Hello- I'm looking for suggestions or advice on whether to invest in a Roth or Traditional 401k.
I've recently considered the possibility of early retirement, and my wife and I are thinking we may be able to "retire" in around 5-6 years at age 42 or 43. I think we will have around 1.5M savings by then (assuming 7% annual return and 50% current savings rate (net income)). I think that will be enough, since our work-related and childcare expenses will go away when we are "retired". Assuming 4% annual withdrawal rate, that would be 60K annual income. To be safe, let's assume we use the full 60K per year.
Would you recommend putting our new retirement contributions in a Traditional 401k going forward in order to reduce taxes now?
If we do that, we won't have access to the traditional retirement accounts until we are 60-ish, without paying a penalty. Or, should we continue putting money into Roth accounts, so we can access the principal w/out penalty before age 60?
Here are our stats:
Both age 37.
Two kids (6 and 2).
Current Gross combined income: $250K
Wife works in public sector, so has access to two retirement accounts: 457 and 403b, in which we put max (17.5k each. 1 is Roth, 1 is Traditional). I work in private sector and put max in Roth 401k. We also put money in Roth IRA ($5.5k each- converting traditional/nondeductable to Roth).
Residence: Tx, so no state income taxes
Current savings:
Roth retirement accounts: $276K
Traditional retirement accounts: 180K
Non-retirement accounts: $130k
Debt:
Student loan: $35k at 2.1%, will be paid off/forgiven in 5.5 yrs. ($250/mo)
Mortgage: $230K remaining balance, 30 yr fixed at 3.4%. ($1000/ monthly payment). house worth ~330k. no plans to pay off early.