Most families I meet don’t have enough money saved up. They have retirement accounts, but not tax-free cash. I understand why. They don’t want money sitting in accounts that aren’t earning anything. But that’s exactly what you need; Money that you won’t have to pay taxes on.
A good target is always 15% of your gross annual income. Contribute to your retirement account up to the amount your employer matches. The balance should go into your own savings account. If you have trouble saving without spending, consider a brokerage account.
It’s true that pre-tax contributions can help lower your taxable income in the year they are made, but they also create an unknown tax in retirement since we don’t know what your tax rate will be when you’re retired. In most cases, it will go up as you lose deductions or a spouse.
