Friday, February 21, 2014

Is Roth and 401k enough to retire on?

Over at Bogleheads we came across the following discussion: Is Roth and 401k enough to retire on?


is Roth and 401k enough to retire on?by des999 » Tue Feb 18, 2014 10:45 pm

My situation:


I have 2 Roths (wife and I) and am maxing them both out. Both currently at $10,000


I have a work 401k plan (3% match) which I am hoping to start maxing out soon, currently doing 11% (need to get to 18% for max). currently at $59,000


I also have $37,000 in a rollover ira from my last employer, which I have no plans to contribute to.


My question is, most likely this is enough for me to retire on in 15 - 20 years. If I did, I'm 34, I'll need to get to some of my money prior to 59 1/2, would you suggest using Roth contributions for the 5-10 years? or should I start a taxable investment of some sort to fund the years prior to me turning 59 1/2? Curious what others are doing.


current situation if interested. We have no debt minus house (owe $75,000 worth roughly $150,000). 1 child who is 3. We live pretty far below our means. household income is $95,000. We plan to live on around 35k per year in retirement.
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Re: is Roth and 401k enough to retire on?by The Wizard » Tue Feb 18, 2014 10:50 pm

If contribs to the Roth and 401(k) account are 20% or more of your gross income, you should be good...
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Re: is Roth and 401k enough to retire on?by grap0013 » Tue Feb 18, 2014 10:57 pm

Any human being is really good at certain things. Most people are pretty modest instead of an arrogant S.O.B. like me, what comes naturally, you don’t see as a special skill.
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Re: is Roth and 401k enough to retire on?by des999 » Tue Feb 18, 2014 11:00 pm

The Wizard wrote:If contribs to the Roth and 401(k) account are 20% or more of your gross income, you should be good...



cool, thanks, they are around 28%, so you would use your Roth to fund your pre 59 1/2 (401k) account?
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Re: is Roth and 401k enough to retire on?by des999 » Tue Feb 18, 2014 11:01 pm

grap0013 wrote:The best kept secret in finance: http://www.irs.gov/Retirement-Plans/Ret ... c-Payments



nice. lots of good info. appreciate the link.
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Re: is Roth and 401k enough to retire on?by grap0013 » Wed Feb 19, 2014 1:27 pm

des999 wrote:
grap0013 wrote:The best kept secret in finance: http://www.irs.gov/Retirement-Plans/Ret ... c-Payments



nice. lots of good info. appreciate the link.



You are welcome. The take home message: "load up tax advantaged accounts now because the 59.5 age rule is a myth." I was on this website a couple of years before I learned about sepp 72t. It should be brought up instantly when questions like yours are asked, but sometimes it is not even mentioned. Not sure why that is.
Any human being is really good at certain things. Most people are pretty modest instead of an arrogant S.O.B. like me, what comes naturally, you don’t see as a special skill.
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Joined: 18 Mar 2010

Re: is Roth and 401k enough to retire on?by keystone » Wed Feb 19, 2014 1:50 pm

grap0013 wrote:You are welcome. The take home message: "load up tax advantaged accounts now because the 59.5 age rule is a myth." I was on this website a couple of years before I learned about sepp 72t. It should be brought up instantly when questions like yours are asked, but sometimes it is not even mentioned. Not sure why that is.



Good advice to load up on tax advantaged accounts first. You're right that 72t is seldom mentioned in discussions like this, but my guess is that is because most people who are in a position to retire early have built up significant enough balances in their taxable accounts so it is not necessary. My guess is that if the OP is committed to the plan, the same thing will happen and 72t will not be necessary. However, it is certainly good to know the option is there.
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Re: is Roth and 401k enough to retire on?by cherijoh » Wed Feb 19, 2014 2:04 pm

keystone wrote:
grap0013 wrote:You are welcome. The take home message: "load up tax advantaged accounts now because the 59.5 age rule is a myth." I was on this website a couple of years before I learned about sepp 72t. It should be brought up instantly when questions like yours are asked, but sometimes it is not even mentioned. Not sure why that is.



Good advice to load up on tax advantaged accounts first. You're right that 72t is seldom mentioned in discussions like this, but my guess is that is because most people who are in a position to retire early have built up significant enough balances in their taxable accounts so it is not necessary. My guess is that if the OP is committed to the plan, the same thing will happen and 72t will not be necessary. However, it is certainly good to know the option is there.



Another exception is that if your 401k is with your current employer and you retire at 55 or later, you can get access to your entire 401k balance at that time without paying the 10%penalty. However, your employer gets to dictate the terms for your withdrawal options. You may or may not be given options that allow a partial withdrawal of your 401k (in addition to the standard options of full payout or rollover to an IRA).
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Re: is Roth and 401k enough to retire on?by Watty » Wed Feb 19, 2014 9:35 pm

grap0013 wrote:The best kept secret in finance: http://www.irs.gov/Retirement-Plans/Ret ... c-Payments



Also note that the age for a 401K as usually 55, if you are employed at that company on Jan 1 of the year you turn 55.
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Re: is Roth and 401k enough to retire on?by 4nursebee » Thu Feb 20, 2014 6:54 am

I read the consensus opinion as
401k for employer match
Roth
fill out 401K
Taxable.


If you have the ability to do all of the above you will develop a nice egg.


I think that Roth and 401K could be enough. It is for me.
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Re: is Roth and 401k enough to retire on?by Hub » Thu Feb 20, 2014 11:25 am

I intend for Roth + 401k to be enough to retire early on, though obviously I aspire to build taxable too.


Keep in mind that if you retire at 50 and your income goes to zero, then doing conversions from an IRA to a Roth IRA are taxed at that new lower income level with no penalty. You have to wait 5 years to access those converted funds penalty free, but I figure you can live on normal Roth contributions in the meantime plus taxable and part-time work if need be.
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Re: is Roth and 401k enough to retire on?by chicago_meatball » Thu Feb 20, 2014 11:31 am

4nursebee wrote:I read the consensus opinion as
401k for employer match
Roth
fill out 401K
Taxable.


If you have the ability to do all of the above you will develop a nice egg.


I think that Roth and 401K could be enough. It is for me.



If possible you can treat an HSA like a ROTH. 6300 a year for family, 3Kish(for singles i believe)

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