19 and addicted!

[rweb941]

Hey guys, after seeing this forum, I couldn't help but join.
I am on my way to a early retirement. While still being a student, I have managed to juggle school and work, which has allowed be to put 9,000 away in a vangaurd roth IRA and I have about 16,000 in taxable accounts. I also have emergency money saved as well. I will max out my IRA as long as I can, and hopefully after graduating get a job that offers a roth 401k. I will also still put extra money aside in taxable accounts as well. What advice do any of you guys have for me? I am also addicted to saving and investing, I find it fun to watch the markets/news daily. Feels good to be a member!

 

[LOL!]

It will probably be better for you to not use a Roth 401(k), but to use a traditional 401(k). The reason is that early retirees can withdraw from the traditional 401(k) practically tax-free. So the money will be tax-free going in and tax-free coming out. That's better than a Roth 401(k) where it will be taxed before going in and tax-free coming out.

 

[nash031]

... I find it fun to watch the markets/news daily...

My first bit of advice would be to stop doing this. You're going to be far better off if you don't let daily market gyrations, predictions, forecasts, and other noise dictate - or even impact in the most minute way - your actions.

Welcome aboard. Congrats on a great start!

 

[rweb941]

I love watching the gyrations though!!! I don't base any of my financial decisions of off the daily fluctuations.

 

[rweb941]

I also dont plan on using my 401k a bajillion years down the road until I'm 60. Live off of taxable assets first.

 

[HFWR]

LBYM, invest as much as possible, stay debt free, marry well; but you're only 19, for Pete's sake, so have some fun as well.

 

[chris66]

What are you studying in school? Are you sure it's something you want to retire from quickly? If so, are you sure this is what really what you want to study?

You're doing extremely well for your age, and I wish I was in that kind of shape at 19. Still, in addition to investing, you may want to figure out what makes you happy. You're just starting out...enjoy the whole journey

But I'll emphasize again -- you're doing great for your age. Very smart!

 

[Elbata]

Congrats. You're definitely an outlier for your age.

It will probably be better for you to not use a Roth 401(k), but to use a traditional 401(k). The reason is that early retirees can withdraw from the traditional 401(k) practically tax-free. So the money will be tax-free going in and tax-free coming out.

LOL, can you explain this to me. I don't understand.

 

[zesty]

I love watching the gyrations though!!! I don't base any of my financial decisions of off the daily fluctuations.

If I ever opened a trampoline store, I don't think I'd call it Trampo-Land, because you might think it was a store for tramps, which is not the impression we are trying to convey with our store. On the other hand, we would not prohibit tramps from browsing, or testing the trampolines, unless a tramp's gyrations seemed to be getting out of control.

 

[zesty]

LOL, can you explain this to me. I don't understand.

The first $9000 taken out would be taxed at 10%, and the next $27000 would be taxed at 15%. It's not tax-free, but it's less than I pay in taxes now, and I probably (hopefully) won't need much past an inflation adjusted $36k per year to live in retirement.

 

[borrom2002]

Are you guys forgetting the 10% penalty? For early retirement Roth would always be better because at least you can get principle tax and penalty free. If you are taking trad 401k/IRA assets before 59 1/2 you would be paying taxes and the penalty. You could do a 72T but that would be harder to control in a long early retirement. I prefer using my principle from roth and taxable money to avoid penalties and have lower taxes. If you do have a large amount of Trad money you can get a Roth conversion ladder going over a 5 year span. I find that is a great way to get to the Trad money early without penalty.

 

[nash031]

I love watching the gyrations though!!! I don't base any of my financial decisions of off the daily fluctuations.

Not yet, anyway. See how you do when there's a 20 or 30% drop in the market! Just beware of watching and caring!

Good luck!

 

[pb4uski]

WADR, you are way too young to be preoccupied with retirement. At the same time, you are doing well in saving - congratulations!!

Focus now on training and entering a profession that you enjoy and can make money to support yourself. Don;t forget to enjoy life - you're young - go out and have some fun!

As you career evolves, save regularly, LBYM, invest in no-load, low cost index equity funds and before you know it you'll have gray hair (or no hair depending on your genes) and be ready to retire.

 

[FireBug]

I also dont plan on using my 401k a bajillion years down the road until I'm 60. Live off of taxable assets first.

What is it about that statement that is so much fun to read? Hey folks (not you OP), was it a 'bajillion' years ago we were his age, or just yesterday!

But seriously, you are thinking, planning, and acting ahead, and that's very good. Keep it up

 

[Birdie Num Nums]

It will probably be better for you to not use a Roth 401(k), but to use a traditional 401(k). The reason is that early retirees can withdraw from the traditional 401(k) practically tax-free. So the money will be tax-free going in and tax-free coming out. That's better than a Roth 401(k) where it will be taxed before going in and tax-free coming out.

Huh? Really?

Uncle Sam gives you some tax advantages with both a traditional and Roth 401(k). Contributions to a traditional 401(k) lower your taxable income, earnings grow tax-free, and you don't owe income taxes until you make a withdrawal. With a Roth 401(k), you don’t get the up-front deduction, but any earnings grow tax-free and withdrawals after age 59½ are tax-free provided you’ve held the account for five years.
​

 

[FireBug]

I believe LOL! meant to say that the 10% penalty could be avoided. But, perhaps they could clarify.

 

[iam21177]

Way to go! My only advice would be to make sure saving/investing doesn't impair your meaningful relationship or rob you of great experiences (this is for if you're truly addicted, like life-sacrificing-addicted). Your money will grow, grow, grow!

 

[FinanceDude]

It will probably be better for you to not use a Roth 401(k), but to use a traditional 401(k). The reason is that early retirees can withdraw from the traditional 401(k) practically tax-free. So the money will be tax-free going in and tax-free coming out. That's better than a Roth 401(k) where it will be taxed before going in and tax-free coming out.

Please elaborate.........I always am willing to learn something new...........

 

[38Chevy454]

I think the Roth is great for you now. With relatively low income, your tax savings in a pre-tax account now is not much benefit. Once you get out of school and have higher income, the pre-tax 401k/403b makes good sense, especially to pick up the employer match!

Congratulations on your success so far. Keep it up and you will be able to retire early for sure.

 

[CaliforniaMan]

Not yet, anyway. See how you do when there's a 20 or 30% drop in the market! Just beware of watching and caring!

Good luck!

+1
IMHO the absolute worst time to begin you association with the market is during a booming bull market. You get used to the gyrations and begin to think it is fun, and start planning how easy it will be to retire keeping it up like this. The important thing will be to see how addicted you are after you are way way down, and all the news reports and your friends are warning of the coming economic collapse.

WADR, you are way too young to be preoccupied with retirement. At the same time, you are doing well in saving - congratulations!!

Focus now on training and entering a profession that you enjoy and can make money to support yourself. Don;t forget to enjoy life - you're young - go out and have some fun!

As you career evolves, save regularly, LBYM, invest in no-load, low cost index equity funds and before you know it you'll have gray hair (or no hair depending on your genes) and be ready to retire.

+1
You are doing an exemplary job at savings now, but I agree with pb4uski, you have a lot of exciting experiences ahead of you in life. You will spend a lot of time working, find a profession you enjoy. And living life is addicting too, not only saving for later.

 

[Travelwanted]

Welcome!

You are off to a good start. . .just thinking about saving at your age puts you ahead of most!

My thoughts:
1- live below your means
2- avoid debt unless for a house or education and even then be cautious
3- save, save, save
4 -agree with not watching it daily. easy to not bother you with 10-20k in the market but wait until you have 1 million+. . .those swings can be tough!
5- this site has TONS of great info...I'm pretty new here and have learned a lot

Good luck!

 

[ShortInSeattle]

Hey! We started investing at 19 and should be comfortably retired by 45. Compound interest is a miracle and you're young enough to participate in it. Kudos!

My best advice for you is to start socking away a nice chunk of your income in boring index funds (15% minimum - rachet it up as you get promotions and raises), marry someone with good values, kick ass at a career you are interested in, and go out and enjoy your life.

If you can stay away from car loans, accidental children, crazy spouses, and conspicuous consumption, you'll do just fine.

Welcome.

 

[pb4uski]

One story on the importance of enjoying life. Uncle lived like a pauper despite earning good money and saved like crazy and retired at 55. and unfortunately dropped dead of a heart attack about a year later.

Life is too short - enjoy it. But it could also be long - so save for the future. A delicate balancing act.

 

[slow n steady]

Please elaborate.........I always am willing to learn something new...........

The mad fientist explains it well.

The way I understand it is:

1. Put money in Traditional IRA or Traditional 401K.
2. Retire and have no income.
3. Roll 401K to tIRA.
4. Convert tIRA to Roth IRA
5. Take converted money out of Roth IRA after 5 years

A single person has a standard deduction of $6,200 and an exemption of $3,950 so they can have $10,150 of income and have $0 in taxes. The next $9,075 is taxed at 10%. If you have no income, you can convert $10,000 of a tIRA to a Roth IRA every year and not pay any taxes. Double that for a married couple. You can take conversions out of a Roth after 5 years at no penalty and no age restrictions.

So if you retire and live off taxable investments for 5 years while slowly coverting money in a tIRA to a Roth IRA, you will be able to take $10,000 out of your Roth IRA every year that had never been taxed. Double that amount for married couples.

A least that's how I understand it.