A couple in their early 40s, with a combined annual income of approximately $272,000, recently shared their financial situation on the subreddit r/PersonalFinance. They report having around $1 million across various retirement accounts and are contemplating pausing their contributions to a Roth 401(k) to allow more opportunities for family travel while their children are still at home.
The couple is currently contributing $16,200 each year to their Roth 401(k) and is considering delaying these contributions until their children, who are about 10 years old, go off to college. They aim to retire in their mid-60s.
Rachel Lawrence, head of advice and planning at Monarch, a budgeting app, provided her perspective on their decision. She emphasized the importance of evaluating current and future spending needs when assessing retirement savings. “Even with $1 million, the purchasing power has changed over the years,” she noted.
According to common financial wisdom, individuals should aim to have three times their salary saved by age 40. In this case, the couple has saved nearly four times their income. However, Lawrence advised against strictly adhering to generalized guidelines, as personal situations can vary significantly.
The couple expressed a desire to maintain 75% to 80% of their pre-retirement income during retirement, suggesting they may have higher spending needs. This indicates that they could reasonably afford vacations, although the extent of their travel will require careful consideration of their financial priorities.
Lawrence highlighted the importance of determining the family’s value placed on travel. Budgeting for trips is crucial, particularly for a family of four, as travel expenses can accumulate quickly and potentially disrupt savings plans.
While many financial experts advocate for aggressive retirement savings to achieve financial independence, Lawrence suggested that not every saver follows this approach. “It appears their focus is not solely on financial independence, but rather on spending quality time with their children and embracing adventure,” she concluded.