Author Topic: 401k = age 60-90 money; how much is enough?  (Read 3625 times)

dfree86

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401k = age 60-90 money; how much is enough?
« on: November 15, 2014, 03:47:33 PM »
Hey y'all,

 So I know MMM has a philosophy about how Much is too much in 401k. He uses the example of $144,000 of 401k money upon retirement at age 30 that will grow into $622,000 inflation adjusted dollars.

Currently, my wife and I have about $40k in our collective 401k accounts, but between maxing out those and solid company matches, we may find ourselves with  almost exactly that $144k or so in our 401ks by the time we are 32.

Like MMM, we have some Vanguard growth and we are also saving for a house. Does this mean that when we hit age 32 (in 4 years) and we have that $144k we should stop contributing to our 401k altogether? Or do we really need to get to $288,000 (two of us) before we have the "too much in 401k" amount that MMM is talking about.

In sum: how do we know do we stop contributing to our 401ks (age 60-90 money) and start using that extra money for the present? My company matches 10% of my base salary at the moment so that's nice.

Thanks!

sirdoug007

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401k = age 60-90 money; how much is enough?
« Reply #1 on: November 15, 2014, 03:54:15 PM »
There is no such thing as "too much" in your 401(k). In fact, it is one of the best tax savings you have access to.  And the 10% match is an instant 100% return on that money.

The mad fientist is the gold standard for 401(k) withdrawal strategies. Read this a few times and let it sink in: http://www.madfientist.com/retire-even-earlier/

There are several methods to access your 401(k) before 60 that maintain the significant tax savings. One is the Roth ladder mentioned in the link. Another is the 72(t) substantially equal periodic payments (which conveniently allow you to take out about 4% without penalty). Keep maxing it out!


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« Last Edit: November 15, 2014, 04:02:34 PM by sirdoug007 »

dfree86

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Re: 401k = age 60-90 money; how much is enough?
« Reply #2 on: November 15, 2014, 04:00:41 PM »
Right, but keep maxing out... For how long? That is to say, obviously I'm going to keep maxing as long as I'm working. But if I hit 35 years old, my wife and I have $300k in our combined 401ks and we both want to retire to raise our 5 year old son (all hypothetical) - is that enough 401k money where I can feel good about retiring young and still having that money appreciate to where it needs to be for years 60-90.

I'm a teacher so I could easily see teaching for 6-7 more years, saving money and then retiring to write, freelance, tutor, etc.

sirdoug007

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Re: 401k = age 60-90 money; how much is enough?
« Reply #3 on: November 15, 2014, 04:06:51 PM »
You'll need to explain more about your retirement strategy.

Are you asking for a threshold where you would stop saving but freelance etc to cover your expenses with the expectation of enough nest egg to cover those expenses from 60 on?  We also need to know your annual expenses for that.


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StartingEarly

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Re: 401k = age 60-90 money; how much is enough?
« Reply #4 on: November 15, 2014, 07:21:29 PM »
Honestly if you're still working it is usually best to keep contributing to 401k.  There is usually matching.  Never pay in less than the match.  Avoid paying in by percentage if you have overtime or bonuses.  If you pay in too much early in the year you can lose the match the last month or two.  It's tax advantaged.  It is generally the best place to put your money if the fees aren't outrageous.

mmta1234

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Re: 401k = age 60-90 money; how much is enough?
« Reply #5 on: November 15, 2014, 07:27:16 PM »
Honestly if you're still working it is usually best to keep contributing to 401k.  There is usually matching.  Never pay in less than the match.  Avoid paying in by percentage if you have overtime or bonuses.  If you pay in too much early in the year you can lose the match the last month or two.  It's tax advantaged.  It is generally the best place to put your money if the fees aren't outrageous.

Can you or someone else explain this to me ? I'm a 401k novice.

wtjbatman

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Re: 401k = age 60-90 money; how much is enough?
« Reply #6 on: November 15, 2014, 09:25:10 PM »
Honestly if you're still working it is usually best to keep contributing to 401k.  There is usually matching.  Never pay in less than the match.  Avoid paying in by percentage if you have overtime or bonuses.  If you pay in too much early in the year you can lose the match the last month or two.  It's tax advantaged.  It is generally the best place to put your money if the fees aren't outrageous.

Can you or someone else explain this to me ? I'm a 401k novice.

He means that you should optimize your contributions to male sure you always get your employer match. With my 401k it doesn't matter if you max out your employee contributions early, at the end of the year they pay out 5% of my salary for the year. Some employer plans literally only match your contribution paycheck to paycheck. So if you max out your employee contributions by November, you may lose a month of employer match. Like I said, it really depends on your plan.