Retirement Investments
- Thread starter Nick1994
- Start date
There you go again Dave, just being logical...
Your advice is only for people who want to do well.
Nick1994
$100 site donor 2024
I opened a Roth IRA with Fidelity last month.
I'm thinking of reducing my 12% Roth 401k contribution to 6% and then putting 6% of my paychecks into the Roth IRA? My company's match is the same either way.
I'm thinking of reducing my 12% Roth 401k contribution to 6% and then putting 6% of my paychecks into the Roth IRA? My company's match is the same either way.
Its never a bad idea to break things up a bit, you dont want all your eggs in one basket.
Nick1994
$100 site donor 2024
Circling back on this. Last year I kept my Roth 401k at 12%, which is the equivalent of somewhere around 15% saved since it's after taxes. I was also able to max out my Roth IRA, invested 100% in $VOO.
This year I've changed it up since with the company I work for it doesn't matter how much I contribute to my 401k, their contribution is the same. I've lowered it to 3%. I've also setup recurring withdrawals and investments in my Roth IRA to have that set to max out at this year's $7,000 with $VOO.
I may up the 401k later but I'm happy with this now, I've got a plan to at least start the year off with.
Thanks again all for the words of wisdom. My parents knew nothing of investing whatsoever so I've had to fend for myself
. Which honestly is for the better.
This year I've changed it up since with the company I work for it doesn't matter how much I contribute to my 401k, their contribution is the same. I've lowered it to 3%. I've also setup recurring withdrawals and investments in my Roth IRA to have that set to max out at this year's $7,000 with $VOO.
I may up the 401k later but I'm happy with this now, I've got a plan to at least start the year off with.
Thanks again all for the words of wisdom. My parents knew nothing of investing whatsoever so I've had to fend for myself
. Which honestly is for the better.
At age 26, you have an investment horizon of around 40 years before retirement. You need some investments with growth potential, and diversification of risk within sectors. I think a part of your money should go into Exchange Traded Funds, or "ETF" s A fund that would be suitable for you, in my opinion, for growth, is Invesco QQQ Trust Series 1.
Another one, which will allow you to grow your investment with the economy as a whole, is Vanguard S&P 500 ETF "VOO" This fund invests in the Standard and Poors 500, mirroring that stock index. Your investments will grow with the overall market, and you will not have the risk of investing in one or two stocks, or one or two industries.
As for Roth vs non-Roth, nobody has any idea of what the rates of taxation will be when you retire. Nor do I know what bracket you are in today. If you are in a very low bracket today, it may be worth going Roth. But if you are in a high bracket, the tax deduction today is pretty valuable.
Another one, which will allow you to grow your investment with the economy as a whole, is Vanguard S&P 500 ETF "VOO" This fund invests in the Standard and Poors 500, mirroring that stock index. Your investments will grow with the overall market, and you will not have the risk of investing in one or two stocks, or one or two industries.
As for Roth vs non-Roth, nobody has any idea of what the rates of taxation will be when you retire. Nor do I know what bracket you are in today. If you are in a very low bracket today, it may be worth going Roth. But if you are in a high bracket, the tax deduction today is pretty valuable.
I went back to reading this, not realizing it has been 2 and 1/2 years.
You are doing great. If you continue investing the way you are, you will retire a multimillionaire.
As to the Roth vs. Ordinary 401k/IRA debate. Do you think your taxes will be higher when retired? I've been retired 7+ years now and my income taxes are higher now than any during any time I was working. Required Minimum Distributions will not make it better. I've been rolling into a Roth as much as I comfortably can.
And, last but not least, a big "I told you so" to the bond and target fund promoters out there. Buying bonds at record low rates has not worked out well for banks or retirement accounts.
You are doing great. If you continue investing the way you are, you will retire a multimillionaire.
As to the Roth vs. Ordinary 401k/IRA debate. Do you think your taxes will be higher when retired? I've been retired 7+ years now and my income taxes are higher now than any during any time I was working. Required Minimum Distributions will not make it better. I've been rolling into a Roth as much as I comfortably can.
And, last but not least, a big "I told you so" to the bond and target fund promoters out there. Buying bonds at record low rates has not worked out well for banks or retirement accounts.
Nick1994
$100 site donor 2024
I have no idea what my income will be like when I’m retired, too long out. Especially since we don’t know what taxes will be like in 30-35+ years. It’s probably close to a wash though, and withdrawing money tax free without having to worry about making estimated income tax payments or file for so much when I’m retired sounds worth it alone for me. But times change, maybe when I’m older and hopefully my income goes up a lot I can then switch to a traditional 401k to defer my tax liability to hopefully a lower rate. But
Your 401K probably has several funds you can invest in. Look for index funds funds. It may have some retirement age funds. Like you invest in a fund that's grated for someone retiring in 2050. It will move the funds from stocks to bonds as you near retirement. Good theory but typically high fees.
As far as retirement goes try and marry someone with a government job who has a great defined pension.
As far as retirement goes try and marry someone with a government job who has a great defined pension.
I chose not to do a Roth. Mostly because I expected to retire in a far-far lower tax bracket than I am currently in. Since I am retiring in 2 months, it seems I made the correct choice.
Looking back at my investments, the "self directed" ones did best. Especially when I invested in what I knew. The "managed" accounts take a 1.5% bite every year. That kills compounding, especially when many years had 5% growth and some years were losses. So the 5% years were 3.5% years for me, and the loss years were 41.5% losses instead of 40%. Many of my managed accounts never recovered.
Look at historical GE stock price for an example of what I mean, and what my GE stock is now. The stock converted 8 shares to 1 share (reverse split) So don't be confused. It's worth 1/3rd of what it was in 2000. Adjusted for inflation, it's worth 1/5th. My simple point, it never recovered, and the "index funds" that had GE stock didn't either.
I am [still] blessed and believe you me, these are all first world problems, thank God retirement verses living in poverty in the last act or simply working yourself to death is not the standard for most of us. Please take no offense, just my $0.02 based on experience, your mileage WILL vary, in no particular order:
- Expect the unexpected
- In less than 2 years I went from great and on track to SHTF to now MAYBE being able to go part-time at ~60, then probably reverse mortgage to keep me out of the poor house for the 9th inning
- Deliberate Risk Assessment and Mitigation are high priority and can help with #1 and #3
- Stuff happens, just when you think you're good or at least on track "BAM! Wildcard b_itch" [ < Chalie from IASIP ]
- Resiliency was pushed pretty hard by the Army, they were correct
- I felt like my retirement investment pace/plan was good, but from ~'19 to'21 it just evaporated. I would have been much better off paying down debt and saving cash
- Since then I have done that; do the minimum to get my employer 5% match, the rest goes to paying down debt and highly liquid reserves
- my goal is: 12-18 months: cash, checking, savings, MMA and CDs
- 3 month CDs are a good place to park $, mostly protected against loss, theft, inflation and rash spending
- The meager retirement savings I have beyond my pensions, 401k and TSP is in a fixed rate RothIRA and SCHD Schwab High Dividend. If I hit that 12-18 month cash goal, the ballance will go to SCHD and paying down mortgage
- stash some cash and equivalents, hide it from EVERYONE. Seriously, see #1 and #3, s_hit happens. Not long ago I REALLY could have used a couple K cash versus having it locked up in retirement and home equity
- Every dog has his day
Last edited:
Sounds like a good setup - I'd go 401K up to the company match, then Roth IRA, then back to the 401k which is what you are doing already.Circling back on this. Last year I kept my Roth 401k at 12%, which is the equivalent of somewhere around 15% saved since it's after taxes. I was also able to max out my Roth IRA, invested 100% in $VOO.
This year I've changed it up since with the company I work for it doesn't matter how much I contribute to my 401k, their contribution is the same. I've lowered it to 3%. I've also setup recurring withdrawals and investments in my Roth IRA to have that set to max out at this year's $7,000 with $VOO.
I may up the 401k later but I'm happy with this now, I've got a plan to at least start the year off with.
Thanks again all for the words of wisdom. My parents knew nothing of investing whatsoever so I've had to fend for myself
I skimmed through the last 6 pages and did not see this touched on much (sorry if I just missed it): it's worth understanding some of the benefits of a Roth IRA beyond paying the taxes today and not needing to worry about it in retirement. No RMDs and no federal income tax for beneficiaries - worth doing some reading if you are not familiar with those aspects. Also the ability to withdraw contributions from a Roth IRA (although ideally you never have to do that - I did see this one mentioned I think).
Good luck!
Secondary to @99Saturn : I don't know if this applies to civilian Roth, but for federal/military Roth: if SHTF you can borrow from your Roth balance up to $5k for whatever and up to $10k for the purchase of a home; both options without penalty or points and flexible repayment terms. (Oct'23 the interest rate was 4%). Not a good idea to borrow from retirement I know, but significantly cheaper access to cash vs other means and relatively fast/easy... saved my bacon (Go back to earlier post, I should have kept more liquid in short term reserve).
Very little merit to traditional except maybe match if just there then take it to make match then Roth. Do Roth over traditional always.
Your age as much as possible if no consumer/auto debt as this is what grows however simply steady across life most important. I’d recommend 12-15% salary and then budget money after .
If debt get rid of while maintaining match.
Your age as much as possible if no consumer/auto debt as this is what grows however simply steady across life most important. I’d recommend 12-15% salary and then budget money after .
If debt get rid of while maintaining match.
Last edited:
Nick1994, start early and contribute as much as you can. You’re doing a great job. Your income will go up during the course of your working life. My best advice as someone who is 10+ years down the road from you is to try and avoid lifestyle creep. Life will also get more expensive if you get married, have kids, etc. So best thing to do is keep a good balance. Lastly, there may be a period in your life where you are tempted to withdraw from your retirement. You want a down payment for a house, or whatever. Don’t do it. Don’t touch that money.
- Joined
- Jun 8, 2022
- Messages
- 5,500
I also have 100% of my company 401K in VOO. Its the best option they have. The only one really, the rest are the managed age till retirement garbage where you never know what you own. Unfortunately they don't match at all.
As for Roth vs regular IRA / 401K - I am not convinced the government wont try to mean test / tax that at some point. However setting that aside - you also need to take into account state income taxes. If your in high income tax state, and the odds are you might retire to a low or no income tax state, then a Roth makes much less sense - which is something many advisors fail to point out - the state part.
As for Roth vs regular IRA / 401K - I am not convinced the government wont try to mean test / tax that at some point. However setting that aside - you also need to take into account state income taxes. If your in high income tax state, and the odds are you might retire to a low or no income tax state, then a Roth makes much less sense - which is something many advisors fail to point out - the state part.
8. Make sure your wife takes planning for retirement seriously and contribute to her employer’s 401K and she has an IRA.
IMO, if you are 26 (ish) and can do so... just max it all out. Someday you'll be married, loaded down with kids, mortgage, debt, wondering how to increase your savings rate. Even if you don't go that path, socking away a pile today that then gets 30+ years of growth is going to have far more than waiting another 10 and then only having 20+ years of growth potential. You never know what curveball life will throw at you.
Having a tax problem in retirement means you have money in retirement.
Having a tax problem in retirement means you have money in retirement.
Yes, it’s better to pay big taxes in retirement than to have little money and struggling financially.
Lots of people retire only to get back into workforce a few years later.
