Adulting 108
Retirement:
• 401(k) Employer Match: If your job offers a 401(k) and matches your contributions (e.g., "we match up to 4%"), contribute at least that amount.
• Roth IRA: If you don't have a workplace retirement plan, open a Roth IRA through a brokerage.
• 4% Rule: This rule states that you can safely withdraw 4% of your total retirement savings in your first year of retirement (and adjust that amount for inflation every year after) without running out of money for at least 30 years.
◦ How to find your "Number": Take your expected annual expenses in retirement and multiply them by 25.
◦ Example: If you determine you can live comfortably on $50,000 a year, you need a total retirement nest egg of $1,250,000 ($50,000 × 25).
• Where does the money come from?
◦ 401(k) / 403(b): Work-sponsored accounts. You withdraw a little bit of this every month.
◦ IRAs (Traditional or Roth): Personal accounts you set up yourself. You withdraw a little bit of this every month.
◦ Standard Brokerage Accounts: Regular stocks, bonds, or index funds. You withdraw a little bit of this every month.
◦ A small percentage of every paycheck you earn goes toward Social Security. When you reach retirement age (currently between 62 and 67), the government starts sending you a monthly check. Social Security is only meant to replace about 40% of your career earnings, so it’s a safety net, not a full retirement plan.
◦ Pensions: Some government, military, or union jobs still offer them (a guaranteed monthly check from your employer for life).
◦ Passive Income: Money from rental properties, royalties, or a small business you own but don't actively run.
