- ✦How much you need, which accounts to use, and how to get there — whether you're 25 or 55.
- ✦How much do I need to retire? — The most common benchmark is 25× your annual expenses — the amount that supports a 4% annual withdrawal rate indefinitely.
- ✦Roth IRA vs Traditional IRA — which is better? — Roth is generally better if you expect your tax rate to be higher in retirement than today (most younger earners).
Bottom line: The two most powerful variables in retirement planning are how early you start and which accounts you use. Getting both right is worth more than any investment selection decision you'll ever make.
Retirement planning is simpler than the financial industry makes it look. Three inputs drive the outcome: how much you save, how long you save, and what you invest in.
How much do you need?
Multiply your expected annual spending in retirement by 25. This is your target portfolio.
- $40,000/year spending → $1,000,000 target
- $60,000/year spending → $1,500,000 target
- $80,000/year spending → $2,000,000 target
Don't forget Social Security. The average Social Security benefit in 2026 is approximately $1,900/month ($22,800/year). A couple both claiming full benefits at 67 might receive $45,600/year combined — significantly reducing how much your portfolio needs to generate.
The accounts: which to use and in what order
401(k) — Start here if your employer matches
- Contribution limit 2026: $23,500 ($31,000 if age 50+)
- Tax treatment: Pre-tax (Traditional) or post-tax (Roth 401k, if offered)
- Key rule: Always contribute at least enough to capture the full employer match
Roth IRA — The most valuable account for most people
- Contribution limit 2026: $7,000 ($8,000 if age 50+)
- Tax treatment: After-tax contributions, tax-free growth, tax-free withdrawals
- Income limit: Phases out above $150K (single) / $236K (married)
- No RMDs: Unlike Traditional IRAs, Roth IRAs have no required minimum distributions
A $7,000 contribution growing at 7% for 30 years becomes $53,000 in a taxable account (after 15% capital gains tax), $57,000 in a Traditional IRA (taxed as ordinary income at withdrawal), or $63,000 in a Roth IRA (completely tax-free). The Roth wins by $6,000–$10,000 on a single year's contribution.
HSA — The triple tax advantage
If you have a high-deductible health plan (HDHP), a Health Savings Account is the single best retirement vehicle:
- Pre-tax contributions — reduces your taxable income
- Tax-free growth — invested like a brokerage account
- Tax-free withdrawals — for medical expenses at any age; for anything after 65
Contribution limit 2026: $4,300 individual / $8,550 family. After 65, HSA withdrawals for non-medical expenses are taxed like Traditional IRA withdrawals — but not penalized.
The investment inside the accounts
Use low-cost index funds. Target expense ratios below 0.10%:
- Fidelity ZERO Total Market (FZROX): 0% expense ratio
- Vanguard Total Stock Market (VTSAX/VTI): 0.03–0.04%
- Schwab Total Stock Market (SWTSX): 0.03%
A target-date fund (named for your expected retirement year) is the simplest option — one fund automatically adjusts allocation as you age.
The power of time
The most important retirement planning decision is starting. Even small amounts invested consistently over decades produce life-changing wealth.
| Monthly Investment | Starting Age | Portfolio at 65 (7% avg return) | |---|---|---| | $200 | 25 | $525,000 | | $200 | 35 | $243,000 | | $500 | 25 | $1,312,000 | | $500 | 35 | $607,000 |
A 10-year head start is worth more than doubling your contribution.
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See Top IRA Rates →Sources: Federal Reserve Survey of Consumer Finances (2025); Vanguard How America Saves (2025); Fidelity Investments Retirement Savings Assessment (2025); Social Security Administration Annual Statistical Supplement; Employee Benefit Research Institute Retirement Confidence Survey (2025).
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Frequently Asked Questions
How much do I need to retire?
The most common benchmark is 25× your annual expenses — the amount that supports a 4% annual withdrawal rate indefinitely. If you spend $60,000/year, you need approximately $1.5M.
Roth IRA vs Traditional IRA — which is better?
Roth is generally better if you expect your tax rate to be higher in retirement than today (most younger earners). Traditional is better if you expect a lower rate in retirement (high earners near peak income). When unsure, Roth wins — tax-free growth is very valuable over decades.
What is the 4% rule?
The 4% rule comes from the Trinity Study: historically, withdrawing 4% of your portfolio in year one and adjusting for inflation each year has sustained a 30-year retirement in virtually every historical period. It's a guideline, not a guarantee.