Looking beyond your 401(k) or IRA for retirement

Investing & Retirement

When it comes to investing for retirement, there are more than just traditional retirement savings accounts out there to help you reach your goals. 

No two visions of retirement are the same, and no one approach can achieve them all.

Take early retirement, for example.

Of millennial workers, 52% say they’re looking to wave goodbye to work earlyDisclosure 1 but did you know cornerstone retirement plans like 401(k)s and individual retirement accounts (IRAs) penalize withdrawals before age 59 ½? At the same time, recent estimates for annual retirement costs range between $120,000 and $150,000 per year.Disclosure 2

None of this means you can’t retire early—or that you should change anything with your existing retirement investments. It just means it may benefit you to go beyond—and build up from—your 401(k) or IRA.

Building on the basics (and tax benefits)

Before looking beyond your 401(k) or IRA, it’s crucial to understand the benefits of these foundational tax-advantaged tools so you can use and supplement them effectively.

401(k): Provided through your employer, a 401(k) works by directly depositing a predetermined amount of your pretax pay into an investment account, with an annual cap on contributions estimated to be $22,500 in 2023 for those age 50 and under. These funds can then be invested in a limited selection of investment options. Typically, companies match their employees’ contributions up to a certain percentage. To take advantage of this benefit, it’s usually a good idea to contribute at least as much as your employer will match.

IRA: Typically for the self-employed (though anyone can open an account), an IRA is a long-term savings account that maximizes tax savings. While providing a wider range of investment options than a 401(k), IRAs also have a lower ceiling for contributions, with the maximum annual contribution set at $6,500 ($7,500 if you’re age 50 or older) in 2023.

Roth 401(k) or IRA: A variation on the traditional 401(k) or IRA, Roth accounts are funded with post-tax dollars. Though it eliminates the upfront tax savings of traditional 401(k) and IRA contributions, you don’t have to pay taxes on your Roth withdrawals during retirementDisclosure 3 a potentially useful feature in the event that tax rates rise during your golden years.

Of course, there are additional types of retirement plans—like 403(b) plans, which are often offered to public school employees—that you may have access to depending on your career situation.

Stacking your investments

The tax benefits that come with 401(k)s and IRAs make them crucial tools for anyone’s retirement investing strategy—but depending on your retirement goals, it may help if you stack some of your investments using other tools. So where else can you look for retirement investing strategies that can complement your 401(k) or IRA?

HSA: A health savings account (HSA) allows you to put aside pretax income for health expenses. In 2023, eligible individuals can save or invest up to $3,850 annually, with unused contributions rolling over from one year to the next—all while interest or gains earned on the account accumulate tax-free. The lesser-known advantage with HSAs? Past age 64, any funds in your HSA can be used for any purpose—health-related or not—without incurring penalties or having to pay taxes on your withdrawals. Pretax savings plus tax-free gains plus potentially tax-free withdrawals make HSAs a powerful tool for more than just what their name alludes to.

Real estate: Purchasing and paying off a home often gets overlooked as a way to invest for your retirement. Over 76% of households age 50 and up own their homes,Disclosure 4 which can be used to acquire home equity loans or reverse mortgages that can help supplement your finances when you’re no longer working. Rental properties—which 6.7% of individual tax filers currently ownDisclosure 5 are also a means of providing steady, passive income that can add a bit of shine to your future years.

Investment accounts: Brokerage and advisory accounts tax your investments and gains upfront, but their flexibility allows for structuring investment approaches to fit your risk tolerance, goals, and time horizon. If one of your ambitions is early retirement, these accounts can be set up to mirror the strategy of an IRA, a 401(k), or an HSA—minus the contribution caps and early withdrawal penalties. So if you hope to be retired before you’re 59 ½, at which point you can start penalty-free withdrawals from your 401(k) or IRA), where will that early retirement income be coming from? Keeping some of your early retirement savings in an investment account could help you bridge the gap.

Investing in an advisory account can be simple with a robo-advisor like Truist Invest. Not only can you customize your investment strategy, but you also get access to a team of financial advisors who can help fine-tune your investment strategy, open an account for you, and answer your questions. Once you get started, let the tech work for you—it analyzes your account daily and looks for opportunities to optimize your portfolio. Should your circumstances or dreams change course along your road to retirement, the advisors can help with advice.

Watch now: Rebalance your portfolio with ease

Plotting it out, talking it through

Regardless of what your post-work goals are, the cornerstones of retirement investing remain the same: Build all your financial plans atop a 401(k) or an IRA—or both. From there, consider a regular brokerage account, an HSA, or real estate as other ways to invest for retirement.

And whether you feel confident or uneasy about hitting your retirement goals from here, it can never hurt to take your vision of the future to a financial advisor who can discuss how these supplemental investment options may work into your plan. 

Let Truist Invest help secure your future.

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