Investor insight please.

[huntnful]

I was going over my investment accounts today and started thinking a little bit. I have a 401k through my work that I've been maxing out for 15 years.

They match a certain percentage, and i think it ends up to about $3-4k a year they put in, on top of my $23,000.

The account currently has $712K in it.

I am 34 years old.

I have a personal investment account that I've been contributing to with post tax money for about 6 years now. I plan to use the money in that account to retire as early as possible. Use the personal investment money to bridge to the gap until I can draw my pension at 55, and then eventually my 401k at 59.5.

Is it really doing me any good to keep maxing out my 401k? Or should I just put in the amount that reaches my company's match minimum (free money), and then put the remainder into my personal investment account, post taxed?

I definitely realize the tax advantages of taking $23k off the top end of my income to not pay taxes on it in the highest bracket. But is it worth it when I'm 59.5 if my 401k would be projected near 3 million anyways?

I'm a pretty frugal personal. I only spend money on hunting/shooting and my wife and kids. Don't have, or want a bunch of lavish shit.


Appreciate any insights and perspectives as always!!!

 

[HuntHarder]

Does your place of work offer 401k Roth? I max out my 401k as well and it is all Roth. The company match is traditional, but if I play my cards right at time to take withdrawals, that should be very low tax rate too.

Typically, deferring taxes is a beneficial thing imo. Now if you want to diversify and buy real estate, I would say do not make out your 401k and set money aside for real estate.

 

[49ereric]

Maxing the IRA donation every year for you and your wife?
Market crash will happen again so not sure what your risk level is but losses are never good and tough to recover from. If that market crash happens when you want to retire then your plans are toast.
Low fee 401K?

You probably know all this though.

 

[DmrbigEshotT]

Good problem to have. Impossible to say if it’s “good” or not.

The more you put in, the larger your RMD tax problem will be (assuming you let it ride until 75).

It’s good you’re diversifying your savings with a brokerage account. Keep that up.

If your goal is to retire ASAP, it may not be a bad idea to keep contributing to the 401 (in some way above the employer match) as your reportable income will be lower post-retirement, and that’ll give you a good window to do Roth conversions at a lower tax bracket.

Regardless, well done.


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[vaquero]

Im pretty much in the same situation

Im going to stop putting so much in the 401k, and put it in post tax accounts

taxes are going to kill you if you want to spend that 401k money on big stuff, (ie land, auction tags, etc)
and 3 million is plenty if not too much to pay basic living expenses in retirement, not even considering social security

 

[vaquero]

worrying about a market crash at 34 years old is not advisable

 

[huntnful]

Maxing the IRA donation every year for you and your wife?
Market crash will happen again so not sure what your risk level is but losses are never good and tough to recover from. If that market crash happens when you want to retire then your plans are toast.
Low fee 401K?

You probably know all this though.

From my research I can’t do a Roth IRA based off the maximum income limitations. I’ve heard of backdoor Roth but it seems pretty extensive for $6k a year contribution or so.

If the market is down when I want to retire, I’ll just keep working until it stabilizes again. No big deal. I don’t mind working, just don’t want to do it any longer than I HAVE too.

Does your place of work offer 401k Roth? I max out my 401k as well and it is all Roth. The company match is traditional, but if I play my cards right at time to take withdrawals, that should be very low tax rate too.

Typically, deferring taxes is a beneficial thing imo. Now if you want to diversify and buy real estate, I would say do not make out your 401k and set money aside for real estate.

Ours is not a Roth or any portion available to go in a Roth that I’m aware of.

Real estate just hasn’t interested me honestly. I know it can be awesome, but I just don’t want to get involved in it for some unexplainable reason.

Good problem to have. Impossible to say if it’s “good” or not.

The more you put in, the larger your RMD tax problem will be (assuming you let it ride until 75).

It’s good you’re diversifying your savings with a brokerage account. Keep that up.

If your goal is to retire ASAP, it may not be a bad idea to keep contributing to the 401 (in some way above the employer match) as your reportable income will be lower post-retirement, and that’ll give you a good window to do Roth conversions at a lower tax bracket.

Regardless, well done.


Sent from my iPhone using Tapatalk

I’ll need to looking in the Roth conversation aspect. I’m not versed on that (or much on anything financial honestly lol)

Im pretty much in the same situation

Im going to stop putting so much in the 401k, and put it in post tax accounts

taxes are going to kill you if you want to spend that 401k money on big stuff, (ie land, auction tags, etc)
and 3 million is plenty if not too much to pay basic living expenses in retirement, not even considering social security

That’s the other aspect. 401k is mostly beneficial when taken at the lower bracket levels. Taking $500k out for something would just be a waste of about 50% taxes. So I really don’t /can’t plan to do anything like that.

Market crash is not of a worry to me. I’m past that point haha. Ride the wave .


Appreciate all the inputs and insights everyone!

 

[CorbLand]

You should be meeting with a CPA here soon. I would suggest talking with them or a financial planner if you have one.

 

[huntnful]

You should be meeting with a CPA here soon. I would suggest talking with them or a financial planner if you have one.

Yeah that is probably a good idea. I just trust my Rokslide homies more than 99% of the general population hahaha. And there’s some smart suckers in here! But someone professional versed in exactly the info I’m seeking is possibly a decent idea….

 

[Shane]

You probably have a Roth option in your 401k. It's rare to see one these days that doesn't offer a Roth option. Maybe yours doesn't, but if you're not certain, check into it further.

 

[Spoonbill]

From my research I can’t do a Roth IRA based off the maximum income limitations. I’ve heard of backdoor Roth but it seems pretty extensive for $6k a year contribution or so.

If the market is down when I want to retire, I’ll just keep working until it stabilizes again. No big deal. I don’t mind working, just don’t want to do it any longer than I HAVE too.

Ours is not a Roth or any portion available to go in a Roth that I’m aware of.

Real estate just hasn’t interested me honestly. I know it can be awesome, but I just don’t want to get involved in it for some unexplainable reason.


I’ll need to looking in the Roth conversation aspect. I’m not versed on that (or much on anything financial honestly lol)


That’s the other aspect. 401k is mostly beneficial when taken at the lower bracket levels. Taking $500k out for something would just be a waste of about 50% taxes. So I really don’t /can’t plan to do anything like that.

Market crash is not of a worry to me. I’m past that point haha. Ride the wave .


Appreciate all the inputs and insights everyone!

If you convert a traditional ira to a roth ira, there is no limit, but you do have to pay taxes on the conversion. Here is an article that goes over the basics.

Roth IRA Conversion Rules

It is possible to convert a pretax retirement account like a traditional IRA into a Roth IRA but prepare to count the funds as income and pay tax on them.

www.investopedia.com

 

[Natebonebusta]

If you didn’t know the 401k carries a rule of 55 provision that basically states when you separate from your last employment that holds your 401k and you leave it there, you may draw on it penalty free prior to 59.5.

 

[MallardSX2]

If you didn’t know the 401k carries a rule of 55 provision that basically states when you separate from your last employment that holds your 401k and you leave it there, you may draw on it penalty free prior to 59.5.

Amazes me how many people don’t know this….including financial advisory’s.

72t is also a great option for the OP.

 

[Clovis]

it sounds like a backdoor Roth could be a smart move--you open a traditional IRA and transfer funds to a Roth account. Because the money you would be putting in is post-tax, you would only pay tax on the gains before conversion, which should be minimal if you move it soon after it hits the account. If you are already putting money into an after-tax account, this may be a good idea for you. Even at current limits, if you do it consistently it can add up to a significant amount. Having some of your money in a Roth has advantage for withdrawals in retirement/estate planning too.

 

[dirtytough]

You should join Bogleheads and ask this question. There are some extremely educated people on there when it comes to finances.

 

[swavescatter]

I've been investing in Tikkas and reloading gear. Not sure why my wife is on my case so much...

My only advice for a "super saver" like yourself is to consider diversifying into real estate. I'm not a great saver, but wound up with a few rental units that will greatly offset my YOLO financial approach.

I agree with others though, find a CPA for state-specific tax-optimized advice.

 

[go_deep]

You need to talk with a professional.
Little known fact, you can withdraw from your Roth before your 59.5 years old, and there's several other investments that allow you to withdraw from them post tax money, but you have to fund them the right way, and withdraw from them the right way.

Congratulations though, your in an amazing position!

 

[jimh406]

It’s a long time til 59 1/2. It’s probably a good idea to create a post tax 401k if you can afford it. But, paying a 10% penalty may not matter if you make enough.

However, the thing you didn’t mention is diversification of investments in your 401K. If you haven’t, spend time choosing mutual funds that have a good history for the past 5-10 years. That can make a big difference in how much money you have at the end.

I’d also consider buying real estate/land. They aren’t making more of it.

 

[DangerRanger]

Why would you not take advantage of the pre tax growth on 23k a year? It doesn’t sound like you should be needing that money if you’re over the Roth income limit.

If you were proposing to drop 401k down to tax hedge with a Roth i could understand, but to drop it down to not take any tax advantages and put the same money in a general brokerage I do not.

 

[TxLite]

401k at 59.5

Check out the rule of 55