Ashley Temer is a Financial Representative with Northwestern Mutual who helps professionals, families, and business owners plan for financial security. She’s here for your “Money Minute.”
Have you ever wondered if 401k is enough to get you through retirement? The truth is your 401k is just one component of a larger retirement strategy, but you’ll probably need a few more financial tools to help protect you from other risks down the road. Here’s why.
Contributions to a 401k aren’t taxed today, but when you start taking withdrawals in retirement, you’ll owe ordinary income tax on the distributions. Those taxes add up quickly and can significantly reduce the amount of income you receive.
The most effective retirement plan strategies go beyond the 401k and diversify your sources of income to provide stability and tax flexibility in retirement. Some additional income sources that typically make up a well-diversified retirement plan are social security benefits, Roth accounts, traditional investment accounts, annuities, and cash reserves.
Your 401k is an important piece of the retirement puzzle, but a robust retirement plan is one that leans on a diverse mix of income sources.