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Retirement: A wonderful time in your life when you no longer have to work for money. In return, your money ends up working for you. If you’re on track for retirement, we salute you.
Today, more Americans are retiring than ever before.
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According to the Lifetime Income Alliance (ALI), 2024 will mark the beginning of the “Peak 65 Zone,” the largest jump in U.S. history in the number of retirement-age Americans turning 65. More than 4.1 million Americans will reach age 65 each year through 2027. This equates to more than 11,200 people every day.
However, if you’re planning to retire as early as next year, there are several reasons why your current retirement plan may not be enough, according to GOBankingRates and The Motley Fool.
not enough money saved
If you don’t have enough money saved, this is the first sign that your current retirement plan isn’t good enough. As a general rule of thumb, we recommend saving 10-15% of your annual income (or more if possible) while working full-time. If you started saving too late, you would have needed to save a higher percentage of your income for retirement.
If you’re not sure, check out Fidelity’s retirement calculator to figure out how much you’ll need to retire comfortably next year and whether you’re actually on track to do so.
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too much debt
If you haven’t paid off your mortgage yet, have student loans to pay off, or have a lot of credit card debt, retiring next year might not be the best idea. Debt burns a hole in your wallet, making it difficult to save and invest money. Focus on reducing and eliminating debt now before you enter your golden years.
you are not yet 59 1/2
According to the IRS, the earliest you can withdraw money from your 401(k) without penalty in 2024 is age 59 1/2. If you choose to withdraw your funds before this age, you will be subject to a 10% tax on your distributions. The 10% tax may be waived under certain circumstances, such as if you become disabled or qualify for medical expenses. If you don’t, you’ll end up using more of your retirement savings and potentially not have the money for life.
GOBankingRates Details
This article originally appeared on GOBankingRates.com: Why your current retirement plan won’t be enough for 2025
