I Asked ChatGPT How To Retire Early Without a 401(k) — Here’s What It Said
Written by
Brooke Barley
Edited by
Zuri Anderson
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If you don’t have a 401(k) plan, retirement is not off the table. However, your strategy might look different than your peers.
Read on to see how ChatGPT suggested retiring without a 401(k) compared to what experts suggested.
Look Into Other Retirement Accounts
If you just have never been offered a 401(k) plan through your employer, that doesn’t mean you can’t have a retirement account.
ChatGPT pointed out that you can invest up to $7,000 a year ($8,000 if you’re over 50) into a traditional or Roth IRA. If you freelance or run a small business, you can also put money into a SEP IRA or Solo 401(k) plan, which ChatGPT said let you save more than a standard IRA.
Lisa A. Cummings, Esq., attorney and executive vice president at Cummings & Cummings Law, agreed with ChatGPT here, saying “These retirement savings accounts allow the individual to set aside higher annual contributions that can grow tax-deferred or tax-free when used consistently.”
Build Income-Producing Assets
If you’re not relying on retirement accounts at all, ChatGPT suggested building other assets to generate income. This included avenues like investing in real estate, dividend-paying stocks or index funds, online businesses or consulting.
Certified financial planner Derek Munchow at Augustus Wealth agreed that real estate could be an especially lucrative avenue for those looking to retire without a 401(k).
“Use taxable brokerage accounts and real estate to create cash flow and capital gains instead of relying solely on traditional retirement plans,” Munchow explained. “You’ll give up pre-tax deductions and tax deferral features, but you gain control, liquidity and flexibility to retire early.”
Plan for Healthcare
Jobs typically provided health benefits, which retirement does not. To plan for this, ChatGPT said to look into ACA health plans or Health Savings Accounts (HSAs). Cummings especially encouraged HSAs.
“A Health Savings Account (HSA) offers a triple benefit. Pre-tax contributions to an HSA can grow tax-free, and the individual can also make tax-free withdrawals for medical expenses,” Cummings said. “After age 65, the individual can make withdrawals for any reason besides medical expenses, paying only regular income tax, similar to an IRA.”
Adopt the FIRE Approach
Though no expert explicitly said this, ChatGPT suggested following the FIRE (Financial Independence, Retire Early) movement. This entails saving 50% to 70% of your income and investing in low-cost index funds.
ChatGPT also said those following FIRE follow the 25-times rule. For example: If your annual expenses are $40,000, you need roughly $1 million invested to retire sustainably.
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