IRA-poor?

[Dpmbball]

That's what tax-deferred means. You don't actually save taxes, you defer them. Eventually taxes get paid, if not by you then by those that inherit the accounts. Many times people will pay their deferred taxes at a lower marginal rate but not always.

Diligent savers can often accumulate higher after-tax level of assets by avoiding tax favored accounts (except for Roth). Tax deferred accounts rob you of the capital gains tax treatment of stock investments since all the gains get taxed as regular income. And taxable accounts don't have RMD issues. However few people will have the discipline to grow and maintain sizeable taxable accounts. Just about everyone succumbs to the siren call of "save money on taxes" by contributing to tax-deferred retirement accounts.

Roth is worth it only… I agree

If the income tax rates are the same at contribution and withdrawal than Roth and Traditional have the same outcomes - thinking that only Roth is worth generally stems from a fundamental misunderstanding of the benefits of tax advantaged accounts - it is a false conclusion to draw.

If you consider what we were talking about taxed brokerage T- 401k/IRA and Roth the two best are Taxed brokerage and Roth if you don’t want to work to 60 if you want to work to 60 then whatever

Again, it doesn't matter whether you want to work until 60 or not - the consideration is only about tax rates.

Most people who want to retire before 60 will definitely be better served with a traditional 401k over a Roth since they are likely to have low tax years after retirement before social security to make conversions.

And again if they retire before 60 you have to live off taxable brokerage or saving unless you want to be hit with IRS rule 401k early withdraw penalties this I believe taxable brokerage for those who want to retire before 60 to be main focus to bridge the gap so you can avoid the early withdraw penalty at 60 assuming that it remains at 60 and doesn’t increase

[Dpmbball]

That's what tax-deferred means. You don't actually save taxes, you defer them. Eventually taxes get paid, if not by you then by those that inherit the accounts. Many times people will pay their deferred taxes at a lower marginal rate but not always.

Diligent savers can often accumulate higher after-tax level of assets by avoiding tax favored accounts (except for Roth). Tax deferred accounts rob you of the capital gains tax treatment of stock investments since all the gains get taxed as regular income. And taxable accounts don't have RMD issues. However few people will have the discipline to grow and maintain sizeable taxable accounts. Just about everyone succumbs to the siren call of "save money on taxes" by contributing to tax-deferred retirement accounts.

Roth is worth it only… I agree

If the income tax rates are the same at contribution and withdrawal than Roth and Traditional have the same outcomes - thinking that only Roth is worth generally stems from a fundamental misunderstanding of the benefits of tax advantaged accounts - it is a false conclusion to draw.

If you consider what we were talking about taxed brokerage T- 401k/IRA and Roth the two best are Taxed brokerage and Roth if you don’t want to work to 60 if you want to work to 60 then whatever

I don't how you can know that in the absence of information about the tax rates at accumulation vs. decumulation?

Well if you have a Roth and taxable brokerage with mix of long term gains/dividends and SS then your tax rate in retirement would be very low. If you retire before SS age and you just have taxable brokerage long term gains/dividends then you will be at 15%.

This is my point aiming for 5 million in taxable at 50 or 55 or 45 and retiring while having a Roth grow in the background and SS waiting to me is better than being locked into IRA/401k rules… I’m not saying don’t have 401k/IRA I am saying they should be supplemental for those wanting to retire before 60.

[Dpmbball]

If you consider what we were talking about taxed brokerage T- 401k/IRA and Roth the two best are Taxed brokerage and Roth if you don’t want to work to 60 if you want to work to 60 then whatever

I’m missing something.

It sounds like you’re assuming that if you retire before 60, you need all of your money to be immediately accessible?

But surely instead you’ll be spending a lot of that money AFTER you reach 60 and have access to your tax-deferred account—and quite possibly a lower tax rate.

Why pay higher taxes on more than you need to?

If you consider what we were talking about taxed brokerage T- 401k/IRA and Roth the two best are Taxed brokerage and Roth if you don’t want to work to 60 if you want to work to 60 then whatever

I’m missing something.

It sounds like you’re assuming that if you retire before 60, you need all of your money to be immediately accessible?

But surely instead you’ll be spending a lot of that money AFTER you reach 60 and have access to your tax-deferred account—and quite possibly a lower tax rate.

Why pay higher taxes on more than you need to?

I am saying you would want to access money that is penalty free and retiring before 60 that money is in checking/savings/under your mattress or taxable brokerage or Real estate, coins, art… IRA/401k you have a penalty before 60 so you want to bridge the gap.

Taxable brokerage Long term gains and qualified dividends are 15% tax after you are retired and not at high income level money in savings/checking doesn’t get taxed when you want to access…I have most of my savings in taxable brokerage checking/savings not IRA/401k bc my goal is to retire in my 40’s that’s 5-7 years away I just need another million or so saved and without a large in controlled deviation from the plan I will do it… what if 80% of it was in 401k/IRA ? I’d have to work longer because of those retirement plan rules

[avalpert1]

Roth is worth it only… I agree

If the income tax rates are the same at contribution and withdrawal than Roth and Traditional have the same outcomes - thinking that only Roth is worth generally stems from a fundamental misunderstanding of the benefits of tax advantaged accounts - it is a false conclusion to draw.

If you consider what we were talking about taxed brokerage T- 401k/IRA and Roth the two best are Taxed brokerage and Roth if you don’t want to work to 60 if you want to work to 60 then whatever

Again, it doesn't matter whether you want to work until 60 or not - the consideration is only about tax rates.

Most people who want to retire before 60 will definitely be better served with a traditional 401k over a Roth since they are likely to have low tax years after retirement before social security to make conversions.

And again if they retire before 60 you have to live off taxable brokerage or saving unless you want to be hit with IRS rule 401k early withdraw penalties this I believe taxable brokerage for those who want to retire before 60 to be main focus to bridge the gap so you can avoid the early withdraw penalty at 60 assuming that it remains at 60 and doesn’t increase

There are ways to access without penalty before 60 - but what's more, for someone to retire before 60, unless they have a terminal illness, they will need to fund retirement after 60 as well... achieving the ability to fund retirement both before and after 60 will be a lot easier if they were smart enough to use the tax-advantaged options the government provides them...

[Dpmbball]

If the income tax rates are the same at contribution and withdrawal than Roth and Traditional have the same outcomes - thinking that only Roth is worth generally stems from a fundamental misunderstanding of the benefits of tax advantaged accounts - it is a false conclusion to draw.

If you consider what we were talking about taxed brokerage T- 401k/IRA and Roth the two best are Taxed brokerage and Roth if you don’t want to work to 60 if you want to work to 60 then whatever

Again, it doesn't matter whether you want to work until 60 or not - the consideration is only about tax rates.

Most people who want to retire before 60 will definitely be better served with a traditional 401k over a Roth since they are likely to have low tax years after retirement before social security to make conversions.

And again if they retire before 60 you have to live off taxable brokerage or saving unless you want to be hit with IRS rule 401k early withdraw penalties this I believe taxable brokerage for those who want to retire before 60 to be main focus to bridge the gap so you can avoid the early withdraw penalty at 60 assuming that it remains at 60 and doesn’t increase

There are ways to access without penalty before 60 - but what's more, for someone to retire before 60, unless they have a terminal illness, they will need to fund retirement after 60 as well... achieving the ability to fund retirement both before and after 60 will be a lot easier if they were smart enough to use the tax-advantaged options the government provides them...

In most cases that last part is true and in some cases it can force you to have to work to 60. Unless at 55 one uses IRS rule 72t or uses the T IRA/401k 5 year Roth conversion method

[Tundrama]

mikejuss - just for the record - nearly all S&P 500 index. We did hop out/hop back in one time on a sell/buy signal from Bob Brinker - maybe in 2000? Maybe that made more than a difference than I realized. But we've been almost exclusively index investing since our 20's. I guess I didn't realize our saved amount was out of the ordinary.

I still don't see how to get to $7 million via retirement accounts alone.

Wife and I are are at 3 plus, 59 and 55 years old. I can see the math had we done things a little differently, and a little earlier. And, all in S and P 500.

[suevv]

Hi friends -

Original poster here with a long overdue followup and thank you.

After working through the wisdom and reality checks offered by you folks - well we are now the proud owners of a little cottage in Carmel, CA. We took a mortgage through Charles Schwab/Rocket mortgage, qualifying based on our assets in our retirement accounts, plus the income we still have since we haven't jumped off the hamster wheel YET. We put 30 percent down, and have a 10-year fixed at 6 percent (after a 0.75% rate cut based on the value of our assets at Schwab). We will refi to a 30-year fixed after the fed does its bit with interest rates.

For the down payment - we sold nearly all our individual stocks, $275k, (keeping a small amount for sentiment's sake), took $200k out of our Roths, and then paid taxes to net out an additional $170k from our IRAs. We are also needing to do some repairs (which of course is why we could afford the little house), so we will probably net out another $100k to cover that Plus a bit more to cover mortgage payments through the end of the year. So with the tax payments, we ended up taking out just a little over $1.2M.

We will make payments out of our Roths, which we will feed with conversions beginning next year - when our income rate drops back down into the sanity range . Oh - and I sold off a chunk of our equity mutual funds to grab a 5-year ladder of t-bills/bonds - still in the IRAs - while rates were mostly over 5%. So we have a few years buffer if the market hits a rough patch while our finances settle back down.

The cottage is high enough up so that the back balcony has a little peek of Monterey Bay. Every time I stand on that balcony I just pinch myself - I can't believe its ours (well 30% ours).

Many thanks for all the enthusiastic advice. You guys are awesome,
Sue
PS - Compounding never stops - our accounts are already ticking back up toward $7M. Crazy!

[helloeveryone]

mikejuss - just for the record - nearly all S&P 500 index. We did hop out/hop back in one time on a sell/buy signal from Bob Brinker - maybe in 2000? Maybe that made more than a difference than I realized. But we've been almost exclusively index investing since our 20's. I guess I didn't realize our saved amount was out of the ordinary.

I still don't see how to get to $7 million via retirement accounts alone.

Seems doable. OP maxed out retirement account, Spouse maxed out SEP IRA (nowadays it’s $69k max. not sure what it was in past, all s&p 500, started in 20’s. Now mid-late 50’s. Doesnt indicate asset allocation but if 100% stocks $7million seems attainable

[YHD]

OP

Congrats on living the dream.

I may join you in near retirement and second home ownership in a VHCOL in the near future.

How fun