geeman said:When you guys retire early, what happens to your 401K and IRA's? Do you withdraw them early or do you have other accounts to hold you over until you reach proper age to withdraw these retirement accounts?
Notth said:Total contribution to all IRAs together cant exceed 4000. And that 4000 is split between traditional and roth, so if you put 2000 into one, you can only put 2000 into the other...
The conventional wisdom is:geeman said:But if you have both, you can't lose.
Nords said:The conventional wisdom is:
1. Max out 401(k) contributions to the limit of your employer's match.
1a. Max out whatever other employer programs that are matched or discounted, like options or buying employee stock or the other 400-series numbers.
2. Max out your Roth IRA contribution.
3. If you haven't hit the IRA limits yet, put the rest into a conventional IRA.
4. Put the rest of your savings into taxable accounts.
Nords said:The conventional wisdom is:
1. Max out 401(k) contributions to the limit of your employer's match.
1a. Max out whatever other employer programs that are matched or discounted, like options or buying employee stock or the other 400-series numbers.
2. Max out your Roth IRA contribution.
3. If you haven't hit the IRA limits yet, put the rest into a conventional IRA.
4. Put the rest of your savings into taxable accounts.
Wotta deal, eh? How ironic that my spouse may never get a pay billet again. Not that she needs it, but the Navy requires Reservists without a pay billet to either drill for free or to go inactive. Considering the hassles of the alternatives it's easier to have a pay billet.FlowGirl said:Nords,
Any opinions on priority of TSP v. Roth contributions when there is no matching? In 2006 the percentage limits for military contributors are removed and we'll be able to contribute the full $15k to husband's TSP regardless of income. Not sure if we'll be able to swing full contributions of $15K to TSP plus $8K to Roth so need to decide how to allocate. My first instinct is to max out TSP first because we'll have until April of the following year to throw money into the Roth if we have it.
BTW, we don't always use Roth. In 2002 and 2003 we put some of our IRA money into a conventional IRA as it lowered our AGI enough to qualify for the 10% saver's tax credit. In 2004 we were back to full Roth as spouse spent half the year in a tax exclusion zone and we qualified for the 50% saver's tax credit regardless. Not sure what will happen this year, because we're in the middle of an overseas move and I'm not sure of how my job prospects look yet. Plus the spouse is getting promoted so am waiting for things to settle before I run the numbers, but I'm keeping a chunk of our IRA money in reserve to throw into whichever (Roth or conventional) is most advantageous.
"It depends." (I hate that answer.) The reason for it being conventional wisdom is that most 401(k)s have high expenses and lousy fund options, so the best thing about most 401(k)s is the employer match.Sheryl said:Nords, could you explain why it would not be better to max the 401(k) regardless of employer's match? I've been doing that the last two years (since the plan was implemented) and assumed that I would be best off to stash as much of my savings as possible there now, tax free. I have also maxed the Roth, but because of the 401k am not eligible for an IRA. Thanks!