Just made my first non-Target Retirement Fund investment with funds in my Roth. Get ready to buy the dip boys. (I opened this thing like a week before things “fell” at the end of 2018, so history isn’t on my side)
My investments went up 28.21% last year. Incredible year. Doubt this year can come close since a chunk of that was making up for the end of 2018.
My employer is offering both a traditional and Roth 401k. Not sure which one to take, could certainly use the tax shelter now, but who knows what tax rates look like when I take the money out in 30 years. Read some articles but they didn’t really move me one way or another. Assuming it really just comes down to tax rates now vs retirement. Anything else I’m missing?
You’re not missing anything. I’m personally locking in these tax rates. It’s hard to see a way in which these rates stay this low. I don’t know what your retirement plans are though which is why most people stay vague on telling people to do things one way or another.
Im likely leaving any money in these type of investment vehicles to others. Guessing the Roth makes sense now that I put it that way. At what bracket would you not want to lock the rates in?
From what I understand, the 22% tax bracket is the decision point. If you think you'll be above it in the future, lean Roth. Something I have saved: You have to remember that in retirement that you need to fill in the lower tax brackets first before you get into the 22% tax bracket. With the standard deduction a married couple will have $24,400 of income tax free. Then they will pay 10% tax on the next $19,050 of income. Then they will be paying 12% on the next $58,350. What this means is that you will need taxable income of $101,800 before you break into the 22% tax bracket and only everything above the $101,800 will be taxed at 22%. You would need $2.5 million in accounts to withdraw $100,000 at a 4% rate. Of course, that is with current tax brackets I'd been pumping all of my money into Roth 401k until I read more on it. I've switched to pre-tax 401k and filling up the Roth IRAs. But I'm 58% Roth overall right now, so I have a ways to go to build up pre-tax.
if you're in your peak earning years and don't expect to retire and have a huge burn rate I'd prioritize 401k to lower current taxable income that being said when i get home from this trip i'll be filling this years roths via backdoor method too its largely a guess, but safe bet is income tax rates will rise to similar levels as the rest the world at some point
I like the Roth 401k for work and the Trad IRA for tax deduction at tax time if your AGI isn't too high.
I’m 34 and have a household income of 210-220k. I’ve got a work 401k, a Roth 401k from a previous employer and everything my wife has(MF and work 401k). We have about 500k in all those funds combined, plus we have around 200k in home equity. I’d like to retire around 55 at the absolute latest. What should I be prioritizing going forward? We have a kid on the way and currently save around 40k/year. I also work for a private company that gives me around 10k in company stock annually, but I just ignore that and pretend it’s not even there. TIA
If you Venmo $10k right now I will send you my ebook and private course called "How to be 34 and have a household income of 210-220k, a work 401k, a Roth 401k from a previous employer and everything my wife has(MF and work 401k), totalling about 500k in all those funds combined, plus 200k in home equity and retire around 55 at the absolute latest"
But for real, should I keep going at this course or stop doing so much 401k? I’ve just been mindlessly dumping money into it since I graduated.
not an exact comparison, but my previous firm's software moved clients in to munis for taxable accts above the 24% bracket. so i've always thought of that as the threshold between "high & low" i like the sentiment of the second paragraph though, we tend to over think the impact of taxes on retirement accounts IMO, speaking in terms of "what bracket will i be in?" if the current year deductions on trad/401k can keep you in a lower bracket, i'm all for it
First, think of what your budget may be when you retire, including taxes and healthcare. Then multiply that by 33 to give you your target total portfolio value. This would give you a 3% withdrawal rate that can basically be indefinite. So say you want $100,000/year, you need $3.3 million saved. I would max your 401k, max both Roth IRAs, and consider saving in taxable. If you want to retire before 59.5, think of where you can get money from, basically Roth contributions, taxable, or early money from the 401k (Rule if 55).
Guys, don’t worry. I’m going to become the starter at my local golf course at 55. There’s always money in being the starter.
the account types don't matter much, since everything is dependent on whether or not the market can get you there (beyond your own commitment to saving, kudos btw). also you'll have to consider what your COL is at that time, w/d rate needed, inflationary factors (college tuition if you intend to save towards that, COL adjustments), taxes (will your wife still be working?) etc etc etc. without that stuff it's impossible to know what trajectory you are truly on ...
Basically this. What I wrote out is just how I set my target to let me know if i need to try and save more. It all depends on the market, if I keep my job, family health, etc.
The obvious answer is that you'll need non qualified funds that you can tap into. Alternatively there is an IRS provision that allows you to take IRA distributions penalty free before the age of 59.5. https://www.irahelp.com/slottreport/10-rules-know-about-72t
can't you withdraw contributions to your roth penalty free? you only have to pay a penalty on any money earned?
You can take your contributions out at any time without taxes or penalties. It's money that's already been taxed.
my fiancee has 5 siblings. two of her brothers and her all work hard and do really well. the other three fucking chill. he is the CEO of a publicly traded company and they have no shame just getting an allowance in their mid 30s.
What kind of health insurance do you have? If you have a HDHP, you should be maxing an HSA every year as well. Backdoor Roth conversions for you and your spouse are also highly recommended, giving you a nice blend of tax-deferred and tax-free money in retirement to control your marginal tax bracket. I'd definitely keep maxing your 401k as well. You can early withdrawal if needed, as someone posted above. 529 for kids would be another idea of tax-free growth.
72(t) is contingency type situations though. not typically something that you can use for "day-to-day" expenses. as billdozer mentioned, rule of 55 could apply for the 401k ...
My wife is an entrepreneur and kills it on her own. She knows she doesn’t have to, but she loves working her tits off. She has an older (33) and younger (23) sister that are lazy shitheads that just suck off of their parents teet and are just basically sitting around waiting for their inheritance. We already know we are going to buy the two sisters out of the business once it gets passed down.
Lol no The new limits for health savings accounts (HSA) for 2020 are going up $50 for individual coverage and $100 for family coverage, the IRS announced last week, bringing them to $3,550 and $7,100, respectively. The catch-up contribution limit for those over age 55 will remain at $1,000.
Nope. Money has to used for medical expenses only. IRS penalties from over payment aren’t a medical expense either.
Current limits for everything: 401k - $19,500 ($57,000 total including employer match) IRA - $6,000/person HSA - $3,550 (single), $7,100 (family)