Author Topic: I think I have enough in my 401K, what now?  (Read 6554 times)

schmiecs

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I think I have enough in my 401K, what now?
« on: July 06, 2012, 02:17:41 PM »
I have what I believe is enough in my 401k/Roth IRA to stop contributing towards it, although correct me if I'm wrong! I am 35, have about 250K in there, would like to retire at 60 (or earlier of course, but that would be when both kids are finished college), and currently live off a taxable income of around $36000/year. (I used to make much more, which is how I got such a high balance).

I own a house, mortgage-free. I have no debt of any kind, except for mortgages on two rental properties I own. Those properties don't make a ton of money, but they do make a little each month and all the expensive items on them (roof/mechanicals) have either recently been done or will be done soon.

There is no employer match for my 401K. I do get a pension. Up until now I'd been putting away around $400/month into my 401K. I want to start investing in something that could possibly enable me to retire earlier. Suggestions? Is it enough to put it into some kind of post-tax mutual fund? I'm not sure I have it in me to invest in the stock market directly, in terms of choosing and monitoring stocks.

Alternatively, does it make more sense to pay off the mortgages on my rental properties earlier? They're at 6.5% and 4%.

Thanks for any advice!

AJ

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Re: I think I have enough in my 401K, what now?
« Reply #1 on: July 06, 2012, 02:44:46 PM »
Keep putting money in the Roth, you can always pull out your contributions later, and you get the benefit of tax-free earnings.

Beyond that, though, it will depend on your goals and projected income. If you are only grossing $36k and have kids, I imagine you are paying very little in taxes. Without a match or tax benefits, I don't see any reason to continue to put money in the 401k. (I guess there are some legal protections they afford you, if you are in a highly litigious profession or social circle. But nothing personal liability insurance couldn't do just as well.)

If it were me, I would be putting the money into more rental houses, if that suits you.

JohnGalt

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Re: I think I have enough in my 401K, what now?
« Reply #2 on: July 06, 2012, 03:29:55 PM »
If your employer happens to offer a roth 401k option (and the fund choices are decent) I would switch to investing in that to lock in your current tax bracket.  I'd even consider keeping the traditional 401k going if roth is not an option so that the earnings continue to grow tax free since you're looking at a pretty long time (I'm assuming your kids are fairly young) line before accessing it.  Even traditional 401k money can be accessed for early retirement - and the benefits of not paying taxes on your annual investment earnings could add up. 

You might also consider looking into what tax efficient options exist for investing your children's college funds. 

Another option would be aggressively paying off the rental properties - especially if the mortgage free income from them could come close to supporting you. 

Mr Mark

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Re: I think I have enough in my 401K, what now?
« Reply #3 on: July 06, 2012, 10:17:57 PM »
Paying off the 6% mortgage sounds like a good investment right now.

And max out the Roths.

Then, Vanguard, naturally. See MMMs posts on investing. Excellent stuff!