SkinsFan0521
Dryer sheet aficionado
- Joined
- Nov 17, 2016
- Messages
- 48
Hi,
I want to explain my situation a bit and see what people think about if we should be investing in a Roth or Traditional 401k going forward.
My wife & I are both 34 and hoping to FIRE between 45 & 50 with spending around $100-120k/year (basically the max to be at the top of 0% cap gains bracket for married filing jointly). We only have a few thousand in a brokerage account and plan to contribute about $6k/year going forward. All the rest of our money is in Roth IRA, Roth 401k, & Traditional 401k. We currently max both of our Roth IRA and both of our Roth 401k and the family HSA. We're right at the cusp of the income limits for Roth IRA contributions, so if we continue to contribute to Roth 401k, we'll be disqualified from Roth IRA contributions in the next 1-2 years.
My biggest concern right now with FIRE is not having enough money to bridge the gap between whatever age we do RE and 59.5. I'm aware that I can use 72t, but I really would like to avoid that. I'm also aware that I can withdraw our contributions to our Roth IRA, but that's probably only going to be like 1-2 years of spending.
Based on all of that information, I'm thinking that we should start to max our traditional 401k instead of Roth going forward and take the tax savings (something like $9-$10k I believe?) and put that into our brokerage account. That would get us to about $15k/yr into the brokerage. As we earn more, we would obviously increase that amount. If I understand it correctly, the other benefit of that is that it would also put us below the income limits for Roth IRA and allow us to continue to max those out for several more years. Is that correct?
The other thought that I had is that if we continue to contribute to Roth 401k, we can roll those into an existing (open for 5+ years) Roth IRA at the time of FIRE and that $$ will then be considered contributions which would be able to be withdrawn at any time prior to 59.5 without penalty. Is that correct?
So, does anybody have any thoughts on what would be recommended for our specific situation? I just want to do everything I can to give us the best chance of having $$ to bridge the gap from FIRE to 59.5 when we can access all of our traditional 401k money.
Thank you!
I want to explain my situation a bit and see what people think about if we should be investing in a Roth or Traditional 401k going forward.
My wife & I are both 34 and hoping to FIRE between 45 & 50 with spending around $100-120k/year (basically the max to be at the top of 0% cap gains bracket for married filing jointly). We only have a few thousand in a brokerage account and plan to contribute about $6k/year going forward. All the rest of our money is in Roth IRA, Roth 401k, & Traditional 401k. We currently max both of our Roth IRA and both of our Roth 401k and the family HSA. We're right at the cusp of the income limits for Roth IRA contributions, so if we continue to contribute to Roth 401k, we'll be disqualified from Roth IRA contributions in the next 1-2 years.
My biggest concern right now with FIRE is not having enough money to bridge the gap between whatever age we do RE and 59.5. I'm aware that I can use 72t, but I really would like to avoid that. I'm also aware that I can withdraw our contributions to our Roth IRA, but that's probably only going to be like 1-2 years of spending.
Based on all of that information, I'm thinking that we should start to max our traditional 401k instead of Roth going forward and take the tax savings (something like $9-$10k I believe?) and put that into our brokerage account. That would get us to about $15k/yr into the brokerage. As we earn more, we would obviously increase that amount. If I understand it correctly, the other benefit of that is that it would also put us below the income limits for Roth IRA and allow us to continue to max those out for several more years. Is that correct?
The other thought that I had is that if we continue to contribute to Roth 401k, we can roll those into an existing (open for 5+ years) Roth IRA at the time of FIRE and that $$ will then be considered contributions which would be able to be withdrawn at any time prior to 59.5 without penalty. Is that correct?
So, does anybody have any thoughts on what would be recommended for our specific situation? I just want to do everything I can to give us the best chance of having $$ to bridge the gap from FIRE to 59.5 when we can access all of our traditional 401k money.
Thank you!