401k investment Strategy
My employer sponsored 401k is with Merrill lynch. My current investment direction is myretirement 2060 fund which i choose without any proper research. Can someone throw light on choosing an investment direction in Merrill lynch. TC 110k YOE 2 Age 25 - Expecting to retire by 45 I dont max out my 401k but invest the amount for which my company matches
You plan to retire at 45? Your quality of life won’t be stellar but it’s possible. Let’s do some quick back of the napkin calculations. $110k TC - let’s say you max our contributions at $19k per year and employer matches 100% of 6%. Annual increase in TC of 5%, annual rate of return of 7%. For 20 years, you’re looking at $1.2m. You’re looking to live off that for how ever long you’re alive. That means you could withdrawal $80k per year and that will make your balance stay where it’s at. Any more and you start pulling out more than it generates. So if you’re fine with $80k per year (not including inflation) then that’s fine. To me, I really dont think it’s enough.
By retire I mean , I would quit my full time job and start doing something which I’m passionate about.. I also have a partner who would be supporting me so that should not be an issue . I m asking this question now because of the current market volatility and how I should diversify my retirement In order to accommodate such dips.
Keep in mind the 10% early withdrawal penalty in a 401k in addition to paying taxes. You’re gonna lose a lot by pulling out before 59.5
I would either choose the 2040 fund or the total market index fund or similar alternative (if your 401k offers)