How would you use some combination of these accounts to save money so that:1. By virtue of various IRS limits (and assuming you Live Below Your Means), you will have a mix of traditional, Roth, and taxable investments that should allow this.
1. It's accessible in early retirement (by supporting a Roth pipeline or some other withdrawal method I'm not familiar with) without hefty penalties?
2. It supports an $80k down payment for home in 5+ years without having $80k sitting in a savings account earning no returns?
3. They minimize my marginal tax rate.
For item 2, I understand it's risky to save for a down payment using investments, but I really hate the idea of losing out on compounded interest. Assuming a Roth IRA does not have a 5 year negative return, between me and my wife we could at least save $55k of money that still has an opportunity to grow in the next 5 years.
Category | Monthly | Comments | Annual |
Salary/Wages for earner #1 | $5,000 | $60,000 | |
Salary/Wages for earner #2 | $5,833 | $70,000 | |
Traditional IRA | $458 | Room to increase? | $5,500 |
401(k) / 403(b) / TSP / etc. | $1,500 | Room to increase? | $18,000 |
Personal HSA | $554 | At maximum | $6,650 |
Income subject to IRS tax | $8,321 | $99,850 | |
Federal Total Income | $8,321 | $99,850 | |
Federal tax | $950 | 2015 rates, MFJ, stand. ded., 2 exempt. | $11,400 |
State/City tax | $330 | Guess, using 5.00% * Fed. Taxable | $3,963 |
Soc. Sec. | $672 | Assumes 2 earners paying | $8,060 |
Medicare | $157 | $1,885 | |
Total income taxes | $2,109 | $25,308 | |
Income before other expenses | $6,212 | $74,543 | |
Monthly Average Expenses: | |||
Other tax-advantaged investments: | |||
Roth IRA | $458 | Room to increase? | $5,500 |
Total Expense | $458 | $5,500 | |
Total to invest | $5,754 | $69,043 | |
Summary: | |||
"Gross" income | $10,833 | $130,000 | |
Income taxes | $2,109 | $25,308 | |
After-tax income | $8,724 | $104,693 | |
IRA+401k/403b/TSP/457 (Savers' credit) | $2,417 | $29,000 | |
HSA | $554 | $6,650 | |
After-tax investable | $5,754 | $69,043 |
Filing Status | 2 | 1=S, 2=MFJ, 3=HOH | |
# Exempt. | 2 | ||
Earner #1 | Earner #2 | ||
Ages | 30 | 30 | |
# of earners | 2 | ||
Total Income | $99,850 | ||
Std. Deduct. | $12,600 | ||
Act. Deduct. | $12,600 | ||
Exemption | $8,000 | ||
AGI | $99,850 | ||
MAGI | $105,350 | ||
Taxable | $79,250 | ||
1040 Tax | $11,400 | ||
Saver's credit | $0 | ||
Tax after n-r credit | $11,400 | ||
Child Tax Cred. | $0 | ||
EIC | $0 | ||
Net Tax | $11,400 | ||
Monthly | $950 | ||
State tax | $3,963 | 5.00% |