So is this how it all works? Assuming $100k income, 25% tax bracket, exact same investments across all accounts, a full emergency fund in cash, $30k flat yearly expenses including food, rent/mortgage, insurance, gas, any outstanding debt, etc., all just for the purposes of simplification.
Close, but not quite. It's really more like this:
$100k income
-$18k in 401(k)
Remember payroll tax! 7.65% off the top, before making 401(k) contributions = $7,650.
$82k income
-$20.5k in taxes
25% tax bracket does not mean you pay 25% of your total income. Instead it means that if you earned an extra dollar, you would pay 25¢ more in taxes. The way you really calculate it is more like this:
Assuming you're single and don't itemize your deductions, this means you get to subtract a $6,300 standard deduction and $4,050 personal exemption.
This leaves a taxable income of $71,650. This income level is in the 25% bracket, but this
does not mean you pay 25% of $71,650 in taxes.
Instead you pay the amount for each bracket, meaning:
10% of first $9,275 = $927.50
15% between $9,275 and $37,650 = $4,256.25
25% of the amount above $37,650 = $8,500.00
Total federal income tax = $13,683.75
This is a simplification that fails to account for any number of deductions and credits that you may qualify for, but it's a start.
$61.5k left $100k - $18k - $7,650 - $13,683.75 = $60,666.25 left
-$30k expenses
$31.5k left $30,666.25 left
-$5.5k Roth 401(k) / traditional Roth
You have already completed your $18k of 401(k) contributions, so you can't contribute more to your Roth 401(k). There's no such thing as a "traditional Roth" either. This $5,500 would go to a
Roth IRA. If you earned a bit less you could perhaps contribute to a
traditional IRA instead (which is pre-tax), but it has an income limit of $61,000 for single people to make a full contribution.
$26k left $25,166.25 left
$26k $25,166.25 into mutual funds / ETFs
So, at the end of the day, $18k is in a 401(k), $5.5k is in a Roth 401(k) / traditional Roth Roth IRA, $26k $25,166.25 is in mutual funds / ETFs
The $18k is designed to grow continuously until retirement, at which point withdrawals will be made regularly, and taxed at the income at retirement, which includes total income from pensions, social security, and all three of these accounts.
Generally, yes. Remember that withdrawals from your Roth IRA generally don't count as income, nor does the principal part of withdrawals from your taxable account. Therefore if you have money in these types of accounts, you should often expect your retirement income to be less than your expenses.
If it's less than $100k, I pay less in taxes than if I had not invested this in the 401(k) and instead added it to the $26k. If it's more than $100k, I pay more in taxes than if I had not invested this in the 401(k) and instead added it to the $26k. This money is very hard to access quickly pre-retirement, and requires years of backdoor shenanigans to convert it to the Roth account.
Retirement fund money is very easy to access prior to retirement, so long as it's not in your 401(k) with your current employer. You just need to ask for a withdrawal and you'll have it. The catch is that you'll likely have to pay 10% extra in taxes on that money if it's in a traditional IRA/401(k) and you haven't done the "shenanigans" first.