Think You’re Saving Enough for Retirement? Think Again

thebalancemoney.com:

Starting a new job and checking the maximum contribution for the tax-deferred, employer-sponsored 401(k) retirement savings plan may be the right thing to do, but is it always enough? Many people might be surprised to learn it isn’t.

Vanguard’s “How America Saves 2021” report, released last month, warned that “higher-wage participants may not be able to achieve sufficient saving rates within their 401(k) plan because of statutory contribution limits.”

By law, maximum annual contribution limits into a 401(k) are $19,500 for those under age 50, plus an additional $6,500 “catch-up” contribution for those 50 or older. Typically, financial advisors recommend saving at least 12% to 15% of your annual income for retirement. Based on those limits, however, you can be earning $163,000 each year and maxing out your contribution, and still miss that goal. Someone earning $150,000 per year would barely be making the goal, at around 13%.

That means many Americans who are only stashing retirement money away like this probably won’t be retiring the way they expected, and should be considering options to supplement those savings. Some choices to consider include traditional and Roth IRAs, health savings accounts (HSAs), taxable accounts, and other employee benefits.

There are two main types of Individual Retirement Accounts (IRAs): traditional and Roth. Total annual contributions to all your IRAs combined are capped at $6,000, plus a $1,000 catch-up if you are at least 50 years old,and both traditional and Roth IRAs can be used in tandem with 401(k) plans. 

Traditional IRAs allow you to contribute pre-tax money. Earnings can potentially grow tax-deferred until you withdraw them in retirement, when many retirees find themselves in a