Author Topic: 401k and IRA and Mutual Funds, Oh My  (Read 832 times)

jen5273

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401k and IRA and Mutual Funds, Oh My
« on: January 09, 2018, 09:57:38 PM »
Looking for some advice from the Mustachian's out there. I'm currently investing 18% of my salary into my 401k at work plus another $5,500/year into a Roth IRA. However, now that I've been reading MMM and my mind has been opened to the possibilities of early retirement, what would you recommend as the best place to accrue investment savings? My understanding about 401k's and Roth IRA's is that you can't touch them until you're in your 60's. But MMM lives off the 4% payout of his investments - so, I guess I'm not clear on how he receives those payouts? Did he only invest in mutual funds or similar through Vanguard, where he can access the money sooner than 401k/IRA retirement age?

Assuming that is what MMM does, then would it make sense for me to decrease my 401k contributions down to 6% (so I still get the company match) and then plow all the rest of the money into more liquid investments like a mutual fund through Vanguard?

I hope this makes sense and doesn't make me look like too much of a noob. Trying to figure all this stuff out makes my head spin. Thanks for any advice!


boarder42

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Re: 401k and IRA and Mutual Funds, Oh My
« Reply #2 on: January 10, 2018, 06:13:44 AM »
you want to use your traditional accounts as much as possible
https://www.madfientist.com/retire-even-earlier/

How do you get to those funds
https://www.madfientist.com/how-to-access-retirement-funds-early/

definitely dont start your taxable savings any earlier than you have to b/c you've maxed your tax advantaged accounts. 

also see this for investment order.
https://forum.mrmoneymustache.com/investor-alley/investment-order/

once you've read thru those feel free to ask some more detailed questions -

knowing what your marginal tax bracket is now and where it will be when you retire would be valuable to determine if you should switch to roth contributions vs stay with all traditional - typically if its all 22% or higher money(the old 25% bracket) you will come out ahead using traditional accounts as your likely to be in the 12%(old 15%) bracket when you retire.  Some are even taking the approach of using 12% money to go into roths on the assumption that the 15% bracket will return when the change expires in 6 or 7 years. 

jen5273

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Re: 401k and IRA and Mutual Funds, Oh My
« Reply #3 on: January 14, 2018, 01:13:26 PM »
Thank you! I really appreciate you both taking the time to reply!