Retiring Early: A Divorced Dad’s Quest for Financial Freedom
As a 43-year-old divorced father, you’ve worked hard to build a substantial nest egg in your 401(k). With $580,000 already saved and a commitment to contributing the maximum amount each year, you’re wondering if early retirement is within reach. The answer lies in understanding the intricacies of your 401(k) contributions and projecting your future income.
Understanding 401(k) Contribution Limits
The IRS sets a maximum contribution limit for pre-tax retirement accounts like 401(k)s. In 2025, you can contribute up to $23,500 from your own earnings, and your employer can add up to $46,500, for a total of $70,000. Additionally, if you’re 50 or older, you can make catch-up contributions of $7,500 per year.
Projecting Your Retirement Income
Assuming an 8% mixed-asset return, your portfolio could grow to around $1.61 million by age 53. Using the 4% rule, you could expect to withdraw $64,400 per year from your retirement portfolio. However, this amount may not be sufficient to cover your expenses, especially considering your family costs, such as alimony, household contributions, child support, and college savings.
The Challenges of Early Retirement
Retiring early comes with its own set of risks and challenges. Your retirement portfolio will need to last longer, and you’ll likely have a busier and more active life, which can be more expensive. Additionally, your family costs will continue, and you’ll need to factor in your personal expenses, such as rent or mortgage, monthly bills, and hobbies.
Finding Your FIRE Number
To achieve financial independence and retire early, you need to plan for the many moving pieces of your money. Consider an income-over-expenses analysis to determine how much income your portfolio will generate and whether it will cover your expenses. Finding a financial advisor who can provide personalized guidance can be instrumental in helping you achieve your goals.
Taking Control of Your Finances
If you’re serious about retiring early, it’s essential to take control of your finances. Consider keeping an emergency fund on hand to cover unexpected expenses, and explore high-interest savings accounts to earn compound interest. By understanding your 401(k) contributions, projecting your retirement income, and planning for the challenges of early retirement, you can increase your chances of achieving financial freedom.
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