Is a 401k Enough For Retirement?



Transcription follows below:

Hey everybody,  this is Jeff Rose from Goodfinancialcents.com. Today I am going to talk a little bit about a common question that I get quite frequently. This question is:

Is just having a 401k enough to have a successful retirement?

It is a very good question because a lot of people wonder about, am I saving enough? Am I putting enough away to make sure I get enough to retire when I want to retire and is the 401k only thing that we need to get us by? And I would say that generally speaking that answer is no. As far as my reasoning and logic behind that is this.

401k By Itself Is Not Enough

For one reason, most people that do have a 401 k, most of you are not maxing it out. This is what I’m gathered from my several client meetings of those that have the ability to put money in a 401k.

So are you putting in $16,500 per year in that 401k? If you are, you definitely have a fighting chance and if not then most likely the 401k is not going to be enough.

Note: See 2011 401k Contribution Limits

And if you have a good company that has a good match at top of that, obviously it will make it better. For those who are not putting the maximum amount in and not having good and favorable 401k match from your employer then you definitely have to consider other means and sources of savings.

You can obviously choose between traditional or Roth IRA. Both of those are excellent tools to complement the 401k and specially if you are doing the Roth IRA and you are doing the regular 401k that gives you pre tax money and after tax money. Both those together are a good compliment.

I know for me personally as a business owner  I have a SEP IRA which is kind of like my 401k.  Over and above that I have been able to do Roth IRA and a Roth IRA conversion.  That gives me some pre tax money and after tax money as well. Nothing like having options!

It’s Nice Having Options

Between the two, having a good 401k, having a Roth IRA traditional IRA, gives you another bucket to choose from. Me personally, I am not really counting on Social Security being there for me. And if it is there, it will most likely come at a later date, say 70 when I can get it, it will probably be a reduced amount. Do not plan on it being there, and utilizing 401k and Roth IRA as an alternate or replacement for that income. Between those two, another thing I would add is saving account and investment account, utilizing other investment savings tools to have that for you at retirement.

So to answer the question, if you have a 401k and is that enough? I will say no. Make sure that you are utilizing all the other tools. For me, I like having three buckets approach. If you got a 401k, Roth IRA it is another source of retirement income that could be a saving accounts or investment account. At least have three buckets, so you can always have choices when it comes to the retirement. One bucket dump’s over is depleted; you have got other buckets to choose from. So that was my advice to you. If you have any questions, feel free to email me, contact me on the blog.

You can also see my Soldier of Finance Video below that addresses having a “Multi-Bucket Approach For a Successful Retirement”.

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