Should you use your 401k before Social Security?

Yes, it's often recommended to use your 401(k) before Social Security to create a "bridge," allowing you to delay Social Security until age 70 for significantly higher monthly benefits, maximizing guaranteed lifetime income while your 401(k) continues to grow and cover expenses in early retirement. This strategy balances drawing down a depletable asset (401(k)) with securing a larger, inflation-adjusted, guaranteed payment (Social Security) later.

Should I use a 401k before Social Security?

Whether to tap into your 401(k) before starting Social Security benefits is a strategic decision that depends on individual circumstances. Using 401(k) funds first can allow your Social Security benefits to grow, as delayed claiming can increase your monthly benefits.

What is one of the biggest mistakes people make regarding Social Security?

One of the biggest mistakes people make with Social Security is claiming benefits too early (at age 62) without understanding the permanent reduction, which significantly lowers their monthly income for life, instead of waiting until their Full Retirement Age (FRA) or even age 70, where benefits grow substantially. Many also fail to consider how their decision impacts spousal or survivor benefits, missing out on thousands of dollars in potential lifetime income. 

What's the best order for drawing your retirement income?

The standard recommendation for withdrawing retirement funds is to prioritize taxable accounts first, followed by tax-deferred accounts, and finally Roth accounts, if available. This sequence allows tax-advantaged accounts to continue growing for as long as possible.

How much can I withdraw from my 401k without affecting Social Security?

The short answer is no, taking a distribution from your 401(k) does not impact your eligibility for (or the amount of) your Social Security benefits.

Should You Draw Your 401(k) to Delay Social Security?

How much do I have to withdraw from my 401k at age 73?

At age 73, you must withdraw a Required Minimum Distribution (RMD) from your 401(k), calculated by dividing your prior year's December 31 balance by a factor from the IRS Uniform Lifetime Table (e.g., 26.5 for age 73) to get your minimum withdrawal, but your employer plan rules might let you delay this if you're still working. This taxable withdrawal is mandatory for most retirement accounts (except Roth) and ensures you pay taxes on pre-tax funds, with the penalty for non-withdrawal reduced to 25% by the SECURE 2.0 Act. 

Is it better to withdraw monthly or annually from a 401k?

Just as with investing, it makes sense to distribute the withdrawals throughout the year, taking them monthly or even bi-weekly, to average out the market ups and downs.

Is $5000 a month a good retirement income?

Average individual retirement income: $60,000/year or $5,000/month. Median individual retirement income: $47,000/year or $3,900/month. Average retirement income for couples: $100,000/year or $8,300/month.

What is the number one mistake retirees make?

The biggest retirement mistakes often involve underestimating future expenses (especially healthcare and inflation), failing to adjust spending habits after leaving work, not having a clear budget, retiring with debt (like mortgages), and shifting investments to be too conservative, thereby missing growth needed to outpace inflation over a long retirement. Many retirees also fail to plan for the psychological aspects, such as loneliness or lack of purpose. 

How to strategically withdraw money from a 401k?

The 4% rule is a strategy that says you should withdraw 4% of your retirement savings in your first year of retirement. In subsequent years, tack on an additional 2% to adjust for inflation. For example, if you have $1 million saved under this strategy, you would withdraw $40,000 during your first year in retirement.

What does Dave Ramsey say about Social Security?

Dave Ramsey's Social Security advice encourages Baby Boomers to claim benefits at the earliest age, 62, and invest the money, believing disciplined investors can grow it more than delaying for a larger guaranteed monthly check. This contrasts with standard advice to wait until Full Retirement Age (FRA) or 70 for maximum monthly benefits, but Ramsey's strategy hinges on individuals having strong investment skills to outperform the lost guaranteed growth and potential early-claiming reductions, a strategy that carries market risk and potential tax implications. 

What is the number one regret of retirees?

The #1 regret of retirees often centers on not saving enough, leading to financial insecurity, but closely followed by not planning adequately for the lifestyle and time use, resulting in missed opportunities like travel or spending time with family, and regretting working too hard or leaving the workforce too soon. Many wish they'd worried less and enjoyed life more, while also regretting issues like underestimating healthcare costs and failing to plan for taxes or a fulfilling post-work identity. 

How much do you have to make to get $3,000 a month in Social Security?

To get around $3,000 a month in Social Security, you generally need high lifetime earnings, often requiring over $100,000 annually for your 35 highest-earning, inflation-adjusted years, and claiming benefits at your full retirement age (FRA) or waiting until age 70 for the maximum, though some high earners claim earlier for slightly less. The Social Security Administration (SSA) calculates benefits based on your Average Indexed Monthly Earnings (AIME) from your top 35 years, so consistently earning above the wage base cap helps significantly. 

What does Warren Buffett say about Social Security?

Buffett suggests a slight boost in Social Security payroll taxes, saying even a modest hike would generate additional funds over time. In addition, a small tax hike would help secure the program's financial stability without unfairly burdening workers or employers.

In what order should I withdraw my retirement funds?

In this case, the conventional wisdom goes that you should withdraw from your taxable accounts first, then tax-deferred, then tax-free. That's because the money you take from a taxable account (such as a brokerage account) is likely to be taxed at the rate for capital gains or qualified dividends.

How much will $10,000 in a 401K be worth in 20 years?

$10,000 in a 401(k) could grow significantly over 20 years, potentially reaching over $67,000 with a 10% return, but the final amount depends heavily on the average annual return (e.g., 5% vs. 8% vs. 10%) and whether you add more money. Using compound interest, a lump sum grows, but adding contributions drastically increases wealth; for instance, at 8% with consistent savings, it's much more, while 2% growth yields less than $15,000. 

What is the $1000 a month rule for retirement?

The $1,000 a month rule for retirement is a simple guideline stating that for every $1,000 in desired monthly income, you need about $240,000 saved, based on a 5% annual withdrawal rate ($240,000 x 0.05 = $12,000/year or $1,000/month). Popularized by financial planner Wes Moss, it helps estimate savings goals by linking desired income to a tangible savings target, but it doesn't account for inflation, market volatility, or other income sources like Social Security, requiring a personalized plan for real-world application.
 

What does Suze Orman say about retirement?

Orman recommended making the most of retirement accounts like 401(k)s and IRAs. She suggested contributing enough to get any employer match, as this is essentially free money. For those closer to retirement, taking advantage of catch-up contributions allowed for individuals over 50 can be a smart move.

What is the retirement mistake boomers should avoid?

Failing to prepare for a long retirement is one of the most common retirement mistakes boomers make. While not every boomer will be retired for over three decades, here's why not planning for the possibility is a misstep.

How much do most retirees live on a month?

The average monthly expenses for a U.S. retiree typically range from $4,300 to over $5,000, with housing, healthcare, food, and transportation consuming the largest portions. Recent data from the Bureau of Labor Statistics (BLS) suggests averages around $4,345 to $5,000+, with older retirees (75+) generally spending less than younger retirees (65-74). Key expenses include housing (mortgage, taxes, utilities), rising healthcare costs (premiums, meds), groceries, dining out, and vehicle expenses, emphasizing the need for a solid retirement budget.
 

What are the biggest retirement mistakes?

• Top Ten Financial Mistakes After Retirement.
• 1) Not Changing Lifestyle After Retirement.
• 2) Failing to Move to More Conservative Investments.
• 3) Applying for Social Security Too Early.
• 4) Spending Too Much Money Too Soon.
• 5) Failure To Be Aware Of Frauds and Scams.
• 6) Cashing Out Pension Too Soon.

What is the smartest way to withdraw a 401k?

As a starting point, Fidelity suggests you consider withdrawing no more than 4% to 5% from your savings in the first year of retirement, and then increase that first year's dollar amount annually by the inflation rate.

What is the average 401k balance for a 72 year old?

For a 72-year-old, average 401(k) balances are generally around $420,000 to $426,000, but the median is significantly lower, often around $90,000 to $95,000, showing that a few high earners skew the average, while many retirees have less, with data from Vanguard for ages 65+ showing a median around $95,000. 

What is the 7% withdrawal rule?

The "7% withdrawal rule" in retirement planning suggests taking 7% of your savings in the first year and adjusting for inflation annually, offering higher initial income but with significant risks, especially in market downturns, compared to the more conservative 4% rule, making it suitable for early retirees or those with higher risk tolerance but potentially unsustainable long-term. It's a more aggressive strategy, sometimes used in real estate for property returns or in stock trading to cap losses, but for retirement, it prioritizes early spending over long-term preservation, risking depletion of funds.