Skip to main content
No. of Recommendations: 0

I have been a registered fool for a little over a year now - but not an active one (trying to do better).

Prior to becoming a fool, I was strictly into managed funds thru work 401ks. Over the last year, I have migrated to index funds and have a couple of stocks - this has been a positive change and I am grateful to fools everywhere.

90% of my retirement funds are in the 401k and 10% in a Roth IRA. I will soon be rolling my 401k into a traditional IRA as I change employers. I plan to continue contributions to the Roth only.

I am 37 and am interested in trying to retire (at least partially) at 55. Since traditional IRA's won't allow retirement until 59 1/2 (I guess Roth's are the same), I was considering shifting my focus to taxable investing to provide usable funds for 55.

Is this a reasonble approach?
Would you purchase the index funds directly from the fund mgr or thru your discount broker?

Print the post Back To Top
No. of Recommendations: 6
IMHO, I would not switch to taxabe devices for investment until you have exhausted your tax deferred options first. The conventional wisdom for sequencing of an investment dollar is:

1. Free money first; therefore contribute to your 401(k) plan up to the employer matching limit first.

2. Tax free money second; therefore switch to a ROTH IRA and fund the $2000 per year.

3. Tax deferred money third; therefore rotate back to the 401(k) and max out all the way to $10,500 if possible.

4. Taxable money last; therefore open a discount brokerage account & invest long-term.

Your desire to retire at age 55 or earlier should not cause you to change this sequencing. There are a variety of mechanisms available to tap IRA's, ROTH's, 401(k)'s, etc. all before age 59 1/2 and still avoid the 10% surtax.

Print the post Back To Top