There is not an income limit for a traditional IRA, but there is an income limit on tax deductible contributions.
There is an income limit on Roth IRA. However, you can contribute to a traditional IRA after taxes, and roll it over to a Roth IRA. It’s called “backdoor” Roth.

It gets messy if you have gains in your traditional IRA, so I just do it all at one time, once a year.

…and I’ve played Bill’s awesome new in box pinball machines in his even more awesome beach house!

Exchange Traded Funds are like individual stocks which means you can buy and sell them at will, unlike a mutual fund that has penalties and fees for selling them. ETFs are just more flexible and also usually offer much smaller MERs, usually less than a percent.

Just do major medical, $10,000 deductible. It will cover you for major illness (cancer, ect.). Just dont go to the hospital for little stuff. Cant keep the full med/dental in retirement, too expensive. prople that want fill coverage will go broke or never be able to retire.

Thanks! I've added GZ and IM since you were here and CC is on order. As always my home is open to Pinsiders visiting Corolla, Duck, Southern Shores

Not all mutual funds have fees, penalties, or high expense ratio but I know some do.

I was curious if people were using the flexibility of ETFs for frequent trading or something. I have ETFs, Index mutual funds, and managed funds.

Mutual funds allow for automatic transactions, so if you want to set up an automatic dollar cost average from your paycheck, you can set it and forget it.

For family? Or just individual? Have a link to a plan? I would have met that deductible this year, unfortunately.

I’ve been overly cautious, because I was promised “a Depression, the likes of which you’ve never seen”. /s

Being serious now….I’ve been overly cautious for the last 15 years. I’ve been 20-40% invested in stocks when I should have been 50-70% stocks. The “Great Recession” killed me because I pulled my money out before it happened, decided I was “smart”, and then mostly sat on the sidelines waiting for a crash that never came.

Question for those approaching retirement (I’m on a 3-5 year timeline): do you have a strategy for reducing risk, and how much do you expect to keep invested after you retire? I have a few friends near my age with $5-10M saved, and they can afford to live virtually risk-free. I think I’ll need to keep at least 35% in the market, with about 3-5 years of drawing from savings before I have to start tapping my IRA.

I'll never be less than 70% in stocks, bonds probably just keep up with inflation (especially now) cash loses money over time. Basically my bond allocation will be so that if/when there is a big loss in the stocks I can live off the bonds while the stocks are not touched and have time to recover.

Yup, a buckets strategy like this!

What type of business do you own? Curious as you seem to be a rather intellectual individual…..and I’ve enjoyed our bantering in other threads. Honest respect….

It sounds like you've identified your weak point - trying to "stay in tune" with the market so you can anticipate changes. As you discovered, it doesn't work! You paid the price, but now you know. Don't be tempted again! Just get in there, and stay with your plan. As for 35% in the market, that is really really light for the vast majority of situations.

Regarding your allocation for near-retirement: Remember you're going to -start- pulling the money at retirement. You're still going to need that money for (hopefully) the next 30-50 years and will likely still want a large exposure to stocks.

Anyone worried that Millennials and younger are going to opt out of 401k contributions to put money into Crypto instead? I have lowered my 401k contribution amounts and moved toward more real estate investments over the last couple of years. I am a Millennial (33) and most of my friends are trading Crypto and don’t care much about 401k contributions.

I retired 5 years ago to focus on my health.
I owned and created Comet Pinball LEDs, 2 Jewelry Manufacturing Companies, and Real Estate Holdings.

I do a bit of business and financial consulting these days.

Thank you for the compliment! I read alot.

You probably know my friend who buys those for his home service calls I don’t think we’ve ever seen a dud bulb over time whereas others have problems as time passes. I’ve converted about 20 of my machines with those and have plans for another 80 machines maybe more.

Im likely to remember many customers...all are greatly appreciated!

About 8 years ago, when there was "The Battle of the Bulbs", all Vendors for the Most part were using the same factory.
(I used 6)

Even 1 bulb bad out of 100, was a headache in time, emails, cost, and SM.
So I asked the Factory to set up a last minute QC, before packaging. I paid .01 cent more per Bulb.

I had very little defect issues after that. Sadly, my rejects ended up at other vendors.

I'm not a Millennial, but I backed down my 401k contribution a few percent about 2 years ago and started allocating that portion to Crypto. I've also been throwing the money I'd probably throw at individual stocks at Crypto. I don't think it's a bad idea to have some sort of exposure to what appears to be a new asset class. On the other hand, I tell everyone that asks me about it not to put any money into it that you're not willing to set on fire in your front lawn.

I'm staking a few right now for 76% interest and no, that isn't a typo.

Fellow millennial. I guess I need better friends. Everyone I know my age is out living life. Buying $50k cars. $90k trucks. $10k jet skis. Vacations once a quarter. Meanwhile I’m eating PB sandwiches and hoping for ROTH limit increases.
They are reducing their 401k contributions to make more credit payments for all of their things.
I put 1% of my portfolio into crypto and it stresses me out more than the other 99%.
I’ll never be wallstreetbets famous or rich. Going more for the “millionaire next door” look. I read that book at 19 and it changed my life.

I’m the same, albeit a little older. I max out my 401k and Roth’s. Have a damn good salary yet drive a 10 year old vehicle. I have zero debt, house is paid off. Keep at it, it’ll be worth it. I’m 45 and now am seeing the rewards of long term investing.

And remember, most people who you see driving those BMWs are broke. I forget what book I read well over a decade ago, a Ramsey one I believe. Finished the book and sold my new truck, bought an old beater without a payment. I haven’t had a car payment since then.

I seriously think that most people don’t worry about retirement. They somehow expect to be able to get by on $200k in savings and social security. And that savings estimate may be generous….

Making the frugal and responsible choices now is what allows you to retire for the future. Most rich people who are smart lease cars, and only buy the ones which are destined to go up in price - and BMW is one of the fastest depreciating vehicles you could possibly own.

Really? I would have thought most rich people who are smart would pay cash for cars (and ensure they are affordable), so there are no interest costs buried in the lease payments? Then they could utilise the otherwise dead end interest payments to invest in appreciating assets? I would have thought its a lot easier to pick a stock/real estate appreciating asset thatn one that is a car?

At this point, I paid for one vehicle that I plan to keep until I donate/scrap it and leased one for my wife. Reason for the lease is technology advances (bells & whistles) and the possibility that electric or a hybrid version will make the most sense at the end of the lease rather than be stuck with a vehicle worth 30% of what I paid when she wants the new one.

I'm not telling anyone how to spend their money and appreciate them not telling me how to spend mine. We all know a used vehicle off of a lease is the best move there is but as I'm getting older, I want to enjoy some new ones and not deal with repairs....

“Rich” is a subjective term based upon your situation. I was visiting in-laws in the Midwest this weekend with assets in the 1.5M range or so and are in their mid to late seventies. Everything is paid off and they have appreciating assets and are set for the rest of their lives. My MIL stated several times that she was “rich”.

Where I live, they would be considered “wealthy”. I consider “rich” in the DC area to be more along the lines of 5M or more. Again, all subjective.

I definitely think the transportation situation is far from a one size fits all approach. I have an 09 Pickup that’s been paid off since 2012, and I plan to get another couple years out of it (shooting for 250k miles). My wife just got a new Grand Cherokee with 0% loan. For us, we like having a more reliable vehicle than my shitty truck for road trips and going up north (it’s a MI thing).
However, when my truck reaches end of life, I will consider buying new (if rates are still this low), or potentially a cheap lease.
Personally, I don’t work on my own vehicle, and I’m getting sick of dealing with the time and hassle associated with an older vehicle.
If we’re talking opportunity costs, I don’t see why I’d want to take money out of the market, and pay gains, to buy a cheap used vehicle, when I can get zero percent financing. I understand that vehicles are generally depreciating assets, but the time associated with keeping a 150k plus vehicle running is starting to become a burden I now longer want.
That’s how I value my time, but I know others have skills, a reliable mechanic, or more time than I’m willing to put it anymore.

Vehicles are always a poor investment overall - but you have to weigh the stress of dealing with an unreliable vehicle with the payments. Paying to fix is *always* cheaper than buying a new vehicle, over the entire lifetime of the used vs new vehicle, but you can't put a dollar value on not having to worry whether its' going to start in the morning, or blow a gasket on the freeway.

I don’t see any advantage to leasing if your goal is to retire early.

Take a 2022 Honda Pilot lease, $4300 down, $499/month payment, 36 months. Comes to about $618/month over life of the lease.

You can buy that same pilot for $42000 if you pay msrp. If you keep it 10 years, it costs you about 350/month (42000/120) AND the car has residual value, perhaps a quarter to a third of the purchase price you can recoup if you want to sell it. There will be some maintenance/repair, but you are saving $270/month (618-350), which is over $30k during that 10 year period. Pilots are pretty reliable so maintenance/repair should be pretty reasonable (you can buy an extended warranty from Honda out to 8 years/120k miles for about $1000 if repairs scare you). If you finance the vehicle, the numbers will go up in the first three years of the loan to account for interest (assuming 36 month loan), but still much lower than a lease.

Leasing only is desirable if you want that new car every three years, which is not consistent with many of the approaches discussed in this thread and does not put you closer to retirement relative to buying.

I remember having my friends come visit me Saturday nights while I was working retail. They were having a good time, I was working the busiest time of the week so I could earn commission to max that 401k! I gave up that one moment a week with friends but had plenty of others. I can practically guarantee that when you look back you won't say "Gosh, I wish I'D bought that $90k truck or $50k car". And the irony will be, at that point you'll be able to do so painlessly with cash. But won't!

You have won the car game when you are driving a paid off car and making “payments” into a separate account so that when the time comes you can pay cash for a new one.

Also, BMWs, Mercedes, etc are expensive junk for people who like to waste money. Fancy junk, to be sure. They are so complicated they are always having some problem. And, everything costs more, oil changes, batteries, tires. You pay, pay, and pay.

Realistically I can afford pretty much any car I want, excluding really stupid supercars and such. But my daily driver is a 2004 Camry I bought new. The damn thing looks and runs great and has never needed any sort of major repair. Every time I get in it I get a great feeling of joy, I feel like I am driving for free. And if someone slams into me which is likely to happen anytime the way people drive these days, no big deal, I’ll throw it in the gutter and go buy another.

I was essentially responding to the types mentioned by PinJim with respect to luxury cars. The honda scenario makes total sense as those cars are reliable and have very good resale value.
My brother and his wife have been in the car industry many years working for luxury dealerships and in these places, people rarely buy the cars new and all in cash. Most prefer to lease/drive them a few years, dump them and get into another lease rather than take a hit up front and again on the massive depreciation. Of course this is a tactic for when you already have enough money to cover that kind of cost and want to drive a certain level of vehicle.

$17708 tax is the social security employer cost plus the employee cost. The employee individual max for 2021 is $8,853.60.

I agree with your financial analysis, and overall conclusion. I have never leased a vehicle, and probably won’t ever lease. However, I do think you’re missing a consideration of how someone values their time. I don’t think this applies to MOST people, but I do think that some people would consider the value proposition of time spent dealing with maintenance vs time they could be making money.
This is why I think the “transportation” question is never a one size fits all approach.
I for one really hope this autonomy shit gets going so I can skip owning a vehicle all together!

A lot of people think they need more for retirement than they actually do. The reason they think they need more is because of all the money that comes out of their pay every paycheck makes it seem like their money does not go very far.

Once you retire you no longer pay: the social security (6.2% of pay up to $8853 max tax), any money you put into 401k or other retirement plans, and medicare tax (1.45% of pay).
You also will not be paying near as much federal tax and state tax assuming your withdrawals from retirement/401k accounts is much lower than your salary when working. Another thing people often drop is life insurance costs.

All of this can be a significant amount, especially if you have been maxing out or nearly maxing out contributions to your 401k.

Spot on. What you need in retirement will be your retirement expenses, not your work expenses (and savings for retirement of course). In order to establish this, as you start to approach the actual retirement itself (within a few years), it would be logical to track what all of your expenses will be. That's where I am at right now. I have realistically started tracking all of the spending that will be required upon retirement. Then it becomes a cash flow game. How much cash flow do you need to pay all the bills each month? And how much will you have coming in? These numbers are different for everyone. But hopefully you have more coming in than what you need to pay bills. You would like to have some disposable income left over after paying expenses for the extras such as vacations, pins, etc.

Our financial advisor told us that we may be overshooting the target. I just pulled back my 401k contributions from max contribution to the 6% required to receive my full match.
I throttled back a bit more than I wanted because of the ivf bills, but even after this I’ll probably split the difference, and up our travel budget.
My biggest goal has always been to reach a monthly income target instead of a dollar amount in my accounts. I have some passive income working, and I have slowly been moving towards an income portfolio in my Roth to generate the monthly income I think I’ll need. All those saving will be for trips, toys, and hopefully kids.

well, you have to do maintenance on a leased vehicle too, and you have to sit in a dealership for many hours and haggle with them every three years on a new lease. If you buy a reliable car with a long track record (like an accord or camry), repairs should be pretty minimal. if you buy these newer untested cars, you could be in for an expensive ride. I'd never want to own a tesla beyond the warranty period.

I do my own maintenance and repair when I can, saving me a ton of money, but I realize most don't want to or can't. I was in an acura dealership one time and the service advisor was telling the customer in front of me he needed to have his cabin filter replaced at a cost of $130. I almost fell out of my seat as the filter is $8 on amazon and takes 3 mins to replace. The customer said yes.

What do people think about HSA contributions? They carry over and are tax free. I was thinking about maxing that out as I assume I will have a lot of medical expenses as I get older. Although I may be better off lowering that contribution and putting more into a Roth or something.

I never said otherwise, I was pointing out that Social Security does collect a crap ton of taxes (both from employee and employer) and some people (self employed) are responsible for both sides of the tax.

Big fan of HSA contributions and putting pretax money away for future expenses (added benefit - those funds won't be taxed when making payments for qualifying expenses).

Also, check with the HSA "bank" - some allow that the account balance be invested (mutual funds, ETFs, etc).

Lease does require maintenance, but I was thinking more about my transmission that I had to get rebuilt at the height of the pandemic. Total PITA! In my hypothetical scenario, I don’t think said person would be haggling over the lease price. Just like I wouldn’t be if I ever leased cause I’m in Big 3 country, we have employee discount for all of them within our family. There are set lease agreements, only negations are for dealer stuff. This also prevents me from buying a Toyota or Honda. While I understand where they’re built, and how many American jobs those companies create it’s not worth the fucking headache I’d get from my family and the in-laws driving a foreign car.

I utilize it. I max out our 401K's, IRA's, and HSA's every year. Regardless at 65 you can withdrawal for any reason and just pay income tax on it. Essentially it's just another good tax free vehicle (if the funds are ever used for medical expenses) or tax deferred if you withdraw for other reasons after age 65. There are some decent fund choices in mine as well fortunately. Anything over $1000 in the pool get's traded into the funds I have chosen.

I didn’t know you could withdraw them and just pay taxes yet 65. Good to know! I’ll have to look into the option to get that money into the market as well. I only have a few thousand in there right now but I upped my contribution to max it out for 2022.

I’m definitely going to look into this bank option. Thank you for the info!

HSA doesn’t require you to take the withdraws for qualified expenses immediately either. You can harvest all your qualified expenses for a rainy day if you wanted to.. Triple tax exempt, perhaps the best savings tool available if you can manage to pay the big deductible out of pocket every year.

Also, if you have utilizing Cobra coverage as part of your retirement early healthcare strategy, you can also use HSA funds to cover the premiums where you otherwise couldn't for regular premiums.

On HSA's, Fidelity has no fee HSA's, I moved a prior employers to there and have it all invested.

As someone else mentioned, I started cataloging all our medical expenses in a spreadsheet and scanning payment receipts so that down the line should I need the cash, I can submit those expenses for reimbursement.

i wanted to update this post as the thread seems to be more active now. fundrise changed their redemption policy to a flat 1% penalty for redemptions within 5 years, and i have an average of 20% return ytd this year. that said, i'm leaving in january for other investment opportunities

Anyone retire early (before age 55) and access their 401k funds through the SEPP terms? If so, post how you did it and how it works.

I did at 56, I had to leave the funds in my employer 401k to be eligible. It was a requirement that I was at least 55 and that I had the required "86 points" fulfilling the requirement to officially retire.
I simply called the plan's Customer Service department to make a withdrawal. There was no penalty. Note that I had to wait until I was 59 1/2 to transfer everything to an IRA if I wanted to be able to withdraw in the "new" account without a penalty. I waited to be safe.

I’ve used it for years. With 4 kids, I have a never ending list of things to use it. Glasses, braces, wisdom teeth etc. plus, the other reasons listed before this. No reason to turn down tax free money.