Frich Reveals: Even more about retirement
We're back with Pt 2 of retirement theme questions. So, without further ado, let's dive in!
Have you ever taken money out of your 401(k) because you really needed it?
This is a big no-no. If you withdraw money from your 401(k) before the age of 59.5, you'll pay a 10% tax penalty on it. The withdrawn amount will be counted as income (so you'll pay income tax on this amount) + you'll pay that 10% penalty. So, as an example, a $10,000 withdrawal in the 22% tax bracket would incur $2,200 in income tax and a $1,000 penalty, totaling $3,200. Meaning, not only did you end up withdrawing $10K from your future self, you're actually only left with $6,800.
So how many people have done it? Around 40%. The best way to avoid making this expensive mistake? Have a HYSA!
<div class="frich-tip">Money experts usually recommend minimum 3 months of living expenses saved up in an emergency fund. If you need help growing yours, learn all our best tips in this article!</div>
Do you think you’re on track with your retirement savings?
The answers here are split pretty 50/50 with a slight majority saying that they're on track with their retirement savings.
But how much do you actually need to be able to retire? The number varies from person to person. But there's a general rule of thumb that suggests that you need to have roughly 25x your current annual spend saved up. So calculate how much you just spend each year - excluding savings and investments (and potentially excluding rent, if you believe you'll own a property by then) - and then multiply it by 25!
<div class="frich-tip">Read our breakdown that will help you figure out how much you need to have saved up for a comfortable retirement.</div>
