I've been a recent lurker here and on bogleheads. Most of us could not afford to pay for the collective wisdom related to personal finance that you provide through these boards. Thank you.
I am starting a new job next month. The company allows me to contribute from 1-50% of my salary (pre-tax) to a 401k and will match 50% up to 3% of the salary contributed.
I don't know yet what investments the plan offers. How much I contribute will be determined based on that answer. However, assuming that I have decent options for low cost index investing, I do have a question for the board.
Background
Based on my budget, we can afford to put 5% my salary into the 401k.
My salary puts us in the 25% tax bracket.
We currently have saved between 15x to 30x our anticipated annual expenses in retirement, depending on whether we have a lavish or bare necessities budget. This does not include social security. We have money for the kids college outside of this. We are debt free including our home.
For our current investments, the account breakdown is as follows.
72.5% in ROTH IRA Accounts
04.5% in Traditional IRA Accounts
23.0% in Taxable Brokerage Accounts
Question
Does it make sense to increase the contribution to my 401k above the 5% budget in order to bring us down to the 15% tax bracket? We can make up the budget shortfall by divesting some of our investments and paying long-term gains?
I'm thinking along two lines of reasoning. The first is we gain on the tax savings between reducing my income vs the long-term gains. The second is we only have 4.5% of our income in traditional ira accounts. This would effectively allow us to move some out of taxable accounts and increase the traditional ira account as we look to balance our roth, traditional, and taxable accounts.
Thoughts?
I am starting a new job next month. The company allows me to contribute from 1-50% of my salary (pre-tax) to a 401k and will match 50% up to 3% of the salary contributed.
I don't know yet what investments the plan offers. How much I contribute will be determined based on that answer. However, assuming that I have decent options for low cost index investing, I do have a question for the board.
Background
Based on my budget, we can afford to put 5% my salary into the 401k.
My salary puts us in the 25% tax bracket.
We currently have saved between 15x to 30x our anticipated annual expenses in retirement, depending on whether we have a lavish or bare necessities budget. This does not include social security. We have money for the kids college outside of this. We are debt free including our home.
For our current investments, the account breakdown is as follows.
72.5% in ROTH IRA Accounts
04.5% in Traditional IRA Accounts
23.0% in Taxable Brokerage Accounts
Question
Does it make sense to increase the contribution to my 401k above the 5% budget in order to bring us down to the 15% tax bracket? We can make up the budget shortfall by divesting some of our investments and paying long-term gains?
I'm thinking along two lines of reasoning. The first is we gain on the tax savings between reducing my income vs the long-term gains. The second is we only have 4.5% of our income in traditional ira accounts. This would effectively allow us to move some out of taxable accounts and increase the traditional ira account as we look to balance our roth, traditional, and taxable accounts.
Thoughts?
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