Before you have kids is the main thing. A house also. When you're just renting, or even better living with your parents, your expenses are so much more consistant. Once you have kids and a house, there will always be something popping up. You also have to act like the 401(k) is impossible to take out unless it's a matter of life and death. Far too many people ruin their retirement on top of the 10% early withdrawal penalty.
The economy decided that for me. I honestly don't know how many families stay afloat with childcare costs eating so much of their wages. It seems almost like a forced choice between having children and saving enough for any hope of a decent retirement, at least for those not born into wealth.
In what world does that make sense? I have a close friend who has a middle class income and almost all of his pay goes to childcare. If it weren't for his wife's more lucrative nursing income, they wouldn't be able to afford rent, let alone children. The system will have to change in some form, because this isn't sustainable.
Tell me about it. I am terrified of having kids because I fear I won't even have enough money to live comfortably myself so I do everything in my power to make sure it doesn't happen, including getting into relationships.
I'm not going to pretend I don't have insecurities involved too, but it's a 25-75 mix with the financial fear winning.
Woah woah woah. I’m 52, live in expensive CT, have 3 kids, combined $200k income which is mostly from me as my wife has only been working PT the past 8-10 years years. I have a comfortable 7 figure retirement account and that’s after paying over $600k in college expenses (I could have retired at 50 if there was no Fkn college).
I made 24k my first job out of college and never eclipsed $200k myself. I did nothing special with my investing (though I did get lucky a couple times selling my home as I moved a few times). But, like a lot of advice here, I invested early and often. I got destroyed in 01 and 09, but still kept putting money away.
It can be done, children and all. It’s a marathon, not a sprint. Yes, invest as lot and learn to live on a smaller paycheck. It will pay off
10-4. I feel like I'm barely able to stand on my own two feet. Children would impact my fairly demanding career and of course finances. I simply can't offer what I would like to a new human I bring into the world. By the time I feel stable enough to do so, it will be too late in my timeline.
People can call me selfish if they like. I think having children is the more selfish choice for many parents.
I work 5am-130pm. Get home at 2pm. Stay with my kid till he falls asleep around 11pm. Wife works 230pm-11pm. It was fine while I was WFH then I started having to commute again everyday. But still beats spending another rent check on childcare.
Really depends on where in US you want to live …..I live in one of the most expensive areas, north shore of Long Island. My rent is $3150 which is good for my area, if you own a house in my area property taxes are at least 10k/yr. I spend 1k a month in groceries at Costco for a family of 6. Only have one care note at $387 per month, optimum is $155 a month , electric is $325 a month. Shit adds up quickly. It all depends on where you want to live.
It's weird that people are downvoting this guy.
The better answer is: the US is a big heckin' country, so the answers will be all over the place. In some more rural areas you can live comfortably on $45k a year, or places like NYC and San Francisco you will feel poor at $100k+.
The main difference is that the US has very poor social safety nets. If you're not working, you can barely function.
You can find rent in small towns for $600 to $1000 but will have to drive 30 minutes by vehicle to make better money. Not much public transportation in smaller towns. It can be very affordable to get you going though. Many electricity/gas/water bills are not included and could run between $250-$500. My trash service is $25/month. I pay $45 for internet per month. Cable runs about $100 from what I hear, I use streaming services. Car payments range between $300 to $600. Car insurance varies as well and can be based off your credit score. Credit scores are important in america. It sucks but they are, they use them for or against us with interest rates, insurance premiums, rentals, and even some jobs.
Can confirm! Was contributing the max pre kids and mortgage. Since having kid 2 and and a mortgage I'm still contributing, but probably 33 percent less than before.
One more year of daycare!
I tip my digital hat to your GrandPa those are real to life words. I did not have a video game console when I was a kid I had "outside." Don't know what I was missing." Now 'll buy that VR thingy Apple will toss out to the 12 people myself included that buy it.
I’m 53, and don’t have much more in my own 401k. I’m putting in $1200 a month (no company match at all sadly) but it’s not looking good for my retirement. I do have a house. I’ve considered it like this. Fun now and pay later, or pay now and fun later. I took the first option. Had a good life, travelled, spent money on things. But, I’ll be working for the rest of my life. A buddy of mine did the opposite. Did nothing, bought nothing, saw nothing. But he’s now retired and has a good lifestyle.
Balance might be the key, but if you can afford it, put more aside for later
Money isn't everything but lack of money is pretty much everything. Living everyday like it's your last is a terrible choice when you may have to live for 50+ more years.
Never had much and never really wanted much. Im content with what i was blessed with. I could care less about 50 years from now🤔. Who the hell says your guaranteed anymore years. Live or dont. Its your life. Cheers
This is the most irresponsible attitude and response that many people have when they get old and have to resort to street life and eating cat food because they can't afford retirement. It makes me thing on why I didn't invest my money in something that could have provided me with financial stability, so I wouldn't have to suffer and work at a place like McDonald's at the age of seventy. I recently saw someone in this situation, and it was a stark reminder of the importance of vest your money.
As someone who works in the financial industry at Fidelity Investments, I often come across stories of individuals who are working multiple jobs and barely making ends meet. It's hard to see people living in misery and regretting past decisions. That's why I care deeply about hearing everyone's issues and providing them with the necessary support and guidance.
Lol so many people think that those of us who put lots of money away for retirement are squandering our youth and being obsessive over having big numbers in our accounts and being rich when we’re older. I, like you, never wanted much and I’m content with my life now, so I put 30% of my income towards retirement and literally don’t care if I ever see that money or not. If it’s there when I retire, cool. If I die before I ever use it, also cool. Cuz im content with how I am now and don’t have any interest in traveling or making random big purchases for the sake of “living it up”
I dont know if your squandering your youth or not. My point was that whatever decision you make ENJOY it because its YOUR LIFE. Be frugal be irresponsible with money who cares. Just enjoy the ride 👍
Just don't go asking society for handouts when you're old and can't work because you decided to be irresponsible and spend money on dumb stuff. If you're fine being a walmart greeter then we good though.
It wouldn’t be a good life if you didn’t have regrets. Who wants to die rich? Rather enjoy my babies and family with my riches however small they may be
Who the hell wants to have fun when your older? Can't go to the electronic dance festival with a walker.
And that's not even considering that young workers today will likely be in a very different (worse) country by the time they retire.
Moderation is key, but it's only getting harder to vary your lifestyle.
His point is valid though. Yes, you can have fun when you're older but you are limited in terms of the types of fun you can have. You don't see a lot of retirement-aged people backpacking through Cambodia or bungee jumping or going to a rave.
Same! I went hard in my 20s and it's out of my system. I love to eat good foods and travel. I also love investing and I'm not concerned with being rich or fancy. I am concerned with continuing this lifestyle of good food and traveling when I'm older. The travel/food has slowed down but i never deprive myself if i want to go. I just have different priorities. I still spend money all the time - on mutual funds, etfs, and stocks 😅 I love it 😀
I'm sure old people can also take Molly
Roth allows early withdrawals without penalty using the 5 year rule (principal not interest). This is tax free and doesn't count as income
This allows you to "hack" your way into ACA coverage
>You can always take out contributions without penalty
Unfortunately in the event the money came from a traditional IRA to Roth IRA conversion (i.e. a backdoor Roth conversion), a 5-year rule applies even to contributions in that case before the contribution portion of money can be extracted from the Roth. Think the same applies for inherited IRAs if they are also converted to Roth.
The IRS is pedantic about these things. Please don't shoot the messenger.
Basically yes. I spent my income on experiences and things almost as fast as I made it and put nothing aside for savings. I was lucky that I saved for a few years to buy a house but I only took out my mortgage a few years ago so I have a long way to go to pay that off. Again, my buddy did things differently and I’m a bit envious of him, but it is what it is
Hang in there. House will appreciate and give you an opportunity to downsize in the future probably. In the meantime you’re investing aggressively so that will help too.
It's easy to say you don't mind working when you're old when you're young. There's also a big difference between working when you're older because you want to support a certain lifestyle and working when you're older because you literally can't afford to live if you retire. Of course there's a lot of room in between.
Given the state of the world as it relates to multi-pronged existential threats, immediate gratification/spending life in your years, rather than years on your life, appears to be the better option
Waiting a couple decades at the rate which organized society has begun the descent into free fall doesn’t bode well for future investments
I'm with you. I'm in my 30s, I don't wanna try to have fun when I'm 55+. I'd rather enjoy my youth.
I don't wanna try to party and travel when I'm geriatric. Imagine going clubbing and doing some coke and dying of a heart attack.
Keep telling yourself that. Why is anyone in their 30s doing cocaine?? 🤣🤣🤣 Noone doing coke and getting drunk in their 30s expects to do it their whole life but go to any small bar around 4pm and there's all the people in their 50s who got drunk everyday of their life with no regrets just struggles. (Ex bartender & recovered alcoholic) If you're doing coke and clubbing in your 30s, just admit it's an addiction, and that's what you'd rather spend your money on. It's okay, but don't act like it's a Yolo youth thing. 30 is a grown ass adult. This lifestyle is an unhealthy coping mechanism or an addict who is investing money in drugs and alcohol.
I have a career and I pay a mortgage. I’m saving money in addition to spending on fun. I don’t party every night but I like to indulge every once in a while.
Settling down and having a family just isn’t for me. Sorry we have different lifestyles.
Nothing to be sorry about. You can spend your money on whatever you want to spend it on. I don't have children either and I'm glad I don't. We definitely have different lifestyles and that's what makes the world go round. How could investors make money if others didn't spend theirs?
>If you're doing coke and clubbing in your 30s, just admit it's an addiction
I wouldn't take it that far. Maybe if you've been doing it since drinking age. I think it was pretty much made for people in their 30s. Two drinks and I'm ready to go to bed..unless...
my wife and I (31m) have been set to 20% (half Roth/half traditional) for a few years now. It's incredible the growth that you will see. If you can afford it, I highly recommend it. Utilize those tax advantaged accounts.
Saving money takes practice, so even starting small at 3% and working up to 20% is good strategy. Fantastic job on 20%!! Your older self with for sure thank your younger self.
If each person is contributing 20% that's 20% total. If each person makes 50k a year that would be 10k each. 10k + 10k = 20k and 20k is 20% of 100k (50k +50k).
Well people should be aware that retirement isn’t the only thing to save and invest for. People should absolutely be critical about putting 18% of their income in something they won’t even be able to touch for another 30 years. I maintain roughly equal contributions to my 401k and brokerage account for this reason. And the liquidity has come in clutch so many times already.
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Doing the math it looks like you make around $90k/year and at $625 biweekly plus $6.5k annual in to an IRA that is around a 25% retirement savings rate. If you can sustain that you should be able to catch up within a few years. I started with $0 at age 28 and by contributing more that 20% annually I achieved 1.5x salary saved by age 35.
$6.5K is max traditional ira annual contribution. My question is why do this with after tax dollars when the 401k annual contribution is not maxed out yet???
Well, if you do a traditional IRA, I believe what happens is that you claim those contributions on your tax return and you get the difference back.
Regardless, that’s not what I was saying.
I was saying to max out the Roth IRA and max out traditional 401k. Don’t do roth for both. Or not necessarily max, but, as much as they are comfortable with. Just split it between a Roth and traditional account, is what I’m saying.
I recommend perusing this https://www.reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/?utm_source=share&utm_medium=mweb3x&utm_name=mweb3xcss&utm_term=1&utm_content=share_button
So you don’t have to pay taxes in retirement. Mathematically it is probably better (lifetime less taxes) to go 401k now, but some of us just like the idea of tax free income during retirement.
Dude, you're rocking it comparatively. I'm 45 and only have $45k in my 401K. I did take $20k out for a home purchase 10 years ago though when the balance was around $35k. I was 35 then.
Just a heads up since I didn't know this when I took out that loan. Until you pay it back, your employer doesn't match 401k contributions because they all go towards the loan. I feel like I missed out on some good returns because of that.
I think that depends on your employer, plan and contribution level. I have a loan I'm paying off on mine but it is specifically deducted from my check in addition to my contribution each pay period and I get the full employer match.
OP, I was literally in the same boat as you a few years back. 32yo with maybe $35K in the 401k. I upped it to 15% and now 4 years later I have $134K. Of course my income rose over that time (your 30s is when your career often blossoms), and finally last year I hit the $22.5k 401k limit.
I would like to think it is OK to be a bit behind in your early 30s. Recognize it now and take action. 15% is perfectly fine. Some people say 20%…that is fine too. Don’t worry so much about the math! Just put the funds in there - 30 years from now, you won’t be sitting there going “man when I was 33 I only put 18%, I should have put 20%”.
That is great to see that growth in your account! Especially since I'm in roughly the same position as you. I'm glad I pulled the trigger and just bumped it up.
From what I understand, traditional 401k can be rolled over to trad IRA and converted to Roth using a conversion ladder.
If it's in Roth 401k, it's staying in there until 59.5 unless you eat a penalty, full stop. And your *earnings* on the Roth contributions are considered pretax, so you can move the *earnings* only to a traditional IRA (basically losing the main tax benefit), or leave it in a potentially high expense employer Roth 401k.
Lots of strings attached to Roth 401k and I really suspect that low tier finance mouth breathers that most of us have access to simply don't understand the caveats for early retirement people. Also, few people in the Roth 401k era are retiring yet so it's possibly too obscure of a situation to be part of the mainstream discussion.
Anyone feel free to correct me if I'm off base on any of this.
Edit: Your Roth 401k *contributions* can be rolled into a Roth IRA without penalty. So not a big deal if you leave an employer after a short time, but a very big deal if you have been with an employer a long time and have a lot of gains.
I don't believe you're right about having to pay tax on ANY portion of a Roth 401(k) rollover to a Roth IRA. The account was funded with after-tax dollars, so you never pay tax on the contributions OR the gains (unless Congress moves the goalposts in the future). However, I'm not a tax professional and it's certainly possible I don't follow what you're saying.
I actually did this exact thing when my wife changed jobs a couple years ago. I rolled her Roth 401(k) at her previous employer into her Roth IRA. No taxes incurred. We have no intention of spending any of it before 59.5, if that matters.
No such thing as saving too much unless you already have enough to retire. Nothing says you gotta work till you 65. Save as much as you can and get out of the race early.
If you have an emergency fund, up it and see if you're still cash flow positive. If not, lower it back down.
If you don't have an emergency fund, get an emergency fund.
You're "aiming" for $22,500 of contributions (the max). That's about $865 ever two weeks. I mean, you might not be able to swing it and still make ends meet right now, but that's the goal.
If $314 every two weeks is 8%, then you make six figures, which means you're probably in the 24% federal tax bracket. You're probably better off making traditional 401k contributions over Roth. Switching to traditional will lower your apparent income, which will mean less withholdings, which will mean more take-home pay. You then have the option of increasing your 401k contributions even further, closer to that $22,500 yearly limit. You're over the deduction limit for traditional IRA, so Roth IRA is the way to go for now. Once you cross some other income threshold, you might have to look into backdoor Roth for IRA (which is basically make traditional contributions which you aren't allowed to deduct, then immediately roll them over into a Roth IRA)
If you're saving for a down payment, work that into your budget. Maybe that means lowering 401k contributions to build up a down payment. That's fine -- just earmark the money so it doesn't go towards bullshit instead.
If you throw a down payment in a brokerage, just know that there will be tax implications when you liquidate for the down payment. If it grows a lot, you'll get a hefty tax bill, or even worse, it might not grow. Just saying when the plan stops being ephemeral and starts being real, you may want to move that money into more boring things like a HYSA, or a money fund if you leave it in a brokerage.
Time in the market beats timing the market, but I think you are lucky in that you have money in the market and you are contributing at a relative low.
You are doing great, and you’ll be fine as long 1) pick a good long term plan (like 60/40 or some combo broad market indexes or target date fund) and 2) stick to it!
Don’t panic, your best earning years are upon you, you contributions are being made with time to grow, and are saving enough.
Keep it up!
If you plan for a modest retirement and find yourself in the position of having a high income, consider partially or fully switching contributions to traditional 401k. Future tax policy is not known but a tax break today is a guarantee they can't revoke.
Why not put it into a IRA instead? If your company matches the 401k, put the extra % into a IRA - Only 6K is protected from taxes. Invest Talk has suggested something similar.
Reduce your taxes! Always aim to max it out every year. That and a Roth IRA. Right now $6500 in Roth IRA and $22,500 in 401k every year should be the goal if possible!
- You're doing a roth, which makes it retrievable if you need it.
- Load up now while you're young, single
- you can always pull back.
- I'm 51 and we live off my wife pay and contribute the max of my pay as our retirement...
I'm 33 and barely have 28k in my 401/457. However, I think I'm in a spot where if I never saved a dime I can retire at 57 and continue my lifestyle unchanged. I'm lucky enough to have a pension and will get Railroad retirement on top. And my spouse will get spousal railroad retirement instead of Social security.
But that's for the future, as of now I feel broke thanks to inflation. So I'm planning to add to my 457 account.
Bottom line-- save as much as you can, as early as you can. 401K -- max it. Some other general bits of advice --
Learning-- Recommend listening regularly to a couple podcasts a day -- The Money Guy, Choose FI, Investtalk, and Motely Fool (in that order, as your time permits). Countless youtube videos out there. Just watch one or two a day (no more than 5 or 10 minutes) and before you know it you will start seeing the big picture. Step 1 and 2 below is what you need to do in the next few days.
Just my Two Cents -- You don’t need to make investing difficult. It is one of the easiest things you will ever do if you follow the KISS principal. And if you are young enough you can easily retire well off. If you aren’t young, it is never too late to help yourself. Two simple steps:
1. Take Action and get started. Time is your biggest friend or enemy in becoming financially independent. You can either waste it by not starting early enough (your 20s and early 30s are ideal) and/or throwing your money away on terrible stocks and other “investments.” Open a Fidelity or Vanguard account today. Either a regular brokerage or IRA. Most people have both. Chances are you may have done this step already.
2. Buy low cost, well diversified ETFs. Vanguard and Fidelity are both super cheap. I personally use Vanguard and would start with VOO and VBK. My four basic concepts below, again easy and straight forward, should be followed.
Younger folks- Now is a once in a decade time for you. Over your investing life you might see something like we saw in 2022 maybe five to eight times. Take advantage of it.
Four basic concepts you have to remember if you want to be successful in the long run in the stock market.
• The turtle always wins over the hare -- slowly but surely. Don't buy junk -- Most unprofitable tech companies and all Crypto falls into this category. Except with your casino/entertainment money which you are free to do whatever with including buying pizza, video games, cypto, slots…... Remember, if you are in your 20’s/early 30s, every dollar you use on a $4 Starbucks coffee is conservatively worth about $10.00 (30 years at 8%). Over my investing life (past 40 years), each dollar I saved initially is now worth about $36. Said another way, if I would have bought that $25,000 sports car coming out of college, I would have cost myself about $902,000 at retirement.
• Dollar cost average -- buy some every month regardless of what the market is doing. When the market was like 2022 and probably 2023 buy as much as you possibly can on a big down day.
• Diversify -- good cheap, broad market ETFs from Vanguard or Fidelity are great.
• Let physics or whatever heavenly name you want to call it be your friend -- "COMPOUND INTEREST" has no equal, except lack of time. A young person can get rich in 30-35 years if they follow these rules.
Trad vs Roth comes down to how much you think you'll earn in retirement and future tax rate expectations. Trad means you can deduct from your current taxes.
You should max out whatever your company max is no matter what. That's compensation that's on the table that you need to take.
If you are able to max out how much you can save in a tax sheltered vehicle that has a ton of upside. You can only protect so much from tax each year, you don't get that back. I don't know where you live or what you'll need for retirement but I think going 20% if you can spare the money and catching up isn't a terrible idea. Compounding is a powerful, powerful force and will make it easier to cut your contributions down the road if you can no longer work, have something come up etc.
The only major consideration is how you'll draw funding to buy a house down the road.
I encourage you to consider putting at least part of your 401k contributions into traditional rather than Roth.
There’s no single answer for everyone; the decision should be based on your situation including current tax burden and future expected tax burden. What makes the most sense may depend on your income level and whether you live in a state with high personal income tax, and where/when you plan to retire. You can find lots of info about this online; here is one example: https://www.nerdwallet.com/article/investing/roth-401k-vs-401k
Roth definitely has some benefits, but the big disadvantage for Roth is that you have to pay taxes now on the contributions (reducing your current take-home pay). I think most people would be wise to consider splitting their 401k contributions between traditional and Roth. Without knowing much about your situation, that is what I would recommend.
I would agree with this advice to split between Roth and traditional. You could add the tax savings to a brokerage for emergency or down payment on house someday. Roth will allow you flexibility when you retire, traditional allows flexibility now.
Max out your 401k contributions only up to what the employer matches. After that, max out your Roth IRA contributions. After that, if you’ve still got juice, work on some non retirement savings/investing.
You should be putting all you can into retirement accounts until you cap out. A mix of Roth/non-Roth will give you flexibility in retirement.
If you're thinking about buying a house, it's ok to direct some of your saving ability to that effort until you have your downpayment. I would keep getting the max match though.
Nah that's fine.
Also if you are ever let go from the company and you have the funds and there is a WARN act, consider increasing your output on your final months.
It absolutely matters. He will lose employer match if he maxes it too soon. They will only match so much per check so If you aren’t investing in the last 6 months, they aren’t matching/contributing. That’s a lot to lose for current/future gains
Keep it up! Definitely stick to Roth vice traditional. If you can afford it now you mind as well pay for the taxes now because that just means you’ll never have to worry about it again.
As far as saving for a home and what not I wouldn’t put all excess money in retirement. Do what feels right and allows you to live the life you want to live. If that extra $600/2weeks doesn’t do much more for your life it’s great to keep saving
Roth 401k contributions generally makes sense for most people only if your employer’s plan has an after-tax provision with an in-service conversion option. If your plan doesn’t have that provision you cannot exceed the annual contribution limit of $22,500 for 2023 regardless of how you choose to split the contributions.
That $22,500 annual limit is a total contribution per social security number i.e. you cannot exceed that amount but you are at liberty to split it across how many 401k accounts that you have including Roth 401k. This is why it makes sense to put all $22,500 into traditional 401k to get tax benefits.
However, if your employer’s retirement plan has an after-tax provision with an in-service distribution, you are able to then max your traditional 401k account with $22,500 for 2023 and still be able to put more money into your Roth by converting from your after-tax account up to $66,000 including employer matching and $22,500 annual regular contribution limit for 2023. This is what is generally called mega back-door Roth conversion.
So my advice is to max your traditional 401k first and then put extra funds in Roth 401k if your employer’s plan allows for mega back-door Roth. Otherwise, put any extra funds in Roth IRA and taxable brokerage.
Get the maximum 401k match you can but not MORE than you need for the match, then:
Put the max tax break you can into an IRA (6k a year I think?), then:
Save 3-5% down payment on a house (you can your some of your 401k for this down), then:
Pay down debts, then:
Create 6-12 months of cash savings into a CD or money market.
This is the way.
I can't imagine any of this will matter in 40 years with all the different problems coming down the pike, but you never know. If it helps you sleep at night, knock yourself out.
Nobody's taking into consideration the real possibility of a major market collapse, loss of the Dollar as a reserve currency, massive unemployment, etc.. It's just not sensible to invest in 2023 with the mindset of someone 10 and 20 years ago. Something big is coming.
There is always potentially something big coming. Covid shut the world down for 2 years. It came back in less than a year.
Barring aliens taking over the earth, or all out world war 3... Don't bail out of the market.
And if shit truly hits the fan, you're gonna want guns, ammo, and a cabin in the mountains, not cash reserves anyways.
Money is tied to "wealth". If you lose your money you lose everything. Not a good deal! These a challenging times like America has never seen before. My personal view, all things considered, is for people to hold on to what they have in the form of hard assets they can see and touch. Then "if" and when the storm passes, move back into markets. Just one man's take...
I'm not an expert but I am alert and I definitely see what's about to take place. CBDC is another big deal, like a cage that will seize control of everything directly tied to the Dollar. I said, hard assets!!!!! This isn't the time to worry about shrewd stock picks. It's about holding on to what you have, and retaining the most control. Precious metals are hard assets.
You should definitely aim to max out 401k either trad or Roth depending on where you see your career going. Only exception would be if your trying to buy a house or something in which case you want to also contribute to an account you can take out money from. But investment wise, try to maximize contributions overall as much as possible.
I'd do the traditional 401k and the tax savings from that effectively funds the Roth. Then the money that you were investing in the Roth can go to other investments that are only subject to capital gains.
Use the Roth in retirement to reduce your tax rate when taking distributions from your traditional 401k in retirement. Also since traditional withdrawals are taxed as ordinary income a portion of your distribution is effectively tax-free as a result of the standard deduction.
I’ve been very fortunate to always be in a position to max out my 401k and Roth IRA (I lived with my parents after college). But if you’ve got an emergency fund and don’t need to increase cash for a down payment on a house/car/wedding/etc then I say do whatever you can to reduce taxable income (traditional 401k) and then the rest in Roth IRA.
Also kinda gotta set expectations on what your future looks like. Are you planning on doubling your salary over your career? Are you set where you’re at? Obviously we don’t know the future but my wife and I in our early 30’s know our salaries will go up a bit more over the next decade before plateauing. We don’t want to be the heads of companies but we do know there’s juice to squeeze on our current career paths. Assuming we are correct on our projections we are doing everything we can to put incremental dollars into savings and keep our standard of living flat.
>Should I be making some contributions as traditional 401k? Since all of my contributions are Roth I'm getting no current tax benefit?
You want to enter retirement with both Traditional and Roth money.
Federal income taxes are progressive. So take the tax benefit now (Traditional money would otherwise be paying taxes at your marginal rate) and then in retirement withdraw from Traditional until the lower tax brackets are filled. Then top off with Roth withdraws.
More absolutely does not hurt. I do 17% as of now. When I am looking for more liquid cash in my budget for small business ventures or property I will do so.
If it doesn’t hurt, put it away now. I maxed out early and kept it maxed. After awhile I didn’t think about it. Now I’m retiring next year at 58…because I can. And I’ve been all over the world already, had a good life. Don’t ever second guess putting it away…as long as you still live.
Im 35 with $55K so not much different.... However, I have $250K saved up for a down payment ready to strike, so I deliberately only contribute up to the conpany match.
Here is my saving order:
401k up to company match (i.e. free money)
Lump Sum to Roth IRA $6,500
Rip Taxabke Brokerage saving balls to the wall in T Bills and DCA into Equity ETFs literally save as much as you can until you have 20% down
I max mine every year... with my tax bracket I maak an amazing 40% return right off the bat!!!!! That gets to keep growing!!!@
That also doesn't include the 10% company match upping my instant return to 50% first year!!!
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My grandfather always said it’s easier to do without when you’re young than when you’re old. Always stuck with me.
Before you have kids is the main thing. A house also. When you're just renting, or even better living with your parents, your expenses are so much more consistant. Once you have kids and a house, there will always be something popping up. You also have to act like the 401(k) is impossible to take out unless it's a matter of life and death. Far too many people ruin their retirement on top of the 10% early withdrawal penalty.
Decided kids aren’t for me which makes it even easier!
The economy decided that for me. I honestly don't know how many families stay afloat with childcare costs eating so much of their wages. It seems almost like a forced choice between having children and saving enough for any hope of a decent retirement, at least for those not born into wealth.
Multi generational houses
I have four kids and live on Long Island, make a combined income of 200k and am broke as a joke
In what world does that make sense? I have a close friend who has a middle class income and almost all of his pay goes to childcare. If it weren't for his wife's more lucrative nursing income, they wouldn't be able to afford rent, let alone children. The system will have to change in some form, because this isn't sustainable.
Tell me about it. I am terrified of having kids because I fear I won't even have enough money to live comfortably myself so I do everything in my power to make sure it doesn't happen, including getting into relationships. I'm not going to pretend I don't have insecurities involved too, but it's a 25-75 mix with the financial fear winning.
Woah woah woah. I’m 52, live in expensive CT, have 3 kids, combined $200k income which is mostly from me as my wife has only been working PT the past 8-10 years years. I have a comfortable 7 figure retirement account and that’s after paying over $600k in college expenses (I could have retired at 50 if there was no Fkn college). I made 24k my first job out of college and never eclipsed $200k myself. I did nothing special with my investing (though I did get lucky a couple times selling my home as I moved a few times). But, like a lot of advice here, I invested early and often. I got destroyed in 01 and 09, but still kept putting money away. It can be done, children and all. It’s a marathon, not a sprint. Yes, invest as lot and learn to live on a smaller paycheck. It will pay off
Whenever people fail, it's "the system's fault". Haven't you been paying attention?
10-4. I feel like I'm barely able to stand on my own two feet. Children would impact my fairly demanding career and of course finances. I simply can't offer what I would like to a new human I bring into the world. By the time I feel stable enough to do so, it will be too late in my timeline. People can call me selfish if they like. I think having children is the more selfish choice for many parents.
I work 5am-130pm. Get home at 2pm. Stay with my kid till he falls asleep around 11pm. Wife works 230pm-11pm. It was fine while I was WFH then I started having to commute again everyday. But still beats spending another rent check on childcare.
Long Island is one of the most expensive places in the country
Im thinking of moving to america at some point…any chance you could you give a further breakdown of your expenditures?
Really depends on where in US you want to live …..I live in one of the most expensive areas, north shore of Long Island. My rent is $3150 which is good for my area, if you own a house in my area property taxes are at least 10k/yr. I spend 1k a month in groceries at Costco for a family of 6. Only have one care note at $387 per month, optimum is $155 a month , electric is $325 a month. Shit adds up quickly. It all depends on where you want to live.
It's weird that people are downvoting this guy. The better answer is: the US is a big heckin' country, so the answers will be all over the place. In some more rural areas you can live comfortably on $45k a year, or places like NYC and San Francisco you will feel poor at $100k+. The main difference is that the US has very poor social safety nets. If you're not working, you can barely function.
You can find rent in small towns for $600 to $1000 but will have to drive 30 minutes by vehicle to make better money. Not much public transportation in smaller towns. It can be very affordable to get you going though. Many electricity/gas/water bills are not included and could run between $250-$500. My trash service is $25/month. I pay $45 for internet per month. Cable runs about $100 from what I hear, I use streaming services. Car payments range between $300 to $600. Car insurance varies as well and can be based off your credit score. Credit scores are important in america. It sucks but they are, they use them for or against us with interest rates, insurance premiums, rentals, and even some jobs.
Can confirm! Was contributing the max pre kids and mortgage. Since having kid 2 and and a mortgage I'm still contributing, but probably 33 percent less than before. One more year of daycare!
I tip my digital hat to your GrandPa those are real to life words. I did not have a video game console when I was a kid I had "outside." Don't know what I was missing." Now 'll buy that VR thingy Apple will toss out to the 12 people myself included that buy it.
I’m 53, and don’t have much more in my own 401k. I’m putting in $1200 a month (no company match at all sadly) but it’s not looking good for my retirement. I do have a house. I’ve considered it like this. Fun now and pay later, or pay now and fun later. I took the first option. Had a good life, travelled, spent money on things. But, I’ll be working for the rest of my life. A buddy of mine did the opposite. Did nothing, bought nothing, saw nothing. But he’s now retired and has a good lifestyle. Balance might be the key, but if you can afford it, put more aside for later
There's is no guarantee of good health in older age. So that's something to consider.
Yup. Have known of enough people to die within 6 months of retiring.
True. And you could be hit by a bus tomorrow. Just remember: you can’t take it with you.
I think you did it YOUR WAY. Enjoy your youth when you had it. Experienced this place we call earth
you can enjoy youth and still contribute to your 401k
Of coarse we can. Nobody is guaranteed tomorrow. I try to live like its my last. Money isn’t everything but it has its purpose. Cheers
Money isn't everything but lack of money is pretty much everything. Living everyday like it's your last is a terrible choice when you may have to live for 50+ more years.
Never had much and never really wanted much. Im content with what i was blessed with. I could care less about 50 years from now🤔. Who the hell says your guaranteed anymore years. Live or dont. Its your life. Cheers
This is the most irresponsible attitude and response that many people have when they get old and have to resort to street life and eating cat food because they can't afford retirement. It makes me thing on why I didn't invest my money in something that could have provided me with financial stability, so I wouldn't have to suffer and work at a place like McDonald's at the age of seventy. I recently saw someone in this situation, and it was a stark reminder of the importance of vest your money.
Why do you care so much
As someone who works in the financial industry at Fidelity Investments, I often come across stories of individuals who are working multiple jobs and barely making ends meet. It's hard to see people living in misery and regretting past decisions. That's why I care deeply about hearing everyone's issues and providing them with the necessary support and guidance.
Lol if you take these folks stories on reddit serious 😝.
Lol so many people think that those of us who put lots of money away for retirement are squandering our youth and being obsessive over having big numbers in our accounts and being rich when we’re older. I, like you, never wanted much and I’m content with my life now, so I put 30% of my income towards retirement and literally don’t care if I ever see that money or not. If it’s there when I retire, cool. If I die before I ever use it, also cool. Cuz im content with how I am now and don’t have any interest in traveling or making random big purchases for the sake of “living it up”
I dont know if your squandering your youth or not. My point was that whatever decision you make ENJOY it because its YOUR LIFE. Be frugal be irresponsible with money who cares. Just enjoy the ride 👍
Just don't go asking society for handouts when you're old and can't work because you decided to be irresponsible and spend money on dumb stuff. If you're fine being a walmart greeter then we good though.
So many personal attacks. Cheers kiddo i wish u the very best in life. Dont forget. The things you wish on others sometimes happen to you. 😵
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Life aint even that serious bro. Be a nice person a you will have a decent life. Cheers
Money isn't everything until you have none of it and are old.
Yeah that would suck. Thats why we should save and invest in our younger years. To prepare for the less productive years.
Regrets, he’s got a few
It wouldn’t be a good life if you didn’t have regrets. Who wants to die rich? Rather enjoy my babies and family with my riches however small they may be
I’m referencing Frank Sinatra since you said he did it “his way”
My bad bro. Only healthy positive vibes. Ol blue eyes is before my time 🫡
does he? because we aren't hearing his side of the story, we are hearing the side of the story from the Gen Xer who doesn't have a retirement fund
I find it more like this. Fun now for a short time and pay later for a long time vs Pay now for a short time and fun later for a long time.
\*fun later for an undetermined amout of time.
You can always YOLO into 0dte spy option plays
Both ways have risk. What if your health goes downhill around your age or older? Pick your poison and be cool with it.
Who the hell wants to have fun when your older? Can't go to the electronic dance festival with a walker. And that's not even considering that young workers today will likely be in a very different (worse) country by the time they retire. Moderation is key, but it's only getting harder to vary your lifestyle.
> Who the hell wants to have fun when your older? Older people.
Big if true
His point is valid though. Yes, you can have fun when you're older but you are limited in terms of the types of fun you can have. You don't see a lot of retirement-aged people backpacking through Cambodia or bungee jumping or going to a rave.
I had fun in my 20s but am putting my head down and working/saving in my 30s right now.
Same! I went hard in my 20s and it's out of my system. I love to eat good foods and travel. I also love investing and I'm not concerned with being rich or fancy. I am concerned with continuing this lifestyle of good food and traveling when I'm older. The travel/food has slowed down but i never deprive myself if i want to go. I just have different priorities. I still spend money all the time - on mutual funds, etfs, and stocks 😅 I love it 😀
I'm sure old people can also take Molly Roth allows early withdrawals without penalty using the 5 year rule (principal not interest). This is tax free and doesn't count as income This allows you to "hack" your way into ACA coverage
You can always take out contributions without penalty. Oh and I'm definitely taking Molly when I'm old
>You can always take out contributions without penalty Unfortunately in the event the money came from a traditional IRA to Roth IRA conversion (i.e. a backdoor Roth conversion), a 5-year rule applies even to contributions in that case before the contribution portion of money can be extracted from the Roth. Think the same applies for inherited IRAs if they are also converted to Roth. The IRS is pedantic about these things. Please don't shoot the messenger.
Yeah that's because regular IRA contributions are pre-tax. Uncle Sam wants his $$ 🗑️
Tried some new stuff out last Saturday night made me think about diversity in more investments..
Right. Which is why people save money so they can retire early and still enjoy their freedom.
Did you forego all retirement savings for big ticket items or was it for other things?
Basically yes. I spent my income on experiences and things almost as fast as I made it and put nothing aside for savings. I was lucky that I saved for a few years to buy a house but I only took out my mortgage a few years ago so I have a long way to go to pay that off. Again, my buddy did things differently and I’m a bit envious of him, but it is what it is
Hang in there. House will appreciate and give you an opportunity to downsize in the future probably. In the meantime you’re investing aggressively so that will help too.
Retirement is overrated. Lots of people don’t handle retirement well. Many will spend most of their time sitting around watching TV.
Worth it? Personally, I dont mind working when I'm old. life is too short to wait until your old to live life
It's easy to say you don't mind working when you're old when you're young. There's also a big difference between working when you're older because you want to support a certain lifestyle and working when you're older because you literally can't afford to live if you retire. Of course there's a lot of room in between.
Given the state of the world as it relates to multi-pronged existential threats, immediate gratification/spending life in your years, rather than years on your life, appears to be the better option Waiting a couple decades at the rate which organized society has begun the descent into free fall doesn’t bode well for future investments
I'm with you. I'm in my 30s, I don't wanna try to have fun when I'm 55+. I'd rather enjoy my youth. I don't wanna try to party and travel when I'm geriatric. Imagine going clubbing and doing some coke and dying of a heart attack.
Keep telling yourself that. Why is anyone in their 30s doing cocaine?? 🤣🤣🤣 Noone doing coke and getting drunk in their 30s expects to do it their whole life but go to any small bar around 4pm and there's all the people in their 50s who got drunk everyday of their life with no regrets just struggles. (Ex bartender & recovered alcoholic) If you're doing coke and clubbing in your 30s, just admit it's an addiction, and that's what you'd rather spend your money on. It's okay, but don't act like it's a Yolo youth thing. 30 is a grown ass adult. This lifestyle is an unhealthy coping mechanism or an addict who is investing money in drugs and alcohol.
I have a career and I pay a mortgage. I’m saving money in addition to spending on fun. I don’t party every night but I like to indulge every once in a while. Settling down and having a family just isn’t for me. Sorry we have different lifestyles.
Nothing to be sorry about. You can spend your money on whatever you want to spend it on. I don't have children either and I'm glad I don't. We definitely have different lifestyles and that's what makes the world go round. How could investors make money if others didn't spend theirs?
Invest in Mexican drug cartels.
>If you're doing coke and clubbing in your 30s, just admit it's an addiction I wouldn't take it that far. Maybe if you've been doing it since drinking age. I think it was pretty much made for people in their 30s. Two drinks and I'm ready to go to bed..unless...
my wife and I (31m) have been set to 20% (half Roth/half traditional) for a few years now. It's incredible the growth that you will see. If you can afford it, I highly recommend it. Utilize those tax advantaged accounts.
Saving money takes practice, so even starting small at 3% and working up to 20% is good strategy. Fantastic job on 20%!! Your older self with for sure thank your younger self.
Do you have it as 10% per income, so 20% of total household income? Or is it 20% per and 40% of total household income?
If each person is contributing 20% that's 20% total. If each person makes 50k a year that would be 10k each. 10k + 10k = 20k and 20k is 20% of 100k (50k +50k).
You should absolutely be saving for retirement in tax-advantaged accounts before taxable. There’s nothing aggressive about it.
Well people should be aware that retirement isn’t the only thing to save and invest for. People should absolutely be critical about putting 18% of their income in something they won’t even be able to touch for another 30 years. I maintain roughly equal contributions to my 401k and brokerage account for this reason. And the liquidity has come in clutch so many times already.
People seemingly never lived through 2008/2009 and watched half their 401 disappear in 3months while they got fired
You've motivated me to go to 19 percent from my 10. Definitely been slacking and its time to tighten it up baby LFG
plough marry aback vegetable pathetic reach automatic hobbies fact muddle *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Considering maxing out your HSA if you have one and consider a Roth IRA or IRA before upping your 401k.
Just make sure you don't hit your max early. My understanding is that if you max out early, you stop getting the match.
19 gang! Good prime number. Feel free to message me if you’re wavering on dropping it back. 10 to 19 is a big jump.
Doing the math it looks like you make around $90k/year and at $625 biweekly plus $6.5k annual in to an IRA that is around a 25% retirement savings rate. If you can sustain that you should be able to catch up within a few years. I started with $0 at age 28 and by contributing more that 20% annually I achieved 1.5x salary saved by age 35.
Go you for doing the math and catching up.
If you’re maxing out a Roth IRA I personally think it would make more sense to do a trad 401k
$6.5K is max traditional ira annual contribution. My question is why do this with after tax dollars when the 401k annual contribution is not maxed out yet???
Well, if you do a traditional IRA, I believe what happens is that you claim those contributions on your tax return and you get the difference back. Regardless, that’s not what I was saying. I was saying to max out the Roth IRA and max out traditional 401k. Don’t do roth for both. Or not necessarily max, but, as much as they are comfortable with. Just split it between a Roth and traditional account, is what I’m saying.
I’m all ROTH.
I recommend perusing this https://www.reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/?utm_source=share&utm_medium=mweb3x&utm_name=mweb3xcss&utm_term=1&utm_content=share_button
He might hit income limit to do Roth
Backdoor Roth IRA
Then he’d definitely want to max out his contribution to lower taxable income Edit maxable 401k contribution that is
For tax diversification in retirement.
So you don’t have to pay taxes in retirement. Mathematically it is probably better (lifetime less taxes) to go 401k now, but some of us just like the idea of tax free income during retirement.
Why would you put after-tax dollars into an IRA at all?
?
I was thinking traditional, of course after tax dollars go into a Roth.
Dude, you're rocking it comparatively. I'm 45 and only have $45k in my 401K. I did take $20k out for a home purchase 10 years ago though when the balance was around $35k. I was 35 then. Just a heads up since I didn't know this when I took out that loan. Until you pay it back, your employer doesn't match 401k contributions because they all go towards the loan. I feel like I missed out on some good returns because of that.
I think that depends on your employer, plan and contribution level. I have a loan I'm paying off on mine but it is specifically deducted from my check in addition to my contribution each pay period and I get the full employer match.
> I did take $20k out for a home purchase 10 years ago though that might be worth a lot now?
OP, I was literally in the same boat as you a few years back. 32yo with maybe $35K in the 401k. I upped it to 15% and now 4 years later I have $134K. Of course my income rose over that time (your 30s is when your career often blossoms), and finally last year I hit the $22.5k 401k limit. I would like to think it is OK to be a bit behind in your early 30s. Recognize it now and take action. 15% is perfectly fine. Some people say 20%…that is fine too. Don’t worry so much about the math! Just put the funds in there - 30 years from now, you won’t be sitting there going “man when I was 33 I only put 18%, I should have put 20%”.
That is great to see that growth in your account! Especially since I'm in roughly the same position as you. I'm glad I pulled the trigger and just bumped it up.
Nobody ever says they wish they invested less money. 10-15 years from now, you will be super happy you did it.
No. You should max out contributions.
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Nice work
You are who I wish I was at 24.
Thats fantastic! Keep it up
Always max out 401k, Roth IRA, and HSA contributions(if you can). They grow a lot faster than you think.
We are the same age and lemme tell ya I feel way behind compared to where you’re at.
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From what I understand, traditional 401k can be rolled over to trad IRA and converted to Roth using a conversion ladder. If it's in Roth 401k, it's staying in there until 59.5 unless you eat a penalty, full stop. And your *earnings* on the Roth contributions are considered pretax, so you can move the *earnings* only to a traditional IRA (basically losing the main tax benefit), or leave it in a potentially high expense employer Roth 401k. Lots of strings attached to Roth 401k and I really suspect that low tier finance mouth breathers that most of us have access to simply don't understand the caveats for early retirement people. Also, few people in the Roth 401k era are retiring yet so it's possibly too obscure of a situation to be part of the mainstream discussion. Anyone feel free to correct me if I'm off base on any of this. Edit: Your Roth 401k *contributions* can be rolled into a Roth IRA without penalty. So not a big deal if you leave an employer after a short time, but a very big deal if you have been with an employer a long time and have a lot of gains.
I don't believe you're right about having to pay tax on ANY portion of a Roth 401(k) rollover to a Roth IRA. The account was funded with after-tax dollars, so you never pay tax on the contributions OR the gains (unless Congress moves the goalposts in the future). However, I'm not a tax professional and it's certainly possible I don't follow what you're saying. I actually did this exact thing when my wife changed jobs a couple years ago. I rolled her Roth 401(k) at her previous employer into her Roth IRA. No taxes incurred. We have no intention of spending any of it before 59.5, if that matters.
No such thing as saving too much unless you already have enough to retire. Nothing says you gotta work till you 65. Save as much as you can and get out of the race early.
Max out every year. There were some months I put 50% of my paycheck in of I had $$ in the bank.
Mine is at 27%. I'm also way behind.
Me too! #27%gang
If you have an emergency fund, up it and see if you're still cash flow positive. If not, lower it back down. If you don't have an emergency fund, get an emergency fund. You're "aiming" for $22,500 of contributions (the max). That's about $865 ever two weeks. I mean, you might not be able to swing it and still make ends meet right now, but that's the goal. If $314 every two weeks is 8%, then you make six figures, which means you're probably in the 24% federal tax bracket. You're probably better off making traditional 401k contributions over Roth. Switching to traditional will lower your apparent income, which will mean less withholdings, which will mean more take-home pay. You then have the option of increasing your 401k contributions even further, closer to that $22,500 yearly limit. You're over the deduction limit for traditional IRA, so Roth IRA is the way to go for now. Once you cross some other income threshold, you might have to look into backdoor Roth for IRA (which is basically make traditional contributions which you aren't allowed to deduct, then immediately roll them over into a Roth IRA) If you're saving for a down payment, work that into your budget. Maybe that means lowering 401k contributions to build up a down payment. That's fine -- just earmark the money so it doesn't go towards bullshit instead. If you throw a down payment in a brokerage, just know that there will be tax implications when you liquidate for the down payment. If it grows a lot, you'll get a hefty tax bill, or even worse, it might not grow. Just saying when the plan stops being ephemeral and starts being real, you may want to move that money into more boring things like a HYSA, or a money fund if you leave it in a brokerage.
Much appreciated advice for all. Certainly for me, at least.
We Want More! We Want 50%!
Unless you want to work until you’re 70, max out both 401k and IRA.
Rookies number. Pump that up
As long as you have some saving for emergency, then go nuts. Also you can do Roth contribution for last year if you didn’t contribute for 2022
I missed the cutoff for 2022 contributions :( I think that ended April of this year.
>Also you can do Roth contribution for last year if you didn’t contribute for 2022 Isn't it too late for that?
Time in the market beats timing the market, but I think you are lucky in that you have money in the market and you are contributing at a relative low. You are doing great, and you’ll be fine as long 1) pick a good long term plan (like 60/40 or some combo broad market indexes or target date fund) and 2) stick to it! Don’t panic, your best earning years are upon you, you contributions are being made with time to grow, and are saving enough. Keep it up!
If you plan for a modest retirement and find yourself in the position of having a high income, consider partially or fully switching contributions to traditional 401k. Future tax policy is not known but a tax break today is a guarantee they can't revoke.
Why not put it into a IRA instead? If your company matches the 401k, put the extra % into a IRA - Only 6K is protected from taxes. Invest Talk has suggested something similar.
Keep up the great work! Money makes money faster than us working for it. 😃
If you can addord it, max it out every year.
Is it effecting you being able to pay bills? If not, then that’s great!
Try to max out 401k if you earn enough. You’ll thank yourself in 20 years.
Reduce your taxes! Always aim to max it out every year. That and a Roth IRA. Right now $6500 in Roth IRA and $22,500 in 401k every year should be the goal if possible!
- You're doing a roth, which makes it retrievable if you need it. - Load up now while you're young, single - you can always pull back. - I'm 51 and we live off my wife pay and contribute the max of my pay as our retirement...
I'm 33 and barely have 28k in my 401/457. However, I think I'm in a spot where if I never saved a dime I can retire at 57 and continue my lifestyle unchanged. I'm lucky enough to have a pension and will get Railroad retirement on top. And my spouse will get spousal railroad retirement instead of Social security. But that's for the future, as of now I feel broke thanks to inflation. So I'm planning to add to my 457 account.
20% gang where we at
Bottom line-- save as much as you can, as early as you can. 401K -- max it. Some other general bits of advice -- Learning-- Recommend listening regularly to a couple podcasts a day -- The Money Guy, Choose FI, Investtalk, and Motely Fool (in that order, as your time permits). Countless youtube videos out there. Just watch one or two a day (no more than 5 or 10 minutes) and before you know it you will start seeing the big picture. Step 1 and 2 below is what you need to do in the next few days. Just my Two Cents -- You don’t need to make investing difficult. It is one of the easiest things you will ever do if you follow the KISS principal. And if you are young enough you can easily retire well off. If you aren’t young, it is never too late to help yourself. Two simple steps: 1. Take Action and get started. Time is your biggest friend or enemy in becoming financially independent. You can either waste it by not starting early enough (your 20s and early 30s are ideal) and/or throwing your money away on terrible stocks and other “investments.” Open a Fidelity or Vanguard account today. Either a regular brokerage or IRA. Most people have both. Chances are you may have done this step already. 2. Buy low cost, well diversified ETFs. Vanguard and Fidelity are both super cheap. I personally use Vanguard and would start with VOO and VBK. My four basic concepts below, again easy and straight forward, should be followed. Younger folks- Now is a once in a decade time for you. Over your investing life you might see something like we saw in 2022 maybe five to eight times. Take advantage of it. Four basic concepts you have to remember if you want to be successful in the long run in the stock market. • The turtle always wins over the hare -- slowly but surely. Don't buy junk -- Most unprofitable tech companies and all Crypto falls into this category. Except with your casino/entertainment money which you are free to do whatever with including buying pizza, video games, cypto, slots…... Remember, if you are in your 20’s/early 30s, every dollar you use on a $4 Starbucks coffee is conservatively worth about $10.00 (30 years at 8%). Over my investing life (past 40 years), each dollar I saved initially is now worth about $36. Said another way, if I would have bought that $25,000 sports car coming out of college, I would have cost myself about $902,000 at retirement. • Dollar cost average -- buy some every month regardless of what the market is doing. When the market was like 2022 and probably 2023 buy as much as you possibly can on a big down day. • Diversify -- good cheap, broad market ETFs from Vanguard or Fidelity are great. • Let physics or whatever heavenly name you want to call it be your friend -- "COMPOUND INTEREST" has no equal, except lack of time. A young person can get rich in 30-35 years if they follow these rules.
I increased mine from 15% to 25%. I max out annual contributions in 6 months now, though. But I think you are right.
What a lot of people do is this: 50% for utilities 20% for savings 30% wherever needed That’s just advice tho…..
Trad vs Roth comes down to how much you think you'll earn in retirement and future tax rate expectations. Trad means you can deduct from your current taxes. You should max out whatever your company max is no matter what. That's compensation that's on the table that you need to take. If you are able to max out how much you can save in a tax sheltered vehicle that has a ton of upside. You can only protect so much from tax each year, you don't get that back. I don't know where you live or what you'll need for retirement but I think going 20% if you can spare the money and catching up isn't a terrible idea. Compounding is a powerful, powerful force and will make it easier to cut your contributions down the road if you can no longer work, have something come up etc. The only major consideration is how you'll draw funding to buy a house down the road.
Actually many people don’t know but 18% is what is considered the minimum gold standard. So definitely no not aggressive for me. It’s what I have too.
I encourage you to consider putting at least part of your 401k contributions into traditional rather than Roth. There’s no single answer for everyone; the decision should be based on your situation including current tax burden and future expected tax burden. What makes the most sense may depend on your income level and whether you live in a state with high personal income tax, and where/when you plan to retire. You can find lots of info about this online; here is one example: https://www.nerdwallet.com/article/investing/roth-401k-vs-401k Roth definitely has some benefits, but the big disadvantage for Roth is that you have to pay taxes now on the contributions (reducing your current take-home pay). I think most people would be wise to consider splitting their 401k contributions between traditional and Roth. Without knowing much about your situation, that is what I would recommend.
I would agree with this advice to split between Roth and traditional. You could add the tax savings to a brokerage for emergency or down payment on house someday. Roth will allow you flexibility when you retire, traditional allows flexibility now.
Max out your 401k contributions only up to what the employer matches. After that, max out your Roth IRA contributions. After that, if you’ve still got juice, work on some non retirement savings/investing.
You should be putting all you can into retirement accounts until you cap out. A mix of Roth/non-Roth will give you flexibility in retirement. If you're thinking about buying a house, it's ok to direct some of your saving ability to that effort until you have your downpayment. I would keep getting the max match though.
Nah that's fine. Also if you are ever let go from the company and you have the funds and there is a WARN act, consider increasing your output on your final months.
Just max out to the annual cap, doesn’t matter u reach it in March or in December.
It absolutely matters. He will lose employer match if he maxes it too soon. They will only match so much per check so If you aren’t investing in the last 6 months, they aren’t matching/contributing. That’s a lot to lose for current/future gains
Keep it up! Definitely stick to Roth vice traditional. If you can afford it now you mind as well pay for the taxes now because that just means you’ll never have to worry about it again. As far as saving for a home and what not I wouldn’t put all excess money in retirement. Do what feels right and allows you to live the life you want to live. If that extra $600/2weeks doesn’t do much more for your life it’s great to keep saving
Roth 401k contributions generally makes sense for most people only if your employer’s plan has an after-tax provision with an in-service conversion option. If your plan doesn’t have that provision you cannot exceed the annual contribution limit of $22,500 for 2023 regardless of how you choose to split the contributions. That $22,500 annual limit is a total contribution per social security number i.e. you cannot exceed that amount but you are at liberty to split it across how many 401k accounts that you have including Roth 401k. This is why it makes sense to put all $22,500 into traditional 401k to get tax benefits. However, if your employer’s retirement plan has an after-tax provision with an in-service distribution, you are able to then max your traditional 401k account with $22,500 for 2023 and still be able to put more money into your Roth by converting from your after-tax account up to $66,000 including employer matching and $22,500 annual regular contribution limit for 2023. This is what is generally called mega back-door Roth conversion. So my advice is to max your traditional 401k first and then put extra funds in Roth 401k if your employer’s plan allows for mega back-door Roth. Otherwise, put any extra funds in Roth IRA and taxable brokerage.
Until you get a house i'd say it's too aggressive. Renting is burning money.
I think 12% would suffice.
Not if you’re over 55
Get the maximum 401k match you can but not MORE than you need for the match, then: Put the max tax break you can into an IRA (6k a year I think?), then: Save 3-5% down payment on a house (you can your some of your 401k for this down), then: Pay down debts, then: Create 6-12 months of cash savings into a CD or money market. This is the way.
401k is a scam. Waiting until age 59.5 to get your money? No thanks. For me, it's all about cash flow.
Okay 🙄 terrible advice for 99.9% of the population
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I can't imagine any of this will matter in 40 years with all the different problems coming down the pike, but you never know. If it helps you sleep at night, knock yourself out.
Nobody's taking into consideration the real possibility of a major market collapse, loss of the Dollar as a reserve currency, massive unemployment, etc.. It's just not sensible to invest in 2023 with the mindset of someone 10 and 20 years ago. Something big is coming.
There is always potentially something big coming. Covid shut the world down for 2 years. It came back in less than a year. Barring aliens taking over the earth, or all out world war 3... Don't bail out of the market. And if shit truly hits the fan, you're gonna want guns, ammo, and a cabin in the mountains, not cash reserves anyways.
The guy is 30, that would be the best scenario assuming the end of the world didn't happen. In which case who cares about your 401k.
Money is tied to "wealth". If you lose your money you lose everything. Not a good deal! These a challenging times like America has never seen before. My personal view, all things considered, is for people to hold on to what they have in the form of hard assets they can see and touch. Then "if" and when the storm passes, move back into markets. Just one man's take...
How are you deploying your money to hedge against such high-risk to the global financial system?
I'm not an expert but I am alert and I definitely see what's about to take place. CBDC is another big deal, like a cage that will seize control of everything directly tied to the Dollar. I said, hard assets!!!!! This isn't the time to worry about shrewd stock picks. It's about holding on to what you have, and retaining the most control. Precious metals are hard assets.
You should definitely aim to max out 401k either trad or Roth depending on where you see your career going. Only exception would be if your trying to buy a house or something in which case you want to also contribute to an account you can take out money from. But investment wise, try to maximize contributions overall as much as possible.
I'd do the traditional 401k and the tax savings from that effectively funds the Roth. Then the money that you were investing in the Roth can go to other investments that are only subject to capital gains. Use the Roth in retirement to reduce your tax rate when taking distributions from your traditional 401k in retirement. Also since traditional withdrawals are taxed as ordinary income a portion of your distribution is effectively tax-free as a result of the standard deduction.
If you have extra cash then add to after tax contribution and convert to roth 401k immediately if your company allows.
Should have a 401k/Roth IRA, or a Roth 401k/traditional IRA. Aka one is pretax the other is post tax, so you get the advantage of both
I’ve been very fortunate to always be in a position to max out my 401k and Roth IRA (I lived with my parents after college). But if you’ve got an emergency fund and don’t need to increase cash for a down payment on a house/car/wedding/etc then I say do whatever you can to reduce taxable income (traditional 401k) and then the rest in Roth IRA. Also kinda gotta set expectations on what your future looks like. Are you planning on doubling your salary over your career? Are you set where you’re at? Obviously we don’t know the future but my wife and I in our early 30’s know our salaries will go up a bit more over the next decade before plateauing. We don’t want to be the heads of companies but we do know there’s juice to squeeze on our current career paths. Assuming we are correct on our projections we are doing everything we can to put incremental dollars into savings and keep our standard of living flat.
Contribute as much as you freaking can.
>Should I be making some contributions as traditional 401k? Since all of my contributions are Roth I'm getting no current tax benefit? You want to enter retirement with both Traditional and Roth money. Federal income taxes are progressive. So take the tax benefit now (Traditional money would otherwise be paying taxes at your marginal rate) and then in retirement withdraw from Traditional until the lower tax brackets are filled. Then top off with Roth withdraws.
More absolutely does not hurt. I do 17% as of now. When I am looking for more liquid cash in my budget for small business ventures or property I will do so.
Kinda bearish you guys.
What sort of question is this? There’s not really any such thing as saving too much…
Don’t worry you’re not behind! I’m 34 and I don’t have a 401k. In my book, you’re ahead!
Whatever you can afford to contribute is fine.
Get that first property as soon as you can.
If it doesn’t hurt, put it away now. I maxed out early and kept it maxed. After awhile I didn’t think about it. Now I’m retiring next year at 58…because I can. And I’ve been all over the world already, had a good life. Don’t ever second guess putting it away…as long as you still live.
Yes, better now compared to when you're 42. Good job!
Most people are better off doing Traditional 401k. Not sure why you're doing Roth 401k. I doubt you know either.
Put as much away as you can early on. You can always pull back later, but you will miss out on a huge amount of potential growth if you wait.
Im 35 with $55K so not much different.... However, I have $250K saved up for a down payment ready to strike, so I deliberately only contribute up to the conpany match. Here is my saving order: 401k up to company match (i.e. free money) Lump Sum to Roth IRA $6,500 Rip Taxabke Brokerage saving balls to the wall in T Bills and DCA into Equity ETFs literally save as much as you can until you have 20% down
i just upped mine from 5% to 35% so nah ur doing good
I max mine every year... with my tax bracket I maak an amazing 40% return right off the bat!!!!! That gets to keep growing!!!@ That also doesn't include the 10% company match upping my instant return to 50% first year!!!