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Joined: Dec 2013
Posts: 28,318 Likes: 564
a.k.a. Dingle Johnson
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a.k.a. Dingle Johnson
Joined: Dec 2013
Posts: 28,318 Likes: 564 |
If I were a young man I’d start a ROTH. If a 401k is offered through my employer , I'd at minimum invest enough to get all the company match. Roths are great , leaving free $ on the table isn't. Nothing wrong with a Roth, but depending on his age and his expected taxable income in retirement, a Roth may make less sense than just maximizing his contribution to his 401k. We started late in life, and for us the Roth didn't make sense. I was still able to retire at 62 with plenty of money and in our first year of retirement my total federal taxes at the end of the year averaged out to be 8%. So a Roth would not have done me any good really. Sure... with a Roth, you don't get taxed on the money when you take it out, but you put in less to begin with, because it's after tax dollars, plus a Roth doesn't help you with taxes while you are still working and need to lower your taxable income. I've made spreadsheets looking into this and also looked at other projections and the same money placed in a Roth and a traditional 401k, work out almost the same at the end of the day. Point being, a Roth is not the panacea that most people think it is. If you are really young and expect to be a high income person in your retirement years, then yes, max out the Roth early on. If you are middle aged, with no debt, and you don't plan on having a large taxable income in retirement, then a Roth may not be for you. Keep in mind; you also don't get taxed on the growth of the money invested in a Roth. That's true, but you start with more money each deposit in your 401k so it all works out at the end. Plus you don't get taxed on the growth of the 401k either, until you take it out. Which in our case is now in a lower tax bracket than we were when we were both working corporate jobs. (We still have not taken any out of ours and don't plan on it until the government makes us take our RMD's) My problem was I was a high earner, and I needed to reduce my taxable income so we wouldn't get totally screwed each year with taxes. A Roth won't help you reduce your taxable income, until you take it out in retirement and spend it. So the question to ask yourself is: Do I need to reduce my taxable income while I'm working and making a bunch of money or do I need to reduce my taxable income after I retire and no longer employed? For me is was the former and not the latter...
Last edited by Irishguy; 05/16/25 06:00 AM.
"When I say ever thing I mean ever thing." - Frankie
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Joined: Dec 2002
Posts: 14,332 Likes: 65
Booner
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Booner
Joined: Dec 2002
Posts: 14,332 Likes: 65 |
If you’ve never put 30% in your 401k and looked at the tax implications you should. Everyone thinks “I can’t do that”, but everyone should try it for a month or so and watch your bring home pay, taxes, and 401k for that month. You’ll never go back imo.
ESPECIALLY for the 50+ group under “catch up” amounts.
30% adds up and you really feel like you’re “sticking it to the man” 🤣.
My state tax liability was zero some weeks when I worked 84 hours.
Everything woke turns to shucks
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Joined: Dec 2002
Posts: 14,332 Likes: 65
Booner
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Booner
Joined: Dec 2002
Posts: 14,332 Likes: 65 |
Everything woke turns to shucks
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Joined: Dec 2013
Posts: 28,318 Likes: 564
a.k.a. Dingle Johnson
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a.k.a. Dingle Johnson
Joined: Dec 2013
Posts: 28,318 Likes: 564 |
If you’ve never put 30% in your 401k and looked at the tax implications you should. Everyone thinks “I can’t do that”, but everyone should try it for a month or so and watch your bring home pay, taxes, and 401k for that month. You’ll never go back imo.
ESPECIALLY for the 50+ group under “catch up” amounts.
30% adds up and you really feel like you’re “sticking it to the man” 🤣.
My state tax liability was zero some weeks when I worked 84 hours. This is what we both did for at least the last 5 years before we retired. We were both putting the maximum amount we could in there. What it also does is it artificially reduces your "take home pay" and guess what? You not only learn to live on a reduced income, but you learn to thrive on it, so when you move from working into retirement, you are already living on a smaller income, so it's no transition. I remember meeting with my boss (who is also a good friend of mine...) and we had one of those 6 month meetings where you get your evaluation, raise, etc... And at the end he asked me if there was anything he needed to know. I told him I had built a spreadsheet to help me plan for retirement. He asked how it was going. i told him I could retire that day and actually make more money than I am making working.  He asked me what the hell I meant by that and I told him, "We need to start training my replacement." 
"When I say ever thing I mean ever thing." - Frankie
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Joined: Jul 2011
Posts: 39,938 Likes: 130
Freak of Nature
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Freak of Nature
Joined: Jul 2011
Posts: 39,938 Likes: 130 |
A good way to manage a 401k is start with at least enough to get all the company match. Then as you get raises , increase your contribution by 1/2 your raise amount . That way you're increasing 401k and take home. Pretty soon you'll have some serious $ in that 401k and you'll never miss it.
"Why do you ask"?
Too many people spend money they don't have , on things they don't need, to impress people they don't know.
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Joined: Dec 2013
Posts: 28,318 Likes: 564
a.k.a. Dingle Johnson
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a.k.a. Dingle Johnson
Joined: Dec 2013
Posts: 28,318 Likes: 564 |
A good way to manage a 401k is start with at least enough to get all the company match. Then as you get raises , increase your contribution by 1/2 your raise amount . That way you're increasing 401k and take home. Pretty soon you'll have some serious $ in that 401k and you'll never miss it. That's pretty much what we did, except we ended up giving our 401k's most of our raises. Like I would get a 5% raise and give my 401k a 4% increase.
"When I say ever thing I mean ever thing." - Frankie
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Joined: Nov 2005
Posts: 8,189 Likes: 113
14 point
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14 point
Joined: Nov 2005
Posts: 8,189 Likes: 113 |
Looks like a downturn next week. Tariffs, credit rating drop, bond market not liking the new bill…..
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Joined: Apr 2010
Posts: 3,982 Likes: 26
10 point
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10 point
Joined: Apr 2010
Posts: 3,982 Likes: 26 |
Looks like a downturn next week. Tariffs, credit rating drop, bond market not liking the new bill….. Buying opportunity
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Joined: Nov 2005
Posts: 8,189 Likes: 113
14 point
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14 point
Joined: Nov 2005
Posts: 8,189 Likes: 113 |
Looks like a downturn next week. Tariffs, credit rating drop, bond market not liking the new bill….. Buying opportunity Shorting opportunity. I did it Thursday
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