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the advantage to deferring taxes isnt as wonderful as financial professionals that want you to guarantee them monthly deposits will try to make you believe. ultimately, you pay tax on the income and the gains at income tax rates (not long term capital gains tax rates). i know mathjak says tax rates will be lower and he knows ninja ways to cut them further, but there are no guarantees. im more comfortable having my money not in tax deferred accounts so thats how i do it.
I try and hit all facets. I invest in my 401k, Roth IRA, and then also do completely taxable investments with after-tax dollars. Luckily my 401k through my employer is extremely low cost to me compared to many. But I do understand how the deferred taxes work.
My thinking right now is to dump a lot into the 401k early. Closer to midway to 3/4 through my career I should have a decent idea (barring a market crash) of where my 401k funds will be. At that point I am hoping to see that I have plenty (more than enough) and really dial back on that aspect and start stashing away even more into my "bridge" funding. Who knows if that is good though.
It also frustrates me that opportunities that existed 20 years ago will never be around for us - pensions, job stability, raises, perks. Weren't they even talking about taking away the child deduction. I don't think that's fair, if everyone else had it, why shouldn't we.
There is so much "not fair" in your posts. Trips to Europe in your 40s, expensive cars, "no way am I working until I'm 70." it is all so very entitled.
You have an education, a girlfriend who apparently loves you and you're young and healthy. Suck it up, make a plan and stick to it.
Easy to say but it's still a what-if. If they DONT make changes to the 401k like I am worried about, then investing in it is great with the deferred taxes (and then I hedge that with investing post-tax in the Roth IRA). Either way it is a guess so saying "do this" only works in one of the scenarios.
For now I am playing the card of maxing out the 401k, hoping they don't make changes but if they do I can always withdraw at a 10% penalty if i REALLY have to (say they push withdrawal back really far and I want to retire)
If your concern is that you may need to withdraw early, cut back your 401(k) investment and max out the Roth. While there are similar penalties for early withdrawal of earnings, Roth contributions can be withdrawn at any time without penalty.
If your concern is that you may need to withdraw early, cut back your 401(k) investment and max out the Roth. While there are similar penalties for early withdrawal of earnings, Roth contributions can be withdrawn at any time without penalty.
Thanks for the help. Right now I do max out both though. I'm not as concerned about needing to withdraw early for an emergency. More like I'd like to retire at 55ish and Id like to figure out a way to generate enough bridge salary between that and being able to tap the 401k and roth gains. I am planning to be able to utilize my Roth contributions as part of that
the advantage to deferring taxes isnt as wonderful as financial professionals that want you to guarantee them monthly deposits will try to make you believe. ultimately, you pay tax on the income and the gains at income tax rates (not long term capital gains tax rates). i know mathjak says tax rates will be lower and he knows ninja ways to cut them further, but there are no guarantees. im more comfortable having my money not in tax deferred accounts so thats how i do it.
Are you just talking about the pros and cons of 401(k) vs. Roth IRA? Or was your scope larger?
we are getting screwed because we are running out of options. the baby boomer generation is going to have their cake and eat it. its not fair, but its reality. they think they are the worlds greatest generation and they complain that kids think they are so wonderful. they are the biggest ego generation and the most "entitled."
well i am 60 and i can tell you this. i graduated right into the horrible 70's . high inflation , no jobs , high taxes, markets that were dead for decades and worst of all vietnam.
but you know what ? like kids today there was decades of time left to make things better. although it never looked like anything would turn around for us eventually many many years later it did.
i was forced to shift gears and find a new career path but life went on and eventually many of us did ok.
the same may happen again , time has a way of eventually cycling things around and the next generation will be talking about how easy you had it.
I'm 34 and I don't have that much saved up yet, but I'm not at all depressed. I have about the same amount saved as you do in my bank, and have been maxing 2 Roth IRAs and getting the company match on a 401k for only about 3 years. But I have no other debt besides a small mortgage, which I intend to pay off shortly after I turn 40. That gives me a good 15 years of saving nearly everything we make in order to retire by 55. That is our goal. Not having kids helps with that goal a lot, which is part (a small part) of the reason we made that decision.
When I was 31, your age, my husband had just gotten over a full year of being unemployed, any loan we could defer was deferred, and we were feeding our expenses every month out of savings, and were almost out of savings,with $0 in retirement accounts. So in 3 years, we've gone from a negative net worth to the point where I expect we will break into 6 digits of positive net worth probably next year (not counting home equity) and have paid off all of our non-mortgage debt. And we only net about $45k a year in income. The trick is to keep your expenses low, and in order to do that, you need to pay off your debt.
Your biggest problem right now is that you are trying to pay expenses for 2 people on basically only one income, which is very difficult to do in today's society. We are a 2 income society. So either one of you needs to get a great paying job, or between you you need to get 2 decent jobs. You can get by on one income if you are careful, as you have been doing, but if you want to get ahead, you either need a great 1 job, or your gf needs to get a better job.
All I can say is that when I was your age 3 years ago, I was in basically the same shape you are in now. What a difference 3 years has made for me. You don't sound like you are in so deep you can't turn it around just as quickly.
I do agree with what others have said. You need to accept that the world today is different than the world our parents grew up in, and not spend so much time being bitter that the generation before us had it better. Honestly, in some ways they did (although less for our parents generation than for our grandparent's generation). They could raise a family on one income, many of them had pensions when they retired, they didn't have to worry about Social Security failing, etc. But given a choice, I will live today over living then. It is a smaller world today, and as I said in your other thread, bad news sells, so we are subjected to 24 hour news stations playing bad news, bad news, bad news. But in reality, our part of this world is more peaceful and safer today than it was in our parent's generation. I would even go so far as to say the world as a whole is more peaceful and safer than it was in our parent's generation.
You have the opportunity to have a great life, but life is hard. If you expect it to be handed to you on a silver platter, you will fail, and always feel like the world is against you. That is the tone your posts have. If you acknowledge the fact that you have to work for the things you have, and that in order to have a civilized world, some of your money that you earn has to go toward maintaining that society (in the form of taxes), you will be much happier and probably come out well ahead in the end.
I was going to say "Accept the world as it is, not as you want it to be", but that leads to complacency. You should always try to make the world a better place, but you need to understand that "a better place" does not mean that everything comes easy.
I am a boomer.
What are all these 'goodies' you think my husband and I have?
I'm 30, and I've discussed this with my Parents generation (Boomers) -Dad was a History teacher, and with my Grandparents generation.
It's fairly factual that your generation... while there was Vietnam, the cold war, the economic issues of the 80's etc...
Won the 'Birth Lottery' the country was 'Booming' following WW2, the US was the world power, the clap etc was killed, and (For your younger years) 'superbugs' like AIDS hadn't come along yet.
There were continual, unprecedented advances in technology leading to the creation of a true 'middle class' and ease of lifestyles for them (Microwaves etc)
It was prosperity from inflation etc, but for those years... it was good. A guy could be unskilled, go to work in a factory, and get a wage to support a family.
You could actually AFFORD a new car (Not just the monthly payments) (OTOH... it wouldn't last 200,000 miles)
And the biggest thing, there was a decent chance of making money in the stock market, AND pensions and similar 'mostly no longer existing bennies' still were popular. (on the individual if they took advantage of it or not)
I don't hold it against you, but it is a sociological fact... Boomers had it good. (And helped Pee-it away... all of our industrial base going overseas, 'borrowing' from the future etc.)
My generation would of likely done the same.
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