Mark Kohler shows a 40-year-old earning $125,000 how to build $20,000 in retirement savings while spending only $15,000 out-of-pocket. Capture the 401(k) match first ($5,000), then max a Roth IRA ($7,500), then fund an HSA ($4,400). The employer match alone doubles your effective contribution.
Chapters
If your income has crossed into 6 figures, your retirement strategy should evolve with it. So let's assume this individual, single individual, makes $125,000 a year, 40 years old. They have an employer 401. A balanced approach might look like capturing the match first. So a 4% match on approximately $125,000 might be around $5,000. So let's get that match and then move on. Then we're going to come out and do the Roth IRA. We'll pay tax on that money first, but that account will never be taxed again. So we could put away $7,500 there. Now what's interesting is you've put away $12,500, but it's already worth $17,500 because of the match. See, that match is that key part that allows you to double your money on that first contribution. Then you go over to the Roth and you're going to invest that self-directed Roth in what you want. And then you're going to go fund the HSA for your healthcare, which is another $4,400. So we're at $20,000 in extremely tax-efficient investing with maybe only about $15,000 of actual out-of-pocket dollars because you're being smart.
