What are people’s thoughts on having a big % of net worth in retirement accounts? I have been heavily contributing to retirement accounts since I started working. This year I maxed Pre-tax 401k (~22k + 11k match) and After-tax 401k which I rollover to Roth IRA (~33k). My NW looks something like: ~75k in Pre-tax 401k ~65k in Roth IRA ~60k in Investment accounts, mostly from vested RSUs ~20k savings ~5k CDs I am conflicted because I’m young (just turned 25) and I won’t be able to touch that money for 35 years (more than what I have been alive lmao). Not planning on buying a house yet, but I’ll probably need a big down payment and stuff since I live in Bay Area. Idk what do y’all think of this strategy? *pic of NW to attract views* YOE 1.8 TC 250 L4 #personalfinance #investments
I would prob contribute less towards retirement accounts to build up a balance which can be used for a down payment
And if you aren’t buying in the next 5 years, invest the down payment in low risk indexes.
You can borrow 50k of that 401k for a down-payment, which helps
I wish I had done that, started maxing out retirement accounts after working for 5 years, invested the difference in taxable account. I have more in taxable account than retirement accounts. Dividend income becomes a real problem for taxes.
Why? I thought divided income gets charged less tax (for qualified dividends)?
Yes, but still have to pay taxes if your investment is in taxable account, you don't if it's in retirement account. It's a tax drag every year.
There are ways to take money out of 401k. Learn the rules
That’s the whole point the earlier you put money into retirement the more time it has to grow . Continue doing it for at least 5 years then re evaluate
Depending on your plans with RE but you can borrow against your 401k as first time home buyer if I recall correctly. Otherwise have emergency fund, have a bit extra in case something comes up - need a new car, want to travel so on. Besides that seems ok to put it into 401k. Roth IRA is even easier, I think you can get money out, will just need to pay tax on gains
Increase TC, then you'll have more left over after your retirement accounts
I think it’s s good strategy. It’s likely that your TC will increase in the next few years and you ll be able to save even more but there’s a limit on mega back door roth ira so you’ll have enough savings in a regular account as well
It's best to continue doing things as you are. Those accounts are tax advantaged, which is a big win if you keep the money in there. And you can remove any of the contributions to the Roth account without taxes or penalty if you really need to tap into those funds.
Suggest rolling over everything from pre-tax to Roth; as soon as you can. And you don’t need a house right now but you will, later in life. Contribute max allowed as per limit to 401K (Post Tax). Start investing in Stock market/mutual funds with rest. If you can’t buy in Bay Area buy in some other city and rent it, when prices go down.
Unless you are expecting that your investment will go down by the time you retire, this is a very ***** advice. Will you pay tax on 10k today or 20k tomorrow?
Dude, Roth withdrawals are not-taxable after 59.5(period). The rollover may push them into a higher tax bracket for that year but even then they only pay little bit higher for amount that that goes over.
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It's fine, as long as you have a liquid emergency fund. Those retirement accounts are awesome