UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 81602  
Subject: Re: 401K, Roth IRA, & Taxes Date: 9/2/1998 2:34 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
>> Thanks for the advice. What I am really wondering is... is it foolish ("small 'f' foolish") to NOT put 18% (instead of 10%) in -- when I could avoid paying taxes on 8% more of my income? <<

Not necessarily.

You do have other needs than your retirement.

While it's certainly small-f foolish to save less than you're capable of saving, that doesn't mean that every last dime of what you save should go into tax-deferred accounts with long time horizons.

You're likely to have other needs in your life before retirement, for which you'll need to save: an emergency reserve (i.e. a few months' after-tax salary in a liquid and safe account), saving for down payments on a home, a car, potentially a college fund for little ones someday, perhaps for early retirement (before you can get to the retirement savings penalty- ad annuity-free), tha kind of thing...

Analyze your retirement situation. Invest that portion aggressively, especially if you're decades from retirement. If you'll have a really nice amount in there, assuming 10% (conservatively), I'd personally start looking to save elsewhere, perhaps "tax-efficient" portfolios in taxable accounts.

I was in the same position as you. I now put 8% in salary into my 401K, and since I started with 12% when I was 22 and have put in 8-10% in the entire decade since, I don't think my retirement accounts need fattening. I decided instead to start building a taxable account which I could use between the ages of 50 and 55 to allow me to retire at 50.

Your own needs and goals have to answer the question. But remember that retirement funds essentially "lock up" the money for a long time, so be sure you've saved enough in accessible accounts as well.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next


The Retire Early Home Page
Discussion on accelerating retirement day.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.