My wife and I have saved $1 million in our 401(k) - how much money do we need to have in our brokerage account?

A 401(k) is a wise retirement savings vehicle, especially with tax advantages and employer matching. However, it's important not to rely solely on a 401(k) due to restrictions on withdrawals before 59 1/2 and limited investment choices, which may involve high fees. This concerns a couple pondering how much to allocate to their $1 million in 401(k)s versus $3 million in a taxable brokerage account, as their retirement plans will significantly influence this decision. Diversifying savings is essential for future financial security.

But while it's a good idea to take advantage of a 401(k), you don't necessarily want to make it your only retirement account.

One pitfall you might encounter with a 401(k) is that taking withdrawals prior to age 59 and 1/2 will generally result in a 10% penalty.

It makes sense to contribute money to a 401(k) for the tax breaks and employer match. But... you may get stuck with funds that charge higher fees.

The problem with 401(k)s is that they typically do not allow you to hold individual stocks. Rather, you're limited to different funds.

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