Your Retirement Recipe: Savings, Plans, and Financial Freedom Tools
Retirement planning doesn’t need to be intimidating. Think of it like following a recipe. You need the right ingredients, a step-by-step method, and maybe a little guidance from experts. That’s exactly what Joe Anderson and Big Al delivered with their “recipe for retirement” strategy designed to help you mix savings, smart tax moves, and income planning into a sustainable path toward financial freedom.
The Retirement Blueprint Starts with Saving
Just like no Italian dish is complete without pasta, no retirement plan works without savings. It’s the base of everything. Joe and Big Al emphasized the importance of having a financial blueprint, a personalized guide you can use to see if your current strategy matches your long-term goals. It’s a free tool they recommend to get started—plug in your numbers and get a roadmap.
Understanding Defined Contribution Plans
You’ve likely heard of 401(k), 403(b), or 457 plans. These are defined contribution plans employer-sponsored retirement accounts where you choose how much to save, and the final benefit depends on your contributions and investment returns.
In 2024, you can contribute up to $23,000 to these plans or $30,500 if you’re over 50. Many employers match 4-6% of your salary, so at the very least, you should contribute enough to grab that free money.
If you work in schools, hospitals, or other public service roles, you may be eligible for both a 403(b) and a 457. That’s a huge advantage for supercharging retirement savings.
The Power of IRAs and Roth IRAs
For more flexibility, IRAs offer tax-deferred (Traditional IRA) or tax-free (Roth IRA) growth. You can contribute up to $7,000 annually—or $8,000 if you’re over 50. Roth IRAs are subject to income limits ($146,000 for singles and $230,000 for couples), but higher earners can still access them through a “backdoor Roth IRA.”
Spousal IRAs let non-working spouses save for retirement, and even minors with earned income can open an IRA starting them on the financial journey early.
Defined Benefit Plans: Old School, Still Powerful
While less common today, defined benefit plans (like traditional pensions and cash balance plans) still exist and offer guaranteed monthly income in retirement. They’re typically funded by the employer, with distributions taxed as ordinary income.
These plans focus on what you’ll receive rather than what you contribute unlike 401(k)s where the outcome depends on market performance.
Retirement Options for Entrepreneurs
If you’re self-employed, you’re not left out. Solo 401(k) plans allow you to contribute both as the employee and the employer, with a 2024 cap of $76,500 (if over 50).
SEP IRAs, funded by employers only, allow contributions up to $69,000 and they can be set up retroactively. SIMPLE IRAs are geared toward small businesses with employees, offering easier setup and lower contribution limits.
And since 2023, some of these plans even allow Roth contributions for those seeking tax-free growth.
Making the Most of Equity Compensation
Almost half of S&P 500 companies offer Employee Stock Purchase Plans (ESPPs), letting workers buy shares at up to a 15% discount. That discount is taxed as ordinary income, but it’s still a great perk especially if your company’s stock is on the rise.
Restricted Stock Units (RSUs) and stock options offer even more potential, but they also carry risks. If your compensation is heavily tied to your company’s stock, make sure to diversify. Otherwise, you could end up with too many eggs in one basket.
Evaluating Job Offers with ESPPs
A listener named Jill asked if it’s worth taking a lower-paying job with strong ESPP benefits. My advice? Look beyond just salary. If the company has growth potential and the stock benefit is strong, it could be worth the trade-off. But don’t base the decision on stock perks alone—consider the whole compensation package and your career goals.
S-Corp Owners and Retirement Contributions
Kyle from Seattle asked about retirement plan contributions as an S-Corp owner with no wages. Big Al made it clear: you need earned wages to contribute. Distributions don’t count. So Kyle would need to restructure how he pays himself if he wants to fund a retirement plan.
The Bottom Line
Retirement planning isn’t just about maxing out an account. It’s about understanding your options, using the tools available to you, and balancing growth with tax efficiency. Whether you’re a full-time employee, self-employed, or somewhere in between, there’s a recipe for your financial freedom. Start by saving, diversify your strategy, and stay informed as the rules evolve.
Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.
IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
