25 Year old Professional needs HELP!!! Pivot Point in life and $$ items

[Anonymous]

the only reason I am hesitante to start a Roth IRA and take out of my emgerncy funds to fund this new Roth IRA is if I continue to put in 8% of my income to my 401(k) till I retire at 65, with my employer putting in 10% of my annual salary and getting 7% return annually..

by the time I retire I will be sitting on a little under 4.5 million$$$

if I move companies and they match 100% up to 6% of my contributions I am still sitting on 3.5Million$$$

so why would I fund a Roth IRA now when I could continue to put $800 to $1000 in my general savings for a ring, house, downpayment on a car?

thats where I get confused

lol, is 3.5 to 4.5 million not enough anymore?  and that is only my retirement, not including my wifes?

[vawt]

Since the Roth IRA is after tax, you won't pay any taxes on that investment when you begin taking distributions from it.  With a 401k, you will have to pay the prevailing tax rate then and many people think it will be much higher than now.  Essentially you are hedging your bets by accumulating funds in both types of accounts.  Long-term I think its a good idea to use both.

If you already have $11k in savings, you can afford to max out a Roth in 2008 (in my opinion).

Congratulations on being on very solid financial ground at age 25.

[Anonymous]

yeah, I did the math and have read a couple books about 401k vs Roth IRA and I plan to be in a lower tax bracket when I retire just cause I will not have the same expenses... so thats why a 401k made sense to me.

I heard that a Roth IRA vs 401(k) were pretty much even out because of the Roth IRA taking taxes out now.

well I have 11k in the bank for savings... but I want to have more in case of a buffer.

i guess what is everyones opinion on staying with a 401(k) and not doing a Roth IRA at all?  and just throwing all my savings into my ING (while still slowly moving my % of my 401K up?)

[Anonymous]

i guess what is everyones opinion on staying with a 401(k) and not doing a Roth IRA at all?  and just throwing all my savings into my ING (while still slowly moving my % of my 401K up?)

just wanted to bump this

having my ING has been awesome, they do also have CDs.  If I keep doing my 401(k) at 8% and put my residual $$$ into my ING while putting $3k here and $5k there into a 6 month CD would that be smart or should I look more into investing (which I know little about)

[Anonymous]

So this is silly and upfront of me but I have to chime in.

You sound exactly like my husband at 25.  And now he's sitting on a buckeful of money from smart investing, but he's so attached to that money that I have old mauve carpet under my diningroom table, an Amex bill (from medical expenses from our son who is in the autism spectrum) I was afraid to tell him about because I thought it would give him a heart attack, my refrigerator shelves are being held together by duct tape, we haven't taken a real vacation in 4 years. Oh and our house is almost paid off.  And he will not rest until he has saved 'his first million'.

So my advice is this!  Live a little!!!   Don't be so hyper focused on savings that you drive your new wife crazy!!  Take a vacation!!      Sorry I just wish someone had said that to my husband 15 years ago.  

That's all from me.  Carry on. 

Leigh

[haulingthescoreup]

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@Anonymous wrote:

yeah, I did the math and have read a couple books about 401k vs Roth IRA and I plan to be in a lower tax bracket when I retire just cause I will not have the same expenses... so thats why a 401k made sense to me.

I heard that a Roth IRA vs 401(k) were pretty much even out because of the Roth IRA taking taxes out now.

well I have 11k in the bank for savings... but I want to have more in case of a buffer.

i guess what is everyones opinion on staying with a 401(k) and not doing a Roth IRA at all? and just throwing all my savings into my ING (while still slowly moving my % of my 401K up?)

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It's great to think that you will be in a lower bracket, but I can promise you that with ~$4 million in retirement funds, your income is going to put you in a very high bracket, especially when you're required to start withdrawing.

That's the advantage of a Roth. Once you retire, start pulling money from your Roth, and it will be untaxed. Then when you start the mandatory withdrawals from your regular 401(k), you'll be older, plus since it won't be as huge (part of that money will be in the Roth instead), you will have to pull less, and therefore you'll pay less tax.

Think of it as staged income.