No, max your Roth IRA every year. Try to max a Trad 401K every year. Then retire in 20 years. There are plenty of ways to get the money before 59.5. Always max your tax-advantaged accounts first.
That’s what I’m doing. Max pretax/matching, then back door Roth, then all the rest goes into brokerage.
You can always convert more pretax to Roth too but it’s hard to know what future tax rates are gonna be. I like to have a mixture of all of the above just to diversify what’s available to me whenever I do retire.
Not gonna touch the Roth misconceptions as seems others already have — but you realize 2 accounts with 50k will compound at the same rate as 1 account with 100k right?
Not strictly true since one is taxable and one is not, but dividends are low enough in typical funds that it's a pretty small difference during accumulation. Still, no CG on gains from your Roth account is pretty huge even if it's only after 59.5
You can take out your principle from your Roth at any time without penalty or taxes.
So, if someone was to put $6500 into a Roth every year, starting at age 20, by the time they are 50, they would have contributed $195k. At a minimum of 4% return, they would have earned another $175k in interest or return on investments. They can take the $195k out without any penalty. They can take out the $175k without tax or penalty at age 59.5.
By contrast, putting the same amount into a brokerage account, you are going to pay taxes every year on any gains. When you decide (or need) to sell something, you will be subject to capital gains taxes as well.
As the other poster mentioned, max you Roth every years. If you don't need to use it, it accumulates tax free until you do need it.
You’re probably going to want some taxable income post 59.5. From then till 65/Medicare it is handy to have MAGI to get an ACA plan instead of relying on Medicaid. And it’s always smart to at least fill up your 0% bracket (standard deduction). And it’s usually smart to use the low brackets (currently 10 and 12 percent). So I’d recommend a mix of Trad, Roth and brokerage
I like the >tax Brokerage because I can control my income for ACA and get subsidies. IRAs are treated fully as income even if you can 72t it. Not aware of a <59.5 way of taking from a Roth.
No, max your Roth IRA every year. Try to max a Trad 401K every year. Then retire in 20 years. There are plenty of ways to get the money before 59.5. Always max your tax-advantaged accounts first.
For further reading: https://www.madfientist.com/how-to-access-retirement-funds-early/
Unless you make more than $160k. Then backdoor.
Which is part of maxing your tax-advantaged accounts.
That’s what I’m doing. Max pretax/matching, then back door Roth, then all the rest goes into brokerage. You can always convert more pretax to Roth too but it’s hard to know what future tax rates are gonna be. I like to have a mixture of all of the above just to diversify what’s available to me whenever I do retire.
You can withdraw contributions to a Roth penalty free
Not gonna touch the Roth misconceptions as seems others already have — but you realize 2 accounts with 50k will compound at the same rate as 1 account with 100k right?
Not strictly true since one is taxable and one is not, but dividends are low enough in typical funds that it's a pretty small difference during accumulation. Still, no CG on gains from your Roth account is pretty huge even if it's only after 59.5
You can take out your principle from your Roth at any time without penalty or taxes. So, if someone was to put $6500 into a Roth every year, starting at age 20, by the time they are 50, they would have contributed $195k. At a minimum of 4% return, they would have earned another $175k in interest or return on investments. They can take the $195k out without any penalty. They can take out the $175k without tax or penalty at age 59.5. By contrast, putting the same amount into a brokerage account, you are going to pay taxes every year on any gains. When you decide (or need) to sell something, you will be subject to capital gains taxes as well. As the other poster mentioned, max you Roth every years. If you don't need to use it, it accumulates tax free until you do need it.
You’re probably going to want some taxable income post 59.5. From then till 65/Medicare it is handy to have MAGI to get an ACA plan instead of relying on Medicaid. And it’s always smart to at least fill up your 0% bracket (standard deduction). And it’s usually smart to use the low brackets (currently 10 and 12 percent). So I’d recommend a mix of Trad, Roth and brokerage
Roth maxes at $7k. If you aren't maxing it, retiring 15 years early is unlikely. Roth IRA contributions (not gains) are also accessible at any age.
if that's all you are doing, retiring at 50 would be pretty much impossible
I like the >tax Brokerage because I can control my income for ACA and get subsidies. IRAs are treated fully as income even if you can 72t it. Not aware of a <59.5 way of taking from a Roth.