46

Can a small family retire early with 1.2M + a part time job? With the right sacrifices, almost certainly. Can you retire early in the scenario you described? No. You're spending more per year than most people earn, so if you wanted to partially retire now you'd have to drastically reduce your expenditures or achieve higher part-time income. If you were ...


34

$90K expenses. Less $12,000 Income. That’s $78,000. You are asking if $78,000 can be returned from an investment of $1.2M. As a rule of thumb, we talk about a 4% safe withdrawal rate. But even then, that rate is based on a retirement that has about a 30 year horizon. So, $48,000 might be possible as an annual withdrawal, but many would say even that is too ...


34

For the reasons you cite may prefer the Roth IRA where you pay tax on the money contributed now, but future withdrawals are tax free. However there is a benefit to pretax plans such as traditional IRAs. Assume Tim and Ron are in a the 25% tax bracket and each will dedicate 1K per year to retirement savings. Tim does a traditional IRA, Ron a Roth. Because ...


32

No, they’re not trying to “trick you”. Government bureaucracies don’t do that kind of thing. You won’t get more money if you defer your first payment until after you’re seventy, so they’re making sure you apply in time to get the money you’re entitled to as soon as you are seventy.


28

You are saving 44.7% of your income for retirement and living like a miser as a result, so the question I propose is simply, "Why?" I must admit that the allure of financial security in retirement is very nice, and can seem worthy of extreme sacrifice to attain. However I believe, as I think you are now coming to realize too, that buying future ...


22

You mention IRAs and 401(k)s so I'm assuming you're based in the US. There is no requirement that you wait for retirement age to begin drawing on your retirement accounts-- you can happily start drawing on it early via substantially equal periodic payments. That's going to be based on your age and the size of the account but you're getting basically the ...


21

You can't do it all. This is why I dislike "put everything in your 401k!" advice: it ignores the reality that there are things other than retirement which are worthwhile to spend money on .


18

The FDIC will not protect you in the event of a market crash. It will only protect cash deposits and other cash-equivalent securities held within your retirement accounts if the institution holding those deposits (not necessarily the brokerage account) fails. If you invest in stocks, mutual funds, bonds, etc. that go down in value due to a market crash, FDIC ...


17

So you only benefit if you are in lower tax bracket when you withdraw With a traditional IRA, you benefit the most if you are in a lower tax bracket when you withdraw, but you still benefit some if you are in the same or even a slightly higher tax bracket. You are implicitly comparing to a non-IRA alternative, which I will take to be an ordinary taxable ...


16

To quote another answer: You can't max out your retirement savings. There is no limit to what you are allowed to save/invest for retirement. There are specific tax-advantaged ways to invest money (IRA, 401(k), HSA, 529, etc.) that have various rules constraining amount and manner of contributions, distributions, etc.; it is possible to max out these ...


12

Your primary focus in retirement should be preservation of assets. Assuming that's resolved, despite popular wisdom, I would withdraw the assets that incur the lowest amount of taxation with the intent of having the highest taxed assets going to my heirs with a stepped up basis (no taxation). In addition, if you minimize the tax bite of a withdrawal (for ...


11

Financial planning requires you to consider all your financial goals, and prioritize them. As it stands, you have defaulted to consider your retirement savings to be the #1 priority, but it is not clear that you have done that after careful analysis. It seems you have done that out of perhaps a fear of what retired life will look like for you. Financial ...


10

The bottom line is you were given incorrect information in both cases. There is federal law/tax code that governs this situation. It used to be that one had to replay a 401K soon after leaving an employer (within 60 days), and for that reason it was widely discouraged by most financial advisers to take such a loan. However, under the Trump tax plan that has ...


10

Any trades made within an IRA are not subject to being taxed for that given year. If you wanted to be a high-risk trader then you could trades stocks till your eyes bleed and not be subject to taxes on your gains. This of course assumes that you're actually making trades in your favor instead of losing money like most people =)


8

with one partner working a part time job, providing decent health insurance (i.e Starbucks $12/hr) ? Part-time may require 30 hours a week to qualify for the benefit. And that assumes that the ACA survives. If it doesn't, then it might require 40 hours to get benefits, or picking from a smaller bucket of employers. $400K combined savings/investments That ...


8

There is nothing that requires you to give up your IRA when you leave the US. You can continue to maintain the account, and the balance will increase or decrease over time based on how you have the funds invested in the account. What happens when you go to withdraw money from the account at retirement age will depend on where you are residing. The US ...


8

With a Roth IRA, you can withdraw your contributions at any point without tax consequences. If you have a traditional IRA (or withdraw more than just your contributions from a Roth IRA) then you are correct, early withdrawal can carry penalty. Since the different types of IRA already give you significant flexibility and they have a relatively low annual ...


8

Preparing to retire and I've looked at a lot of info on the internet and it all says the same thing: pull money out of your high taxed brokerage account first so you leave all that tax deferred money in your IRA alone. Do they say to pull all of your money immediately out of all your taxable accounts?? No, they don't. Sell long-term investment first, only ...


8

Because the mortgage company doesn't care about your mother as an individual. They have a certain set of (probably automated) bureaucratic procedures that they go through for everyone that fits particular criteria. At the moment, your mother fits the "employed with W2 income" set of procedures, so she gets to provide those paycheck stubs and tax ...


8

Generally, (and not considering Roth vs traditional status) the way you would want to prioritize/order these contributions would be the following: 401(k) up to whatever is required to capture maximum employer match (in your case this is 0) IRA up to maximum. Currently this maximum is the lesser of your earned income or $6,000 (or $7,000 if you are over 50). ...


7

For most people a properly diversified stock market investment is actually better than buying 4 houses: you can start investing with small amounts of money every month a house is a huge clump investment. This is the exact opposite of a diversified investment. It does not matter if you are a company with thousands of units but if you only have 1 or 2 houses ...


7

The typical way to value such payments is to think about it from an investment standpoint. Meaning, how much would I pay for an annuity (which is just a fixed series of payments) with some interest rate r that paid P dollars for n years? The rate of return can be either a "risk-free" rate of return like you'd get from a savings account, or if you ...


6

Yes, if they file with Married Filing Jointly filing status. The so-called "spousal IRA" is not a different kind of IRA; rather, it just refers to the rule that when the couple is filing as Married Filing Jointly, it considers the couple's joint earned income instead of separate earned incomes, so that if the couple has at least $14000 in joint ...


6

When faced with the dilemma regarding how to allocate retirement funds the general advice is to allocate enough money in the 401(k) to maximize the company match, then put money in the IRA until you reach the maximum IRA contribution, and then put more in the 401(k) if you need to save more. The complexity for some is that their income, or their family ...


6

Lots of good answers pointing out the financial advantages, but I don't see any mention that retirement accounts can also provide you with some protection in the event of a bankruptcy or lawsuit. While not ironclad protection in either event, they're definitely not as exposed as a brokerage account would be. https://www.fool.com/retirement/what-happens-...


5

To first order, assuming your tax rate in retirement will be the same as now, you would be indifferent between traditional and Roth -- an equal reduction in current take-home pay will lead to equal after-tax retirement income. Note that the employer match always goes into a traditional account, so that does not affect the decision (since you are maxing out ...


5

You don't deduct taxes for Traditional IRA contributions as the title of your question says; in some circumstances, the law permits a taxpayer to deduct the Traditional IRA contribution from gross income is arriving at the Adjusted Gross Income (AGI) which is what can be subject to taxation (subject to additional rules). Taxpayers in this fortunate situation ...


5

Two things stick out at me that I would consider adjusting: You are putting a very large percentage of income into retirement. You could easily lower that amount to provide some more "breathing" room. Another idea would be to switch some of the Roth to Traditional on either the 401k or the IRA which would reduce your taxes by approximately 22% of ...


5

What am I missing here? The example is for one year: two people each accumulating $19500 for 30 years is $1,170,000. If it earned 3.73% (the rate at which money triples in 30 years) the whole time, they'd have just under $2.1 million. 4% of that is $83,650/year, which puts you in the 24% bracket. While employed, their combined earnings are $19500/15% x 2 = ...


5

My question is basically what makes IRA better than putting in a brokerage account to buy index fund etc. You put money in a regular brokerage account with after-tax dollars. When you sell something within a brokerage account, you may pay taxes on your gains every year1. If you were to take the same after-tax dollars and put them into a Roth IRA instead of ...


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