DeepSummary
Brian Preston and Bo Hanson discuss whether just getting the employer 401(k) match is enough for retirement savings. They analyze hypothetical scenarios with different starting ages and contribution rates to show the long-term impact on retirement income. Starting early with even a small additional contribution can make a significant difference due to compounding growth.
For someone starting at age 25 and contributing just 4% matched by the employer (8% total), they could end up with almost $1 million by retirement age 65, replacing 53% of pre-retirement income. However, starting later reduces the power of compounding. By age 35, the projected portfolio would only replace 27% of income.
The hosts emphasize that to reach retirement goals, higher savings rates are likely needed beyond just the employer match, especially when starting later in life. They encourage listeners to utilize resources like the wealth multiplier tool to visualize the potential impact of increased savings.
Key Episodes Takeaways
- Getting just an employer's 401(k) match is often insufficient for a comfortable retirement, especially when starting later in life.
- The power of compounding growth over time makes starting to save and invest early, even with small amounts, extremely impactful.
- Higher savings rates beyond just the employer match are generally needed to reach retirement goals.
- One's unique financial goals and priorities should shape their retirement planning approach.
- Following the financial order of operations provides a prudent framework for putting one's money to work effectively.
- Utilizing tools like a wealth multiplier can help visualize the long-term impact of different savings rates.
- An adequate emergency fund prevents feeling cash strapped and allows consistent investing.
- Singles may need to approach some aspects of retirement planning differently than couples, like long-term care planning.
Top Episodes Quotes
- “If you're in your twenties watching this, use this case study to show you, I don't care if it's dollar 50 a month, just do something. Because, yes, you might look at your coworkers, maybe your 40 something year old coworker. You look at em and go, man, they have so much more than me. I'm jealous that I didn't get in when they did. You have time, which is so much more powerful than what they have.“ by Brian Preston
- “Your priorities and your goals are going to shape what these things look like in the long term.“ by Brian Preston
- “The financial order of operations really is your kind of instruction manual on knowing what to do with your next dollar.“ by Brian Preston
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Episode Information
Money Guy Show
Brian Preston and Bo Hanson
6/5/24
We get asked all the time about how much you should invest in your 401(k). Is just getting your employer match enough, or do you need to save more?
We'll walk you through that question and more in today's Q&A episode!
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