows to $76,122 through compounding. Starting early matters more than investing more later.
Roth IRA
A retirement account funded with after-tax dollars. Contributions can be withdrawn anytime tax-free. Earnings grow tax-free and withdrawals after age 59½ are tax-free. 2024 contribution limit: $7,000 ($8,000 if 50+). Income limits apply. The most powerful retirement tool for young earners.
Traditional IRA
A retirement account funded with pre-tax dollars (tax-deductible contributions). Grows tax-deferred. Withdrawals in retirement are taxed as ordinary income. Required minimum distributions start at age 73. Best for high earners who expect lower tax rates in retirement.
Tax-Advantaged Account
Any account with special tax treatment: tax-deductible contributions (401k, Traditional IRA), tax-free growth (Roth IRA, HSA), or tax-free withdrawals (Roth, 529 for education). Maximizing these accounts before taxable investing is a fundamental wealth-building strategy.
Health Savings Account (HSA)
A triple-tax-advantaged account for those with high-deductible health plans. Contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. After 65, non-medical withdrawals are taxed like a Traditional IRA. The only account with all three tax benefits.