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Old 01-23-2013, 09:27 AM
 
Location: North Metro Atlanta
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Allays do the 401K (s) up to the Match... It "Free" money... Before doing the Roth(s).
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Old 01-23-2013, 09:38 AM
 
20,802 posts, read 30,770,819 times
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Quote:
Originally Posted by darrell2525 View Post
Yes we have child now and taxes we pay this year is about $5K, and it hurts. This is with standard match. Adding the 25% from the Roth IRA contributions pushes it up to about $7K in taxes.

Tuff decisions. I am thinking to just do one ROTH IRA for now for me. And just continue with the company 401K match for each account.
Add a lot of zeros after that 5 for us this year. Last year we paid about $8000 and change, this year, it's well over 50K......yes there was a pay raise but not 6 TIMES what we were earning before.....
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Old 01-23-2013, 09:50 AM
 
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Quote:
Originally Posted by 1Prairiegirl View Post
I have been wondering that same thing! The difference is we are already in a 15% tax bracket, so would it even make a difference for someone like us?
For your case, I would say start your ROTH IRA because you will pay less (only $825 per year) in taxes now. 5500 x .25 - 825.

That money in ROTH IRA will grow tax free and compound interest will grow as well. Plus Vanguard Target funds is what I will use. Its simple and easy and cheap. Where as 401k don't have lots of index funds.
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Old 01-23-2013, 09:54 AM
 
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Originally Posted by golfgal View Post
Add a lot of zeros after that 5 for us this year. Last year we paid about $8000 and change, this year, it's well over 50K......yes there was a pay raise but not 6 TIMES what we were earning before.....
My goodness, thats carzy. I calculated next year, i will pay about $6K in taxes. This is alot along with having to save every year for general reasons. I want be buying another new car for quite some time when done with car notes.
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Old 01-23-2013, 09:55 AM
 
20,802 posts, read 30,770,819 times
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Quote:
Originally Posted by darrell2525 View Post
My goodness, thats carzy. I calculated next year, i will pay about $6K in taxes. This is alot along with having to save every year for general reasons. I want be buying another new car for quite some time when done with car notes.
You are in that sweet spot of making a reasonable wage so life isn't a struggle but still getting some tax benefits. Once your income goes up however, you lose a lot of those tax befits and that is where you start seeing a lot of the jumps in taxed owed.
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Old 01-23-2013, 10:15 AM
 
Location: Cold Springs, NV
4,379 posts, read 2,280,197 times
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And don't forget you can always start taking the 401k money before 59.5 using the IRS rule 72t without the 10% penalty. See 72t on the Net | SEPP, 72t, and /72q Distributions for more information.
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Old 01-23-2013, 10:54 AM
 
981 posts, read 1,043,338 times
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Quote:
Originally Posted by darrell2525 View Post
I just redid my retirement expense (calculated at $62k) in today prices and guess what???? I forgot to include taxes I have to pay on the retirement redrawl.

So if I redrawl about $62K a year @ 25% (who knows what it could be, maybe even 18%, i chose 25% just incase), with no deductions (no kids, no house, etc.) I will have to pay about $15.5K a year in taxes (approximation), which means I have to redrawl $77.5K a year. Which means I would need to save more.

Is my logic thinking correct? If so, I need to save more looks like.
LOL, so is my logic correct on this. Of course the $15.5k is over estimated, but is the ideal correct for planning?
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Old 01-23-2013, 11:18 AM
 
Location: Upper East, NY
1,144 posts, read 1,270,103 times
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This assumes you have no other income except your 401k/IRA, which is highly unlikely. You'd better have taxable money sitting in a brokerage account somewhere and Social Security.

There are a lot of assumptions that are impossible to make accurately for the year 2043.

I'm a big fan of Roths and the benefit of compounding tax-free forever and that benefit is higher the younger you are. If you can afford the smaller paycheck, max the 401k now for the tax deduction, then when you leave your company, roll to an IRA and convert at an opportune time (when your tax rate/income are low) to a Roth.
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Old 01-23-2013, 11:38 AM
 
Location: Cold Springs, NV
4,379 posts, read 2,280,197 times
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Quote:
Originally Posted by darrell2525 View Post
LOL, so is my logic correct on this. Of course the $15.5k is over estimated, but is the ideal correct for planning?
62k a year would be $8454, and that doesn't even consider the standard deduction for a married couple of $12,000 which would reduce it even further.
http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
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Old 01-23-2013, 11:46 AM
 
Location: IL-just wait 15 minutes it will be different!
112 posts, read 136,753 times
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Quote:
Originally Posted by darrell2525 View Post
For your case, I would say start your ROTH IRA because you will pay less (only $825 per year) in taxes now. 5500 x .25 - 825.

That money in ROTH IRA will grow tax free and compound interest will grow as well. Plus Vanguard Target funds is what I will use. Its simple and easy and cheap. Where as 401k don't have lots of index funds.

Thank you for the advice! I will look into that!
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