Author Topic: New to the forum!  (Read 3075 times)

cheetonone

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New to the forum!
« on: July 17, 2013, 07:26:25 AM »
So I am new to the forum, after finding this about a week ago and really enjoy reading what I see here.  I had a few questions (I was trying to post this in the "Ask A Mustachian" Forum, but whenever I tried to open that page it would log me out of my account so I couldn't post).

I am currently 25, getting married in September.  My financial situation to me seems pretty good, but the idea of early retirement sounds wonderful, my real dream is to retire around 35 from my career as an engineer and open up a small brewery.  I have been home brewing for the past year and I really love it.

What forms of savings do you count towards your percentage saved of your total income?  My take home pay after taxes ranges from 3400-4500 a month (gotta love overtime pay). 

My 401k is a Roth, so I get taxed first and then 10% of the pretax amount is deducted from the after tax amount.  So right now I am putting away 10% which is a contribution of around 450-600 a month. 

Other savings include a personal investment account where I put away 150 biweekly (300 a month), an investment group where I put in 100 monthly (This is just a group of guys from my college where we like to meet up and talk stocks and we have a little investment account going).  I am partially funding a Roth IRA so we can average that out to ~200 a month. (My goal is to start fully funding this by the end of this year)  Now the question is do you also count in the amount you are paying in principle towards your house?  If so that is ~500 a month.

So with all of that information I am saving approximately ~1550-1700 a month which is right around 40-45%, but I didn't know if looking at my house as a "savings account" was the way I should be seeing things. 

I appreciate any information and I look forward to contributing more to this forum!

matchewed

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Re: New to the forum!
« Reply #1 on: July 17, 2013, 07:48:28 AM »
Do you have the option to contribute to a standard 401k? I do like the Roth option but the tax deferral is some powerful stuff. If you like the Roth option and you find it good for your particular circumstances you can get a smaller amount through a Roth IRA.

cheetonone

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Re: New to the forum!
« Reply #2 on: July 17, 2013, 10:34:41 AM »
Yes I do have the option to choose either a Roth or traditional 401k.  I mainly went with the Roth because of advice from other people in my company saying that since I am so young the Roth was a good option for me, as I would most likely be paying more in taxes upon withdrawal then I am now.

I have always been curious about the pros and cons of choosing either the Roth or traditional and there seems to be a lot of different views on the matter.

NumberCruncher

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Re: New to the forum!
« Reply #3 on: July 17, 2013, 11:42:26 AM »
Yes I do have the option to choose either a Roth or traditional 401k.  I mainly went with the Roth because of advice from other people in my company saying that since I am so young the Roth was a good option for me, as I would most likely be paying more in taxes upon withdrawal then I am now.

I have always been curious about the pros and cons of choosing either the Roth or traditional and there seems to be a lot of different views on the matter.

If you're planning on early retirement and keeping your costs about the same as they are now, traditional might be a better idea, depending on the actual tax brackets you're talking about. If you're in the, say, 28% tax bracket, but you expect to be withdrawing at the 15% tax bracket, traditional is a pretty good bet. Most of your coworkers probably aren't expecting to withdraw at this kind of a level. :)


Eric

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Re: New to the forum!
« Reply #4 on: July 17, 2013, 12:01:53 PM »
Yes I do have the option to choose either a Roth or traditional 401k.  I mainly went with the Roth because of advice from other people in my company saying that since I am so young the Roth was a good option for me, as I would most likely be paying more in taxes upon withdrawal then I am now.

Your taxes are based on your income.  So the only way you'd be paying more in taxes upon withdrawal is if your income during retirement is higher than when working.  That's possible, but it seems unlikely to me.

That's why it's generally a good idea to us the regular 401k too, as it lowers your overall tax bill.

mom-n-teacher

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Re: New to the forum!
« Reply #5 on: July 18, 2013, 10:12:02 AM »
Cheetonone, I'm pretty new, too, and the way the forum works is confusing.  I finally realized that although it looks like it's logging you out when you head into a particular forum to post, it's really not.  Just refresh your browser once you get to where you want to be and you'll be able to see that you're still logged in, and the posting buttons will magically appear. :)