Comments on: The Right Contribution Order Between Your Investment Accounts

By: Jay

Jay — Fri, 10 Jan 2025 03:54:10 +0000

In reply to Financial Samurai. Ha! 2 years later why not. MF was saying to max 401k for years then when ready to leave the workforce move that money into Traditional IRA. From there, you would do a series of conversions to Roth IRA (which would be accessible in 5 years ). So in year 1 you would convert what you need for income in year 6. In year 2 you would convert what you need for income in year 7 etc.. If your income is low enough you can avoid the taxes during the conversion (or at least most of them) and because of that the timeline to FIRE would be decreased. They call this the Roth Conversion Ladder.

By: George

George — Thu, 21 Jul 2022 00:03:33 +0000

You don’t have to do a roth conversion every year because you can do a backdoor roth IRA. This is done by contributing to a traditional IRA with after tax dollars and then immediately rolling that to a roth IRA. This loophole was on Biden’s docket to be closed last year but it didn’t make the cut so you are still in luck for the time being.

By: Mike

Mike — Wed, 26 Jan 2022 00:43:18 +0000

In reply to J K.

Rule of 55 can differ between plans. Many plans don’t even offer them. Look into your individual plan before counting on the rule of 55

bankrate.com/retirement/rule-of-55/

Here is some information on SEPP payments. You can change them the latter of 5 years or reaching 59 1/2.

investopedia.com/terms/s/sepp.asp#:~:text=The%20amount%20you%20withdraw%20will,the%20lifetime%20of%20the%20plan.

By: Joe

Joe — Tue, 25 Jan 2022 06:04:11 +0000

We always contribute to the tax-advantaged accounts first to minimize current tax liability.
After that, we go with Roth IRA then taxable accounts.
As a result, our tax-advantaged account is about 3x our taxable account. We didn’t make high enough income to save more in our taxable account. I think most normal people are in the same position. It’s hard to overtake your tax-advantage accounts unless you make high income.

By: Financial Samurai

Financial Samurai — Sun, 23 Jan 2022 23:23:53 +0000

In reply to Jay.

Hi Jay,

I’m actually not exactly sure I understand what you and MF are saying. If you contribute to your tax-advantaged accounts and not to your taxable accounts, how does one retire early and live off the investment income before age 60?

MF is in a different situation than I am in. He has no kids and his wife has been working full time as an optometrist.

I think it’s great more stay at
home men without kids are owning their retirement. However, I’m way too busy as a dad and writer to say I’m retired.

Looking back, retiring without kids was a walk in the park. And having my wife earn six figures and provide for healthcare would have made early retirement even easier. Alas, I haven’t been able to convince her to go back to work, yet! :)

Sam

By: Mike

Mike — Sun, 23 Jan 2022 21:22:16 +0000

Ages 40 & 44. 2 kids (1 & 3). 100% Equities. Late starters so once we meet our number we will rebalance into more conservative portfolios.

We have access to:

403b we will max out for first time 2022 to age 65 with top ups.

457b we will contribute 10k and are starting in 2022 build up to max to age 65 with top ups.

Pension ~8% pay.

HSA we contribute to.

We have our Roth’s established and will contribute max.

Brokerage account: 100% Equities; 50% VTI 50% VXUS.

I am curious between a brokerage account that we already have or if we should start contributing to our works DC (defined contributions) after tax contributions?

We will work to max our both 403b and 457b since we will have to stay at our CA state job to gain our pensions.

529’s we front loaded and now contribute a few hundred dollars a month. 100% VTI.

By: Jay

Jay — Sun, 23 Jan 2022 20:48:02 +0000

Hey FS,

Great article. I’ve been hoping you’d do this topic for awhile.

I’m curious about your thoughts on this article from MF. He’s seems to have a different opinion on this subject. My takeaway is that he is saying that for middle income people ( ~22% bracket) contributing to retirement accounts is an optimization for FIRE rather than an insurance policy for old age as you describe above. Only difference I might see is that you are referring to living off income generated whereas he is referring to living off capital gains from selling? What do you think? Did you consider this perspective in your analysis ?

madfientist.com/retire-even-earlier/