Retirement Account savings

Based on the most helpful WSO content, here are some insights and strategies shared by users regarding retirement account savings:

1. Maxing Out Contributions:

   • Many users recommend maxing out your 401(k) and Roth IRA contributions if possible. For example, the 401(k) contribution limit is typically around $20k annually, and Roth IRA contributions are capped at $6k per year (subject to income limits).

2. HSA as a Backdoor IRA:

   • HSAs (Health Savings Accounts) are highlighted as a great tool for retirement savings. Contributions can be withdrawn for non-medical expenses after age 65, effectively making it a "backdoor IRA."

3. Diversified Savings Approach:

   • A balanced approach is often suggested: contribute to tax-advantaged accounts (401(k), Roth IRA, HSA) and also maintain a brokerage account for additional investments. This ensures liquidity and flexibility.

4. Starting Early:

   • Starting early, as you have at age 26 with $140k, is a significant advantage. Compounding over time can lead to substantial growth, potentially reaching seven figures by retirement age if contributions and market performance remain consistent.

5. Consider Tax Implications:

   • Evaluate whether a Roth or Traditional 401(k) is better based on your current tax rate versus your expected tax rate at retirement. Roth accounts offer tax-free withdrawals, while Traditional accounts provide immediate tax savings.

6. Emergency Fund:

   • While focusing on retirement, ensure you have a rainy-day fund for liquidity. This is crucial for financial stability during market corrections or unexpected expenses.

Your current balance of $140k at 26 is impressive and sets a strong foundation for future growth. Keep contributing consistently, and consider diversifying your investments to align with your long-term goals.

Sources: How much do you contribute to your 401k?, Managing Your Money - Building a Personal Financial Model, Retirement Planning for IB Analysts