By John Spitzer, Ph.D. and Todd Houge, Ph.D., CFA
With employers shifting away from traditional pension plans to defined contribution plans such as the 401(k), most of us are responsible for building a nest egg that will provide the financial security we need in retirement. How much do you need to have in your 401(k) account in order to retire? To answer this question, we recommend that you follow three basic steps.
In our discussion, we focus on Traditional 401(k) plans, where retirement distributions are taxable. For Roth accounts, you would reduce the required balance to reflect the fact that distributions from Roth accounts are tax-free. Our discussion applies equally to 403(b) plans and IRAs.
The first step is to estimate the level of before-tax income, in today’s dollars, that yo...Read More