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The 4% rule is the most widely used retirement planning guideline. It suggests you can safely withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation each year, without running out of money over a 30-year retirement. Working backwards: if you need $60,000/year in retirement, you need $60,000 ÷ 0.04 = $1,500,000 saved.

This rule was developed by financial planner William Bengen in 1994 based on historical US market data. It has held up through every market environment since, including the 2008 financial crisis and the 2022 bear market. Some researchers argue that 3.5% is safer given current valuations and lower expected returns, while others say 4.5% is fine if you're flexible about spending in down years.

If your employer offers a 401(k) match, that's your first priority — always. A 50% match on 6% of salary is an instant 50% return on your money. No investment in history reliably beats that. After capturing the full match, the decision between additional 401(k) contributions and a Roth IRA depends on your tax situation.

The optimal order for most people: (1) 401(k) up to the employer match, (2) max out a Roth IRA ($7,000 in 2026), (3) go back and max out the 401(k) ($23,500 in 2026), (4) taxable brokerage account for anything beyond that. This sequence maximizes tax advantages at every income level.

Someone who invests $500/month starting at age 25 will have approximately $1.4 million at age 65 (assuming 8% annual returns). Someone who starts the same $500/month at age 35 will have only $590,000 — less than half, despite contributing for only 10 fewer years. The first investor contributed $240,000 total; the second contributed $180,000. The $60,000 difference in contributions produced an $810,000 difference in outcomes. That's compound interest at work.