Author Topic: I plan to max 401K BUT WAIT A SECOND!!  (Read 2177 times)

teltic

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I plan to max 401K BUT WAIT A SECOND!!
« on: October 26, 2016, 12:16:38 PM »
Age: 25
Salary $60,000

Plan: Max 401k, HSA, and Roth IRA




But wait a second! These accounts are untouchable until I'm  59.5! (I've read I can touch at 55 with no penalty)


If I want to retire before then... Like in 10-15 years.... Shouldn't I be putting money in an individual account?


Dicey

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Re: I plan to max 401K BUT WAIT A SECOND!!
« Reply #2 on: October 26, 2016, 12:26:29 PM »
You need to do as much as possible of both, but only after you've read ZiziPB's link.

boarder42

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Re: I plan to max 401K BUT WAIT A SECOND!!
« Reply #3 on: October 26, 2016, 01:07:38 PM »
http://www.madfientist.com/how-to-access-retirement-funds-early/#ck_modal2

here is another link that shows even taking the 10% penalty can be better than putting your money in taxable accounts. You will have to do the math for your own situation on that.  It also walks thru all the normal ways to get it with out paying the penalty.

GrOW

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Re: I plan to max 401K BUT WAIT A SECOND!!
« Reply #4 on: October 26, 2016, 01:53:16 PM »
http://www.madfientist.com/how-to-access-retirement-funds-early/#ck_modal2

here is another link that shows even taking the 10% penalty can be better than putting your money in taxable accounts. You will have to do the math for your own situation on that.  It also walks thru all the normal ways to get it with out paying the penalty.

The madfientist article is really a great one. I would highly recommend bookmarking it and rereading from time to time. Or after someone says something that makes you doubt your plan. There is a lot to absorb in the article.

robartsd

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Re: I plan to max 401K BUT WAIT A SECOND!!
« Reply #5 on: October 26, 2016, 03:52:46 PM »
Assuming you have enough to max all those tax advantaged accounts but no additional savings (30,250 assuming family HSA), you spend 29,750 per year (including taxes). Your 50% savings rate is approximately 16 years to FI. 16 years of Roth contributions is 88,000 (nearly 3 years of your assumed expenses), so you only need 2 years of expenses more to fill a Roth conversion pipeline. If you haven't found any other way to save this up by the time you are projecting FI in 3 years, determine if it would be better to pay the early withdraw penalty or reduce tax advantaged contributions. On the other hand, if you project that your savings outside of tax advantaged accounts would cover more than 2 years of expenses, you might be over contributing to Roth and should use Traditional IRA instead.
« Last Edit: October 26, 2016, 04:04:32 PM by robartsd »

teltic

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Re: I plan to max 401K BUT WAIT A SECOND!!
« Reply #6 on: October 26, 2016, 05:31:12 PM »
Wowowowowowowowowow! You guys rock!

I've read the links you guys provided. Way cool stuff! Feels good to know I can use my retirement accounts before 59! I'll definitely need to reread this every now and then to fully comprehend it... But knowing that maxing my 401k and HSA is a smart move, feels good!