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Well this is probably a strange question but my wife and I have a small problem. My wife has been contributing the max to her companies 401k(no match but there are a few index funds) for a few years. We opened Roth ira's this year and maxed both out as well. Now my work is going to be offering a SIMPLE-IRA(I'd prefer a SEP but oh well).

We're in a position currently where we can max that as well. We don't expect this to last for many more years do to possibly buying another home. Before finding out about the SIMPLE-IRA I was just planning on opening a taxable account and putting the money there over the next couple years.

Is it possible to over do it with having to much tied up in retirement accounts? It figures out to be almost 30% of gross pay that would be going into retirement accounts. We have a large emergency fund as well as a savings account(used for things like her new appliances and the big screen tv I want to buy in the next year or 2).

I guess my main concern is that retirement is so far away(I'm 31, she's 33) I have no clue what taxes will be then. Not to mention by then the government may want a tax on our Roths lol. With a taxable account atleast you have an idea what to expect.

Thanks for any input,
Brad
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FraDcat:
I guess my main concern is that retirement is so far away(I'm 31, she's 33) I have no clue what taxes will be then. Not to mention by then the government may want a tax on our Roths lol. With a taxable account atleast you have an idea what to expect.

You might be surprised how soon you can retire considering your savings rate and the apparent financial savy that you and your wife have. See the "Retire early home page board" or the "FIRE wannabes board" for a wealth of information on how to retire early! People on these boards boast savings rates similar to yours, some higher.

REHP tends to be more of a social club of early retirees but no one over there has ever hesitated to answer an honest question about any subject related to finances or more specifically, retiring early.

The FIRE wannabee board has less posts but cuts to the chase with people seeking ways to get to FIRE faster.

I highly recomend both boards.

BTW! FIRE is an acronym for "Financial independant/Retire early!

decath
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You should check to see if you might run into the AMT, alternative minimum tax, by having large retirement contributions. I haven't run in it, so I'm not sure how the AMT treats retirement contributions. Does anyone out there know?

You touched on the unpredictability of what the tax structure and social security will be like when you retire. That is the reason that I keep my investments in a variety of accounts (401k, Roth, taxable capital gains, etc). Having some long-term investments outside of the retirement accounts would give you more flexibility. Depending on your situation, paying off your mortgage early, if you have one, could give your more flexibility because your monthly cash requirements would be much less.

The question on if your are saving too much really depends on what you want out of life. Search the Internet for actuarial tables and look up the possibility that either you or your wife will not live to retire at 65. You will probably be surprised to find out that there is something like a one in twenty or thirty chance that you both won't. There is also a significant chance of major health problems before then. Life is too short, save for the future but enjoy your time now.

Greg
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Life is too short, save for the future but enjoy your time now.

Well said Greg.

Gup
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I agree with the other posters about life being too short.

Are you saving too much? That is personal. If you're eating dog food instead regular groceries to put more money into savings, you have a problem. If you're able to take vacations and enjoy a few extravagancies along the way, then you're probably OK.

FIRE is a balancing act. Planning for the future but living for today. Need a little of both.

JLC
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I'm not an expert, but I believe the AMT applies to investment gains and interest income. Since a 401K is not taxable until you withdraw, and then it's taxable as ordinary income, the AMT wouldn't seem to apply.

2old
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Brad,

I agree with Watty in that I have my investments spread over many different account types: 401K, TIRA, annuity and retail brokerage. Over the next few years I plan to put more money in the brokerage to take advantage of the lower cap gains rate until 2008.

It's good to know that the taxable account dollars are there whenever you might need them for whatever you might need them for, without worrying about early withdrawal penalties (which are killers).

With a taxable account atleast you have an idea what to expect.

Well, let's hope for the next 5 years anyway :-)

2old
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Thanks for the input. As far as our financial savvy well unfortunately we wouldn't be this far "ahead" if my mother inlaw hadn't passed away a few years ago. The life insurance my wife received is what allowed us to pay off all the debt we accumulated. My wife had stopped working to stay home and take care of her.

The points regarding living for today make sense. We both want to travel when we get older/retired. Why not take a few trips now as long as we aren't neglecting our retirement. My wife has been hounding me to go on a cruise sometime(she even mentioned that Queen Mary 2 as if we got that kinda money lol) but being trapped at sea isn't a priority of mine.

As for the AMT man I hope that doesn't get us.

Now I jsut need to figure out how best to devide the money between the simple, 401k, roth's and taxable acounts.

Thanks again for the input,
Brad
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My wife has been hounding me to go on a cruise sometime(she even mentioned that Queen Mary 2 as if we got that kinda money lol)

I read that this was about $1500 per ticket for us "common folk", but they do have a $99,900 ticket that includes a two-story cabin with balcony overlooking the ocean, along with a helicopter flight to the deck of the QM2.

baldguy13
-knows these kinds of weird things
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