I’m 38, sold my house for $1.3 million and saved my money, but I wonder if I’ll ever be able to retire

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Dear Marketwatch,

I'm 38 and wondering if I'll ever be able to retire. In 2020, I bought a house for $649,000 with 25% down. In 2022, I sold it for $1.3 million, took that money and reduced the cash payment. My total monthly housing expenses are still $1,500 (taxes, insurance, HOA, utilities, etc.). I didn't own a car until recently and now have $1,000 down payments for the next 5 years.

My with the bonus is $150,000. I have $150,000 in a traditional IRA, $50,000 in Roth, and $50,000 in my company 401(k) (20% Roth, 80% Traditional). I am currently maxing out my contributions, I have an employer match of $4,000/year plus an additional $8,000/year putting into the company after tax 401(k). I have about $1,300 a month in extra income. Am I saving enough? Would I be better off buying an income generating asset and cutting into my retirement savings?


Look: I'm 36 with $435,000 and want to retire early – ‘the sooner the better' – but without a frugal

Dear reader,

First of all, kudos for being in your 30s, saving so much, thinking deeply about your decisions, and really having a pulse on your retirement . This in itself is a huge achievement.

You are very lucky to be in a position where you earn the salary that you do and the accounts and employers that you are offered match. This is a situation many young Americans don't find themselves in, and you should absolutely take advantage of it. With the country moving in a way where private sector pensions are being phased out, Social Security is in the midst of some sort of transformation (Congress has never allowed it to stagnate, but it needs help this time). and retirees are mostly responsible for their own retirement income, the sooner employees think about the finances behind their retirement, the better. A 401(k), an employer match and a good salary are key elements when doing this.

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You ask if you're saving enough, but truth be told there's really no way of knowing what “enough” is. You're 38, so unless you plan to retire much earlier than a traditional retirement in your 60s, you may not know what your expenses will be in retirement. No one can know for sure what housing, utilities, auto payments, care, emergencies and so on will cost 20 or 30 years from now. You can try and calculate what you want in retirement income each year, factor in inflation, and work backwards to find a number to try, but that figure is more important now and when you actually live. Will be close to retirement, will change many times in between. ,

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That being said, at this point in your retirement journey, the focus should be on saving, saving, saving as much as possible without completely depriving yourself in the present. It appears that you are doing this.

If by income-generating property you mean one focused on rental income, it's certainly a way to bring in extra cash, but it often comes with a lot of work. If you have vacancies then there are months where you can't make money, and then less than ideal times when you are paying for repairs, replacements etc. Rental income is a great way to make money — many people who retire early use it as one of their main sources of retirement income — but it's better than stashing cash in a 401(k) or IRA. is more intense. You also need to find reliable and responsible tenants, as the opposite can be a huge headache for you as a landlord.

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If you go that route, plan to keep extra cash on the side in case you need to fix something and to help maintain the day-to-day if you eventually decide to have multiple properties. Consider hiring a trusted manager to help. Before buying a property, make sure you look at the “bones” of the home or building and get details on the roof, pipes, history of the property, etc.

You shouldn't deduct too much of your retirement savings in for a rental property. Ideally, you would take some of that profit and put it in an account for the future. But I would say, you may want to diversify the types of accounts you have for the foreseeable future anyway.

See also: Should You Be a Homeowner in Retirement?

You mention that you have Roth and traditional accounts. That's great, because tax diversification is a huge advantage in retirement. This gives you the ability to choose how you source your retirement income, and therefore how much of a tax bill you could potentially face, and that's powerful. But this is not the only means. It also helps to diversify the types of accounts you have. For example, you have a 401(k) and an IRA, but those accounts have restrictions, such as the account holder must be 59 ½ years old to withdraw freely from them (Roths allow investor contributions to be distributed penalty-free. Granted, but there are other withdrawal rules to keep in mind).

Instead of putting all your money in retirement accounts for retirement, you may want to try a brokerage account. They are taxable, but have fewer rules for distributions, and can help if you retire early after all.

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For now, keep up the good work. The fact that you're already invested in your retirement security is a pretty good sign.

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