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Old 02-03-2017, 11:27 AM
 
Location: Rosa’s Cantina
177 posts, read 194,152 times
Reputation: 412

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Quote:
Originally Posted by nep321 View Post
I have a total of 17 years on my earnings record, which isn't a whole lot.
From an old single gay guy, kudos to you for getting an early start to your work life and thinking so much about your future finances. The total you save will be the biggest factor. The more you can learn now and fine tune your finances the better off you will be. If I could give young Llep financial advice I would tell him to pile his money into low cost index funds. The Bogleheads forum has been a great benefit to me over the years. If your not there you should check them out. They are the sharpest knives in the financial drawer. You're off to a great start! Keep it up!
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Old 02-03-2017, 12:53 PM
 
Location: Jacksonville, FL
11,145 posts, read 14,126,475 times
Reputation: 7075
Quote:
Originally Posted by Llep View Post
From an old single gay guy, kudos to you for getting an early start to your work life and thinking so much about your future finances. The total you save will be the biggest factor. The more you can learn now and fine tune your finances the better off you will be. If I could give young Llep financial advice I would tell him to pile his money into low cost index funds. The Bogleheads forum has been a great benefit to me over the years. If your not there you should check them out. They are the sharpest knives in the financial drawer. You're off to a great start! Keep it up!
I am already 32 years old and only have $33K saved up in my 401k. I am expecting to receive $1,940 a month from Social Security. I am planning to live off of about $55-60K during retirement (today's dollars). I can't stand Roth anything. If I did the Roth all these years, that $33K would have been significantly lower...probably like $24K. So with the $33K, I have a much higher foundation for which growth and gains can occur.
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Old 02-03-2017, 01:15 PM
 
Location: Rosa’s Cantina
177 posts, read 194,152 times
Reputation: 412
Quote:
Originally Posted by nep321 View Post
I am already 32 years old and only have $33K saved up in my 401k. I am expecting to receive $1,940 a month from Social Security. I am planning to live off of about $55-60K during retirement (today's dollars). I can't stand Roth anything. If I did the Roth all these years, that $33K would have been significantly lower...probably like $24K. So with the $33K, I have a much higher foundation for which growth and gains can occur.
I may have had a negative net worth at 32! My student loans weren't completely paid off until 35ish. Laws, rules and strategies evolve and change over time. I have tried to keep myself educated and adjust where needed. 10 years ago (when I was 44) I thought I knew everything important to know financially. Now I know I didn't know $*it! Reading this forum, Bogle and ER, and reading the "great ones" here debate the issues (mathjak and PerryinVA, I'm looking at you!) have helped me considerably. I "clocked out" hopefully for the last time over a year and half ago. When I was working I always maxed 401k, then Roth and threw what was left into taxable. I am now contemplating Roth conversion strategies. And SS estimates and strategies will make you go crazy! The 62 or 70 or FRA or some other time debates for claiming make for interesting reading and what sounds perfectly logical one day sounds obviously flawed another day. So definitely keep it simple and enjoy life. The best times in my life started in my mid 30's!
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Old 02-03-2017, 01:29 PM
 
Location: Jacksonville, FL
11,145 posts, read 14,126,475 times
Reputation: 7075
Quote:
Originally Posted by Llep View Post
I may have had a negative net worth at 32! My student loans weren't completely paid off until 35ish. Laws, rules and strategies evolve and change over time. I have tried to keep myself educated and adjust where needed. 10 years ago (when I was 44) I thought I knew everything important to know financially. Now I know I didn't know $*it! Reading this forum, Bogle and ER, and reading the "great ones" here debate the issues (mathjak and PerryinVA, I'm looking at you!) have helped me considerably. I "clocked out" hopefully for the last time over a year and half ago. When I was working I always maxed 401k, then Roth and threw what was left into taxable. I am now contemplating Roth conversion strategies. And SS estimates and strategies will make you go crazy! The 62 or 70 or FRA or some other time debates for claiming make for interesting reading and what sounds perfectly logical one day sounds obviously flawed another day. So definitely keep it simple and enjoy life. The best times in my life started in my mid 30's!
My net worth is $108K. I have no debt, other than revolving credit card debt, which is only a few thousand at any given time. I paid off my student loans entirely by the age of 27. I also paid off my car entirely 7 years ago, so I haven't had a car payment since then. Each year, I usually take one major vacation and one minor vacation. I tend to keep my stuff for at least 5-10 years before replacing. My annual income is $70K and I live alone. I have $56K in liquid cash in the bank, too.
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Old 02-03-2017, 01:39 PM
 
Location: Mount Airy, Maryland
10,462 posts, read 5,930,681 times
Reputation: 16156
I didn't start switching to a Roth for my 401 until my 50's, up until then I wanted as much money in my account compounding for me as possible. But you can also look at the other side of the coin. Tax free growth is HUGE. Imagine the tax benefit of a Roth that has been compounding for as long as the OP's will.
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Old 02-03-2017, 01:42 PM
 
Location: Jacksonville, FL
11,145 posts, read 14,126,475 times
Reputation: 7075
Quote:
Originally Posted by DaveinMtAiry View Post
I didn't start switching to a Roth for my 401 until my 50's, up until then I wanted as much money in my account compounding for me as possible. But you can also look at the other side of the coin. Tax free growth is HUGE. Imagine the tax benefit of a Roth that has been compounding for as long as the OP's will.
This.

This is why I prefer a tax deferred account. Especially because I believe I will be in a lower tax bracket during retirement. During retirement, I plan to live a modest lifestyle; probably more modest than I will be living pre-retirement. I'm just glad we have options for different people and different life plans.
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Old 02-03-2017, 03:20 PM
 
Location: RVA
2,167 posts, read 1,266,787 times
Reputation: 4460
Dear lord, I would rather have $24k in a Roth, than $33k in a tIRA at age 33 any day of the week. Like I said, long after I'm dead, (well, I MIGHT be still around) you will think...dang, those old guys were right....

Different strokes for different folks, I guess.

At least you ARE saving, which is far more important.
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Old 02-03-2017, 03:50 PM
 
Location: Jacksonville, FL
11,145 posts, read 14,126,475 times
Reputation: 7075
Quote:
Originally Posted by Perryinva View Post
Dear lord, I would rather have $24k in a Roth, than $33k in a tIRA at age 33 any day of the week. Like I said, long after I'm dead, (well, I MIGHT be still around) you will think...dang, those old guys were right....

Different strokes for different folks, I guess.

At least you ARE saving, which is far more important.
No one has still shown me how a Roth is better for someone like myself who will be in a significantly lower tax bracket and rate when I'm in retirement compared to now. And by deferring the tax, I am allowing a MUCH bigger base from which growth can happen. It's simple. Would you rather have 35 years of growth starting at a foundation of $33K? Or 35 years of growth starting at a foundation of $24K?
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Old 02-03-2017, 04:19 PM
 
Location: Omaha, Nebraska
7,316 posts, read 4,162,308 times
Reputation: 18323
Quote:
Originally Posted by nep321 View Post
No one has still shown me how a Roth is better for someone like myself who will be in a significantly lower tax bracket and rate when I'm in retirement compared to now.
Right now you're in the 25% tax bracket. If SS pays out the way you expect it to (it may not, benefits may well be cut), and if RMDs don't force you into a higher tax bracket, you'll be in the 15% tax bracket when you retire. It's a drop, but not the huge drop you seem to be thinking of. And that's only if SS benefits aren't cut (forcing you to withdraw more taxable income yearly than you're currently planning from your 401k), and that the gains in your 401k don't force RMDs high enough to keep you in your current tax bracket. (RMDs go up as the 401k balance rises, and they also increase with your age.) Either or both could keep you right in your current 25% tax bracket during retirement. It's not a slam-dunk that you'll be in a lower tax bracket during your retirement, in part because you're not in a high tax bracket now.

Quote:
And by deferring the tax, I am allowing a MUCH bigger base from which growth can happen. It's simple. Would you rather have 35 years of growth starting at a foundation of $33K? Or 35 years of growth starting at a foundation of $24K?
What you don't seem to get is that the bigger gains in the traditional account are largely offset by the taxes you have to pay on the distributions 35 years from now. The traditional 401k balance damned well BETTER grow bigger over those decades - it needs to, in order to make up for the taxes you'll be paying on the withdrawals!

And the maximum balances you can contribute to a traditional 401k or IRA and a Roth 401k or IRA are the same. So the initial Roth 401k balance can potentially start from exactly the same place as the traditional 401k balance; needless to say, this clearly tilts the final results in favor of the Roth,as the ending balance will be the same in both accounts but you'll owe no taxes on the Roth funds at all.

Last edited by Aredhel; 02-03-2017 at 04:39 PM..
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Old 02-03-2017, 04:38 PM
 
Location: Omaha, Nebraska
7,316 posts, read 4,162,308 times
Reputation: 18323
Quote:
Originally Posted by Perryinva View Post
At least you ARE saving, which is far more important.
I definitely agree with this!
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