We sat down with Lasso founder, Chip Castille, to ask him the top retirement questions that Lasso users had.
Chip’s “Ask Me Anything” Interview
Question: Any good tips for saving for retirement?
Answer: Try to find a job you like and work for as long as you can. Seems obvious, but every year past the normal retirement age that you work is one year more of savings, and one year less of retirement that needs to be funded.
Question: Do I need $1 million saved at retirement?
Related: How much money do I need to retire?
Question: Should I change my retirement saving strategy since the market is going down?
Answer: Every retirement plan has four components: savings, future contributions, time horizon, and portfolio returns. It’s a good idea to revisit your plan yearly and make adjustments to one of the components mentioned above to ensure you are staying on track. When markets go down, you adjust other factors to get back on track (e.g. working longer, saving more, etc.) or you can wait a year and see if markets correct and put you back on track without making changes. The key is to be informed and be comfortable with your choices.
Related: How to keep your cool (and save money) during a bear market
Question: Looking at the stock market, inflation, etc. today, should I change up my retirement investments?
Answer: For my own investments, I like target-date funds. I have adjusted my time horizon, or how much I save. But given the long-term nature of investing for retirement, I haven’t changed up my retirement investment strategy. The nice thing about a target-date fund is that it automatically adjusts the investment mix over time for you.
Related: The silver lining of volatile markets? Your retirement savings.
Question: I’m supposed to retire in the next few years, should I be worried about inflation?
Answer: Inflation can really impact the quality of life during retirement. At current levels, inflation could reduce your spending power by 60 percent over 20 years.
Related: How could inflation affect your retirement plans?
Question: What’s the advantage of saving specifically for retirement instead of just trying to get as rich as possible?
Answer: Tax advantages! By contributing to a retirement-specific investment account (401k, 403b, IRA, etc.), you could get certain tax benefits. For example, in many of these accounts you can save tax-deferred which increases the amount of money you are able to invest today. Or, you may have the option to withdraw money in retirement tax free! There are other potential benefits you might be able to take advantage of like an employer match (extra money!) for your 401(k).
Question: Is a traditional or Roth IRA better?
Answer: That depends. The difference between the two comes down to taxes. In a traditional IRA, you pay taxes later (defer taxes) when you actually take money out to use it. A Roth IRA, you pay taxes today, but don’t have to pay when you retire.
Related: What’s a roth conversion (and why should you care)?
Question: Where should I retire?
Answer: It can actually make a big difference. Make sure you consider the cost of living when choosing. Income taxes, in particular, can have an impact on overall affordability. There are 9 states without state income taxes: Alaska, Florida, South Dakota, New Hampshire, Tennessee, Wyoming, Texas, Nevada, Washington. It may be something to consider when choosing a location.
Question: What should I make sure I’m taking advantage of?
Answer: Here are 3 things to see if you can take advantage of:
- Employer Match. If you save in a 401(k), your employer might have a match. That means they will match your savings – put money into your account – up to a certain amount. Try and get the full amount of extra savings they are offering you. It’s free money!
- An HSA. Not necessarily retirement specific, but your medical plan might come with the option to save in an HSA account. This is an account you can use for any medical purposes. And, there are triple tax advantages – you can put the money in, grow it, and withdraw it all tax free! Retirement can come with big medical bills, so an HSA is something to consider.
- Catch-up Contributions. If you are over 50, there are opportunities to save more for retirement. Depending on the type of investment account you have, you can often increase your savings and benefit from the tax advantages.
1 Based on Lasso calculations as of May 2023.
2 Source: US Census Bureau. Current Population Survey Annual Social and Economic Supplement (CPS ASEC), 2021.