Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
401k roth and something else
Old 10-12-2006, 09:04 PM   #1
Dryer sheet aficionado
 
Join Date: Feb 2006
Posts: 46
401k roth and something else

Ok, here are my stats

Just turned 23. Love my job(apache corporation), great security, make 55k.

I put 12% of salary to 401k, and the company matches 6% (already have 2k).

The company also fully funds another account for 6% of gross salary.


Here is my question, would I be better off lowering my 401k to 6% and putting the rest in a Roth?

Also, my future wife is an RN, makes 45k puts up 10% and gets a 4.5% match. (same question, move some to roth?)

Plus, she gets a fully funded account by her employer for 6% of her gross salary.

Last question, we gross right at 90-100k. We will be getting married next summer. What is the price range we should be looking at in a house? (I have 20k saved up already, and plan on having 35k when we buy)

Our salaries will go up atleast 3% every year, plus we get bonuses.
__________________

__________________
bode316 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: 401k roth and something else
Old 10-12-2006, 11:46 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Re: 401k roth and something else

Apache? Nice. Hey, I have this memory leak....

Yes, lower the 401k to put some in the Roth. The general rule is to get the 401k match, max the Roth, and then increase the 401k with whatever is left.

As for the house, that depends on the area. You'll need to save 20% for the downpayment though. You don't want to pay the PMI, which is not tax deductible.
__________________

__________________
eridanus is offline   Reply With Quote
Re: 401k roth and something else
Old 10-13-2006, 07:33 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,271
Re: 401k roth and something else

I have a slightly different take... but close...

First to 401 to get all the match... then determine how much more you can contribute so you do not fall into the lower tax bracket... (I have a few friends who will fall into the 15% bracket if they maxed out)... put in the amount until you would drop to that bracket...

Then do ROTH...

Then do taxable accounts...

As for a home.. the 'old' rule of thumb was 2.5 to 3 times your gross salary... but it seems that has gone up to 5 times in many locations..
__________________
Texas Proud is offline   Reply With Quote
Re: 401k roth and something else
Old 10-13-2006, 11:42 AM   #4
Dryer sheet aficionado
 
Join Date: Feb 2006
Posts: 46
Re: 401k roth and something else

Why would you not want to fall into a lower tax bracket?
__________________
bode316 is offline   Reply With Quote
Re: 401k roth and something else
Old 10-13-2006, 11:45 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: 401k roth and something else

Quote:
Originally Posted by bode316
Why would you not want to fall into a lower tax bracket?
Just a guess, but I suspect that Tx Proud doesn't wish to do so because he'd rather pay 15% and get the money into a Roth.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: 401k roth and something else
Old 10-13-2006, 06:34 PM   #6
Thinks s/he gets paid by the post
Coach's Avatar
 
Join Date: Nov 2005
Location: Colorado, USA
Posts: 1,127
Re: 401k roth and something else

Hey Bode, if it were me, I'd keep funding the 401k rather than switch money into a Roth. I know, it may not be the best solution mathematically, but at 23 I would HATE paying taxes that I could defer for 30 or 40 years.

But I would use my emergency fund to fund a Roth, until I was saving enough to fully fund the 401k and the Roth. Then I'd start building after-tax savings.

Using a Roth for your emergency fund, you'd want to pick something safe like a money market account. Then start diversifying it when it get big enough.

Coach
__________________
"Comprehensive health insurance is an idea whose time has come in America." President Richard M. Nixon, February 6, 1974
Coach is offline   Reply With Quote
Re: 401k roth and something else
Old 10-13-2006, 07:10 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,271
Re: 401k roth and something else

Quote:
Originally Posted by brewer12345
Just a guess, but I suspect that Tx Proud doesn't wish to do so because he'd rather pay 15% and get the money into a Roth.

ding, ding ding... we have a winner...

Coach.. the problem I have with your thinking is that all you are doing is DEFER taxes... you still will pay them 30 or 40 years down the road... where if you were in a ROTH, you would NOT pay any taxes down the road... so, for a small tax today (say 15%) you have 'bought' 30 to 40 years fo compounding TAX FREE FOREVER...

Now, if you are in the 15% bracket when you retire.. then it is a push... but if you are in a higher bracket... well.. than you pay more..
__________________
Texas Proud is offline   Reply With Quote
Re: 401k roth and something else
Old 10-13-2006, 09:27 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,948
Re: 401k roth and something else

Quote:
Originally Posted by bode316
Why would you not want to fall into a lower tax bracket?
Bode, they are not saying it's bad to fall into a lower tax bracket, but the 401k benefit is more valuable in the higher tax bracket. Once you have put in enough to drop your bracket down from 25% to 15%, some believe there is more "value" in using a Roth from that point on.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Re: 401k roth and something else
Old 10-15-2006, 07:15 PM   #9
Dryer sheet aficionado
 
Join Date: Feb 2006
Posts: 46
Re: 401k roth and something else

Yeah, I get what you are saying now. Anymore advice?
__________________

__________________
bode316 is offline   Reply With Quote
Reply

Tags
401k


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:46 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.