I set 6% of my after taxes income to my 401k. My company matches that with 4%.
How much do I need to save to retire comfortably? What is the best way to achieve this goal at my age?
First of all you should be contributing 401k pretax NOT after tax. Pretax reduces your AGI therefore giving you a bigger tax return each year.
How much you need to save depends on many factors:
How much of your current salary do you want to make in retirement? 100%, 75% 50%?
What is your life expectancy? Do you plan to live until 100 or 75?
Will you draw on SSI in retirement? (Depends on the kind of job you have and if it pays into the system)
How do you have your current 401k invested today?
What is the expected rate of return on your investments?
What % salary increase do you expect to see annually over the next 30 years?
I started contributing to my company 401k when I was 24. I contributed 16% pretax and my employer matched up to 6%. In addition, I opened a Roth IRA for the maximum after tax contribution at $5000 per year. In addition I have additional investments (real estate, stocks and collectibles) Based on my average HH income, life expectancy and projected spending I will need $3.5M by the time I reach 62. I am on target to hit that number. I have a CPA and a CFA handling my investments.
You have to figure out the answers to those questions above if you want to plan for your future. In general CPA’s estimate that the millennial generation will need at least $3M by retirement age. Health care costs will skyrocket in 30 years from now.
Make sure you’re earning at LEAST a 3% raise every year to keep up with inflation. Otherwise every year you’re essentially taking a pay cut, this will significantly affect your ability to reach your retirement goals. Talk to your financial planner. If you have a 401k chances are you are with Fidelity Investments, they offer consulting services for corporate clients. You’re already paying them to manage your account, just call and set up an appointment. They’ll ask you the same questions I posed above.