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401k and Roth for young invester
Old 11-04-2007, 08:44 AM   #1
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401k and Roth for young invester

Ok heres the deal.

I currently contribute 13% to 401k with 6% match. Dollar per dollar
On top of that, I get a 6% retirement plan from work based on total salary.
So basically together between the 2 accounts, I save 25% of my salary.
I make about 70k a year, and I am 24 years old. I have approx. $20,000 in the account.

My wife contributes 7% to 401k, and gets a 3% match. 50 Cents match to dollar.
Also gets a retirement plan that is 5.5% of total salary. SHe has approx. $2,000
She makes approx. 50k a year.

I want to get a Roth account going for atleast one of us, and maybe both. We have no debt besides a mortgage. We have a total of 12k in a taxable savings account, and money in stock options totally about 10k right now.

I really want to get a roth going so this is what I am thinking.
Lower my wifes contributions to 3%, and put the 333.33 per month into a roth. I am not sure if I should start a roth for me or not, just need some help with this.

Let me hear some ideas.
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Old 11-04-2007, 09:20 AM   #2
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Given your young age and apparently good jobs, your income may increase in the next few years making you ineligible for a Roth IRA. So, there is good sense in both of you setting up a Roth now so it can grow over the years. Just make sure to keep your 401k contributions high enough so you don't lose the match.
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Old 11-04-2007, 09:36 AM   #3
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Bode, how about if you use your savings to fund the Roths? You can keep it in a mm account if it needs to serve as your emergency fund. You can withdraw contributions at any time without penalty. As you rebuild your after-tax savings you can reinvest the Roths more creatively.

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Old 11-04-2007, 02:10 PM   #4
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Combined you earn 120K per year. I don't understand why you would have to lower your 401k to contribute to a Roth. You must not be living much below your means unless your aggressively paying down your mortgage. I see no reason why you shouldn't both be able to max out your 401K and Roths and still have money left over for a taxable account if you want. I make barely 1/3 of your combined income and still max both 401k and roth so you can definetly do it if you want.
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Old 11-05-2007, 08:56 AM   #5
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Quote:
Originally Posted by bode316 View Post
Ok heres the deal.

I currently contribute 13% to 401k with 6% match. Dollar per dollar
On top of that, I get a 6% retirement plan from work based on total salary.
So basically together between the 2 accounts, I save 25% of my salary.
I make about 70k a year, and I am 24 years old. I have approx. $20,000 in the account.

My wife contributes 7% to 401k, and gets a 3% match. 50 Cents match to dollar.
Also gets a retirement plan that is 5.5% of total salary. SHe has approx. $2,000
She makes approx. 50k a year.

I want to get a Roth account going for atleast one of us, and maybe both. We have no debt besides a mortgage. We have a total of 12k in a taxable savings account, and money in stock options totally about 10k right now.

I really want to get a roth going so this is what I am thinking.
Lower my wifes contributions to 3%, and put the 333.33 per month into a roth. I am not sure if I should start a roth for me or not, just need some help with this.

Let me hear some ideas.
drop your 401k down to 6%, then put other 7% into Roth IRA
drop your wife's 401k down to 6%, then put the other 1% into a Roth IRA

Same savings rate, slightly higher taxes, money divided between accounts.
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Old 11-07-2007, 09:44 AM   #6
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Has anyone had experience/luck stories about those Vanguard funds that are designed for people retiring in X number of years?

I've been following Vanguard Target Retirement 2045.
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