Retirement planning is at the heart of what I do as a fee-only CFP® — and the question I hear most often is simply: “How much do I actually need?” The honest answer is: it depends on your lifestyle, your timeline, your other income sources, and your goals. But there are concrete steps you can take right now to build toward a retirement that gives you real financial freedom.
One of the most powerful and accessible tools available to individual investors — especially those without a workplace 401(k) — is the Individual Retirement Account (IRA). Here’s what I want every client to understand about IRAs and retirement saving.
Why IRAs Matter
An IRA is a tax-advantaged account designed specifically for retirement savings. Unlike a taxable brokerage account, an IRA shelters your investment growth from taxes — either deferring them (traditional IRA) or eliminating them entirely on qualified withdrawals (Roth IRA). Over decades, that tax shelter can add up to a significant difference in your ending balance.
Traditional IRA vs. Roth IRA: A Quick Comparison
- Traditional IRA: Contributions may be tax-deductible (depending on your income and whether you have a workplace plan). Your money grows tax-deferred and withdrawals in retirement are taxed as ordinary income.
- Roth IRA: Contributions are made with after-tax dollars, but your money grows tax-free and qualified withdrawals are 100% tax-free. No Required Minimum Distributions during your lifetime. I recommend this option for most of my younger clients and for anyone who expects to be in a higher tax bracket in retirement.
IRA Contribution Limits for 2026
You can contribute up to $7,500 per year to an IRA in 2024 — or $8,600 if you’re age 50 or older (the “catch-up” provision). To contribute, you must have earned income at least equal to your contribution amount.
When Can You Withdraw Without Penalty?
The general rule is that you must be at least 59½ and the account must have been open for at least 5 years to take qualified withdrawals without penalty. However, there are important exceptions I discuss with clients who face unexpected needs:
- Medical expenses: Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income can be withdrawn penalty-free.
- Higher education: Qualified education expenses for you, a spouse, child, or grandchild are exempt from the 10% early withdrawal penalty.
- First-time home purchase: Up to $10,000 can be withdrawn penalty-free for a first home purchase (lifetime limit).
- Disability: If you become permanently disabled, withdrawals are exempt from the early withdrawal penalty.
- Death: Distributions to beneficiaries after the account holder’s death are not subject to the 10% penalty.
How Much Do You Need to Retire?
A common starting point is the “25x rule” — saving 25 times your expected annual spending in retirement. This is based on the 4% withdrawal rate, which research suggests can sustain a 30-year retirement. But this is a guideline, not a guarantee, and I help each client build a retirement income plan tailored to their specific situation, Social Security strategy, and other income sources.
Calculate What You’ll Need
Use the retirement savings calculator below to estimate how much you need to accumulate — and whether you’re on track to get there.