Author Topic: No 401k?  (Read 1488 times)

P938LVR

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No 401k?
« on: July 27, 2014, 04:31:47 PM »
My husband and I do not have a 401K where we work and I see a lot of people mention having one. Is it possible to FIRE within a reasonable amount of time without having one?

Frankies Girl

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Re: No 401k?
« Reply #1 on: July 27, 2014, 05:32:04 PM »
Depending on your income and tax brackets (before and estimated in retirement) you could do either traditional or Roth IRAs. The sticking point on these is that you can each only contribute $5,500 - so 11,000 a year for the both of you (in your own accounts), so you would have to run the numbers to see if the tax deferred (traditional) or after tax (Roth) would be the best bet for you.

Then a regular taxable account if you have extra money to get it growing. It should be possible to save and invest and still retire early without a 401k or other work retirement account, but the earlier you start the better.
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P938LVR

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Re: No 401k?
« Reply #2 on: July 27, 2014, 05:41:09 PM »
What are traditional and ROTH IRA's? How do they work and how are they different? Thanks!

Chrissy

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Re: No 401k?
« Reply #3 on: July 27, 2014, 06:36:00 PM »
"Both traditional and Roth IRAs provide generous tax breaks. But itís a matter of timing when you get to claim them. Traditional IRA contributions are tax deductible on both state and federal tax returns for the year you make the contribution, while withdrawals in retirement are taxed at ordinary income tax rates. Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free. So with traditional IRAs, you avoid taxes when you put the money in. With Roth IRAs, you avoid taxes when you take it out in retirement."

Source:  http://www.rothira.com/traditional-ira-vs-roth-ira

Your family can put $11,000 ($5,500 total per person per year) into IRAs.  You might want to put it all into ROTHs, you might want to put it all in traditional, or you might want to put some of it into a ROTH and some into a traditional, depending on your situation.
« Last Edit: July 27, 2014, 06:37:51 PM by Chrissy »