Current situation: 24 yo, getting married this summer. Our finances are pretty much already combined. NW ~150k, mostly in cash and equities. Goal is to be FI in 11ish years by age 35.
Currently on track to max my trad. 401k, Roth IRA, and HSA this year. From research and reading this sub, I thought even if you wanted to access funds before 59.5, the trad 401k was still probably best.
We had a free session with a financial advisor recently just for the heck of it. He suggested lowering 401k contributions to just get employer match and either switch to Roth 401k or taxable investments. The rationale being that 401k money is locked up and you have to pay income tax on it even if using early withdrawal methods (72t, Roth ladder). And he argues that tax rates are likely to go up (even if we were to go down in brackets). This point makes relative sense to me but everything I've read says max traditional 401k -> HSA -> Roth IRA -> taxable investments.
I definitely do want to contribute to taxable investments since the goal is aggresive. This year we are paying off student loans aggresively so are only investing a few hundred per month in taxable (and aren't budgeting to max my spouses roth IRA).
So in future years we likely could max my spouses Roth IRA as well and contribute more to taxable investments.
But what is the general consensus? Does it make sense to continue in traditional 401k or take some of that and put it into taxable accounts instead. TYIA
Also if this context helps, HHI is 140-150k
Ditch traditional 401k for Roth or taxable?
byu/Savings_Actuary_2833 infinancialindependence
Posted by Savings_Actuary_2833
1 Comment
You’ll likely have low income in retirement, so pulling out money out of your traditional 401(k) will have minimal taxes. Stay the course on what you’re doing. In the end, nobody really knows what the tax situation will look like 40 years from now. You can diversify amongst both traditional 401(k) and Roth 401(k) if that makes you feel better