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Is SSA and 401(k) Enough?

In short, no – not if you plan on really enjoying your retirement by traveling and not counting pennies. Both sources of income can certainly help in retirement. A 401(k) is a great tool for creating a secure retirement because all contributions and earnings to your 401(k) are tax deferred, plus your employer likely provides matching contributions up to 100 percent. Social security can also pad your next egg, but the amount you receive each month is akin to poverty level.

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You can see what you’ll have in your 401(k) come retirement with Bankrate’s handy calculator. It’s wise to think this through strategically. Experts use four percent as the magic number: if you withdraw four percent of your retirement savings during your first year of retirement, factoring in increases for cost of living changes, you could possibly survive on this throughout the golden years if you’re careful. But unexpected things come up, perhaps cost of living increases will come more fast and frequent, and you may find it’s simply not enough to cover the type of lifestyle you wish to have. Most people find that 80 percent of their pre-retirement income is enough to maintain their lifestyles. All you have to do is take your desired income, subtract projected SSN, and multiply the amount by 25 – now you know how much you’ll need for a four-percent withdrawal, says The Motley Fool.

Is this simply not enough for you? You’ll have to pad your income in retirement by taking a more active role in investing. Try an IRA, either a traditional or Roth. With a traditional IRA, just like 401(k), your contributions can be tax-deductible (this is dependent on your income and eligibility); with a Roth IRA, contributions are not deducted, but if you make a qualified withdrawal upon retirement, those are tax-free. You don’t need to pay capital gains or dividend taxes with these accounts, plus you can contribute up to $5,500 in contributions or $6,500 if you’re over the age of 50.

Other options to have more money at retirement? Stay working just a few years longer than you planned. Not only will your nest egg grow, but you’ll get more out of your Social Security check. You will also have more time to get out of debt. Pay off your credit cards steadily now so you aren’t saddled with debt later on, which will increase your income requirements. Invest in the stock market. Your stock broker can guide you in the right balance in your portfolio. Depending on your age and retirement goals, you may choose to be more or less aggressive with your stocks. Just be careful in choosing a stock broker or financial planner and always have a stock broker attorney on your side who can help you if needed.