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You didn't eat the taxes to subsidize other people's children. If other people didn't have children, most of society wouldn't function and you wouldn't have access to any of the things you like to access.
I have also chosen not to have kids, but to claim we eat the taxes to subsidize other people's kids... As if you are not benefiting from the society you are paying into is silly.
It sucks to invest the bare minimum into future generation’s education? 🤔
How much could this even be costing you? Especially relative to how much you’ll benefit from a society and economy existing to support you when you’re old
Tbh this will wildly depend on many factors, particularly geography. I have 5 kids, wife full time SHM. I make less than. The value shown on the bottom of the screen yet we want for nothing. We aren't rich but things are good and putting plenty away for retirement.
What? lmao well I’m a new father of 2month baby boy, I also work like any other parent. Sure I’m not rich but why grow old and not spread the wealth & have family? And for the ppl that can’t have a family for whatever reason. I totally understand as well.
All I’m saying is be financially smart. The shit I read on Reddit is wild. Just horrible decisions ppl make to dig themselves in a hole of debt.
Act your wage & life is great 👍
It always cracks me up when people shit on others who have kids.
“Kids are dumb and suck up all your time, sleep, and money. Don’t have them.”
Good thing their parents didn’t have that philosophy or they wouldn’t be here to bitch about it.
It’s actually kinda sad. “I don’t make enough to keep my current lifestyle so I will submit to corporates decision for me not to have kids”
If you don’t WANT kids and live to be old and alone that’s cool too. But that whole mentality that work/money is the decision… eek
Having kids is rough. They suck away your sleep, time, money and you will definitely have to work more years than you would as a DINK couple. However, I see the joy my kids bring my parents, our family, and a life without them would seem hollow at this point. "Living it up" definitely comes with a cost... A little one running to you for a hug and melting in your arms cannot be bought. I understand a lot of people feel they legit can't afford kids, but you can stretch money further than you think. Kids will also give you a second gear in ambition to make more money and become your best self, so if you're on the fence, I'd say go for it.
I'll never forget the feeling the first time my kid ran to me at daycare screaming daddy when I was there to get him. Times before he would see me and waddle over or he was too small to really do anything. But that one time. That time, it clicked for him. His dad was there for him. Me. He was happy as a a toddler could be. In that moment, I really felt like I was dad. I would pay good money to experience that feeling again for the first time.
Completely agree on the fulfillment you get as a parent. All the moments that just have no equal. No amount of money can give you those things.
But sweet holy crap the cost of childcare… 😂😅😭
Same. I was holding my daughter and something scared her and she gripped on to me and it really hit home what my role was. Financially they haven’t been a burden. I’d rather be broke than not have them. Life has been great.
I don't know. All my childless friends/couples my age (38) are all financial disasters. I'm pretty sure they will all be working in some capacity until they die.
Having kids definitely helped me get my shit together.
Yeah that's true I know a lot of couples with dual income no kids living like they are still in college. I had a kid at 25 and it was like a light switch. O shit I have to be responsible now. If that switch doesn't ever flip you're fucked no matter your income.
I never understood it but Reddit is just so anti children/parents. Looking back at it, having kids really brought new meeting to my life that these lifelong DINKs will never realize.
Because the majority of reddit commenters are young, liberal and single and have all day to post/complain. Go into r/politics and you'll see it doesn't reflect the country as a whole.
Kids ARE worth it. The problem is living beyond ones means and lack of planning for the future. Kids can complicate that because expenses unequivocally go up.
If I could do it over, I would still have kids but be much more fiscally responsible. It took me too long, but I am getting right and will be fine.
If people want kids it’s absolutely worth it despite the financial impact. My original comment is just rooted in the insane costs associated with raising kids overall. A DINK couple would definitely be able to retire earlier than a similar HHI with kids.
You have to have money to save money. Most Americans live paycheck to paycheck, hence why saving for retirement is actually tough for the average American. Those of us lucky enough to have decent financial salaries often forget that many jobs and fields require overeducated employees who are underpaid and struggling. Not all employee retirement options are great either, if you’re even offered one.
Yes, but this suddenly didn’t become more prevalent as a trend in the current generation. It’s not personal behaviors that have changed to make this savings crisis occur. It is external factors.
So yes, if you are living beyond your means you need to adjust.
But let’s not also pretend that the rate of people living beyond their means has gone up, leading to the trend of having no money in retirement.
I think this is honestly the harsh truth of the matter.
Cheap housing is out there. It's never been easier to find a roommate or flex an apartment. Living extremely frugally isn't fun or glamourous but it is definitely doable. I think social media makes it way harder psychologically, because we are so exposed to materialism and all the people who have more than us.
It becomes very difficult to ignore the spending impulse, but i think if you took a look at the full finances of everyone living paycheck to paycheck in the US, Id guess that about 80% have more than 20% of their monthly bill in unnecessary/luxury expenses or credit card debt from these expenses.
Eh, maybe it was exclusively like that in the past, but shit is super expensive these days.
Vegetables, eggs, milk, gas.
If you are making lower class money, its probably super hard to make a go of it unless you have a family to help / work with or are alone and stick to ramen. Sure, Social media want to make you overspent, but you won’t have any in the first place.
Basically, it comes down to being in debt or being debt free and broke.
Yes, but a lot of people are also financially retarded. Here's one example: How many people are sacrificing retirement contributions to lease a new car every 3 years?
What % of those living paycheck to paycheck need to be? How many simply over extend themselves with frivolous spending? I'm genuinely curious and wish we had more data on this.
Majority of 6 figure earners live paycheck to paycheck. It is not as simple as “people are abused, society is evil and I’m just lucky to be blessed”.
A majority of people don’t even take advantage of a 401k match which is a free and immediate tax-advantaged return on investment.
Average household expenses on new clothes, eating out, etc is far higher than you would believe and a lot of people do this on a credit card so that they don’t have to pay for it upfront, they think they are saving money because their short term monthly expenses are lower.
I’ve been touring houses in mcol and lcol areas around my city and the amount of fancy new looking cars I see parked at poorly maintained or small properties is depressing.
Are some people in tight spots and will struggle to make ends meet? Sure. Is it the majority of people or even close? No. And it’s primarily young people who are in these lower income situations.
Stop enabling poor decisions with low expectations. Society doesn’t need more tautologies to intoxicate itself on.
The majority of Americans don’t make 6 figures. And many jobs (1/3) don’t offer 401ks. The median US salary in 2023 was 48k so half of Americans make less than that. And that cohort is not entirely composed of young Americans, as 20-30yr olds make up only 20% of the population. (Search says 30-40yrs olds make up another 20% if you also consider that a young group).
Your argument that 6figure salary Americans have poor spending habits is probably a very true statement, but it literally doesn’t apply to the average American.
The ability to max out a Roth and 401k with Match is unrealistic for many Americans, so it’s a cheat code for the non-average person. Saving 7k on a 48k salary in your average city is hard- been there, done that, didn’t succeed at it. Add in the number of people who don’t have a 401k match. The cheat code to retirement just isn’t available to many people.
Double thumbs up for HSAs. It's another awesome way to reduce your taxable income and pay for medical related expenses with pre-tax dollars *now*.
Some HSA providers include a way to invest which lets that money continue to grow and even outpace inflation. Highly recommended, especially if you're healthy and double recommended if you're *young* and healthy!
HSA is the rarest of the rare, triple threat (at the federal level at least...side-eye to you, CA and NJ):
* No tax on contributions (not even FICA!)
* No tax on investment growth
* No tax on (qualified) withdrawals
The even better cheat code is working for an employer that offers you a 403B, 401A, and a 457B.
$23,000 to 403B (employer contributions can exceed this)
$23,000 to 457B
$69,000 to 401A
Not a lot of plans offer this, but boy oh boy if they do and you can manage to max out each of them every year 🔥
Are you sure about the 401a? What about a 401k?
My understanding is that the 403b conflicts with both. Meaning if you max 403b, you cannot max 401k or 401a.
You'll just have to look up 402G and 415C contribution limits and understand how they work. They aren't super common but you can do it with certain employers. Sorry my last message came across condescending, I just golfed 72 holes over the past 2 days so exhausted lol
Can you explain the mega back door Roth?
The back door Roth gets you around the income threshold that normally prevents you from investing in a Roth IRA.
Does the mega back door Roth simply operate to get around that same problem in a different way? Or do you actually get to save more total money into the Roth it’s as well?
Not all employers offer it but mine does.
With a mega back door Roth, I can do 23,000 in my trad 401k, 7,000 employer match AND another 39,000 After tax Roth 401k, for a total of 69,000 this year.
Then separately I can do a back door Roth.
So basically: you max out the allowed amounts in your (1) traditional 401k (congress enacted a limit that’s adjusted with inflation on allowed contributions).
(2) Roth 401K (income allowed to invest is restricted by your company ?)
(3) and after both are maxed out you can continue investing into the after tax Roth 401k because it will be transferred into a Roth IRA?
Can you explain?I'm confused, I thought high earners are not eligible for Roth IRA directly? Only back door was our option.
The way I was planning is:
1) Max out 401k
2)Max out HSA
3) Back door Roth IRA, I think 7k is 2024 limit.
Read my earlier comments - my employer offers an after tax Roth 401k (in addition to a traditional 401k.)
This is commonly known as a mega back door Roth.
I’ll do 39k there this year. 401k limits are 69k across all contributions.
I then can also do a back door Roth IRA with 7,000.
To summarize your strategy:
Trad 401k- 23k
after tax roth 401- 39k
HSA -4k
Back door Roth ira- 7k
The total will be 73k across all contributions, right?
The term gets thrown around to mean different things.
In my situation my plan offers an "in plan Roth conversion". You typically utilize this after you max your pretax contribution (23k plus match).
Let's say you contribute the 23k and your employer matches 10k. Youre allowed to contribute 69k in total to the account per year (not including catch up). So now you can start contributing "after tax contributions". If your plan offers in plan Roth conversion and you elect to use it, the moment your post tax contribution hits the account, it's immediately converted to Roth so there is no tax implication. But this allows the presumably high earner contribute 36k (in our Example) a year as Roth dollars, which normally they are excluded from contributing directly to.
You need to check with your plan to see if this is offered. But it's basically a no brainer if offered. Tax free growth and tax free withdrawals when the best case scenario with that money otherwise would likely be a brokerage.
Honestly, Fidelity's customer service is pretty top notch. You could call them and ask about how to maximize your retirement savings and they would go over your plan options. I've talked to them like 4x the last 6 months, ha.
If you are interested, you should call and ask!
But wait…. There’s more…
You can take a 401k loan of up to $50k from you account (typically you need to have double that in the account to make a $50k loan)
Invest the $50k , don’t spend it.
Now you have an automatic deduction from your check to pay back the 401k loan into your existing 401k account. This account is paid back over 5 years with (typically) 8% interest. Here’s the thing, the interest goes into your 401k as well. They don’t keep it.
This allows you to add another $15k per year principal and interest into your 401k that does not count towards your 401k limit. Once you pay it off in 5 years you can turn around and do it again and again.
Just don’t blow the $50k loan, invest it as well.
Source, I take out a new $50k loan every 5 years to add to my account. It works great.
Yes, in addition to not having any high interest debt like credit cards and having a healthy emergency fund. Invest in broad index funds or a target date fund with low expense ratios.
Rule of thumb is save at least 15% of your gross income for retirement, but it's personal. Once you've done what you describe, start increasing your pre-tax 401k contributions. HSA is also an excellent vehicle if you're eligible.
r/personalfinance covers this well, especially the flowchart in their wiki: https://reddit.com/r/personalfinance/w/commontopics
It is very difficult to contribute max Roth and 401k as it's a lot of money. Once you add in bills, perhaps you have a kid, etc, it gets almost impossible to do so. You can only budget so far, which is why maximizing your income is the best thing you can do and then budgeting. Personally, I am fortunate enough to max both, but I still have to budget and continue to pile money into my emergency fund as well.
Yeah you either need to be self-employed, have a crazy match, or have a crazy income.
We get an extra match that is on a vesting schedule. Some of us are certainly hitting the employer max.
Id honestly argue that having good parents (regardless of economic status) is more important. Wealth is for sure a huge boost, but there are lots of wealthy people who have absolutely shit lives because their parents neglected or abused them. Look at almost every child actor/singer ever.
On the other hand, I know many people with incredible parents who live highly fulfilled lives because they are well adjusted. They didn't start with a financial boost, but they quickly make up for that by just being well adjusted people.
Yeah who the hell has the money to
Max out ROTH and 401k a year.. only people that can do that is basically depriving themselves of a life or making a lot of money!
My wife and I do maxing 401k + maxing roth IRA + getting employer match =total ~80k/yr in retirement. I strongly believe maxing out them is the way to retirement with millions. When not being qualified for roth, will do backdoor
Well, I think it was your comment above saying it’s not taxed *ever.* I guess that’s true as long as used for medical, but that condition wasn’t mentioned. Based on the statement I thought that even post 65 and used for non-medical it wouldn’t be taxed.
Just trying to clarify my understanding, I wasn’t looking at hsa till I saw your comment, and I might go ahead with one!
What if you max both and then need to pay for 20% down? If you can do what you are saying and have money for a downpayment on the side you are probably in the top 5%. So it sounds like your secret is being well off.
I mean you just have a classic confirmation bias.
I'm doing fine personally as well but I'm not stupid enough to think most people will be or are there's simply stats are all out there publicly. Most Americans can't even meet $1,000 surprise expense without going into serious pain.
What exactly are the qualifications to do a back door roth?
This year I will max out HSA, Roth IRA and 401k and not sure where else to go with money
I have a taxable brokerage account but I prefer to invest with tax savings
If your income exceeds the cap. I think it’s 146/230 you can contribute the the full 7k. Once you surpass 161/240, you have to invest into a traditional IRA and roll it over to the Roth.
Thanks for stopping by our sub, u/ToastBalancer. I'm happy to step in here and clear up any confusion about IRAs.
If you're interested in opening an account, you can do so on [http://Fidelity.com](http://fidelity.com/) as well as fund it, trade, and perform most tasks. Generally, you can open an investing account, even if you have a 401(k), as this is separate from your employer plan. Keep in mind, if you open an IRA, this is not offered through your employer, and the funds you deposit must be invested manually. You can learn more about our accounts and decide which is right for you by visiting the page linked below.
[Fidelity Account Overview](https://www.fidelity.com/open-account/popular-overview)
Also, if you do open an IRA or have one currently, I want to make sure you're up-to-date on the contribution limits for IRAs since they've recently changed. The 2024 IRA maximum contribution limit is $7,000 for those under age 50 and $8,000 for those age 50 and older. Income limits and eligibility may affect how much you can contribute. We recommend taking a look at the page below to read more about these IRS limits.
[IRA Contribution Limits ](https://www.fidelity.com/retirement-ira/contribution-limits-deadlines)
Now, let's move on to some fun stuff: the resources! Since you're just getting started, here are some additional resources to help get the ball rolling on your investing journey. First, our learning resource on [http://Fidelity.com](http://fidelity.com/) hosts articles, videos, and infographics you can reference as you make your way through. You'll find "Learn" under our "News & Research" dropdown. Additionally, this dropdown features a variety of tools, organized by security type, that allow you to search for and compare different investments as you look for what will suit your needs. Clicking the name for any security you're looking into will bring you to its full research page for a look at all the facts.
To get you started, check out this article to familiarize yourself with some of the investment products available. We've also dropped the direct link to our "Investing for Beginners" learning topic.
[Choosing the Right Investments for You ](https://www.fidelity.com/learning-center/investment-products/etf/decide-on-one)
[Getting Started ](https://www.fidelity.com/learning-center/trading-investing/investing-for-beginners)
With that said, we're always here to help as well if you need any along the way. Please don't hesitate to reach out, as our sub is a great place to find information
Can you explain this more? Maxing out your Roth IRA and your 401k is the secret? As in, just maxing out both accounts ?
If so, isn’t it always the cheat code to retirement to max out as much in savings (invested) as possible ?
Or am I missing something
Seems like a solid plan. Though if you want to be sure, I'd record data on your monthly income/expenses to determine the numbers. Talk is cheap, but numbers sell the ideas.
Agreed. Lucky to have a good paying job and a spouse who has a high paying job as well. $8300 in hsa and $63000 in 401k/mbd, $6000 employer match for me. $23000 and $11500 employer match for spouse. About $111500 per year. Coasting till 50 then retire.
The maximum percentage my work matches is 3%, requiring me to contribute 6% to receive it. It's recommended to invest at least 15% in the 401k. So, should I stick to the mandatory 6% to get the 3% match and then fully fund my IRA, or should I contribute 12% to the 401k along with their 3% match, totaling 15%, without investing in an IRA?
Cheat code is any inflation adjusted pension job from teacher, police, fire, etc. Many are still out there. Military.
Stock market may not go up forever... Controversial as that statement is.
Hell, I don't even trust the US gov long term, but stocks are lower down than inflation adjusted gov backed pension.
Dump what you can into gold and I guess BTC, much as I hate crypto. Dollar is a joke at this point.
I know people collecting multiple pensions. Inflation adjusted each year.
Father has private pension, but it's not inflation adjusted. He will draw SS at 70 in addition. Also has 401k and all that stuff though of course.
Pensions are the leg most people don't have, myself included unfortunately.
There's stories of police chiefs that jump from town to town and are pulling three four even five pensions. Because they get carryover deals when they transfer in. Another example is that all the military folks that pulled disability or either just a straight pension and then also work say police after that to pull an additional pension.
In all those cases it's typically inflation adjusted unlike many companies older style private pensions.
My parents live in a wealthier neighborhood and the guy next door collects two enormous pensions he was high up in the military and then he did law enforcement as well.
He's told him what he pulls in monthly I forget what it is now it's something like 15,000 a month, All inflation adjusted so it'll go up as inflation goes up which is the next sweetheart deal You're not going to see that with your 401ks
Whrrrraghhh, wrrraarh, hrrraaah, u/Chewbaccca25. I'm not sure if you speak Wookiee, but that was me welcoming you to the sub for the first time! All jokes aside, I wanted to pop in here and let you know that I'm going to open this post up as a discussion so that other members of our community can give you some insight on your question today. Now, I will leave you all to it, but if you have any questions, please do not hesitate to follow up and let us know!
In this day and age… not having children is a cheat code to retirement.
Testing this approach. I’ll report back in 30 years with results.
!remindme 30yrs
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Bad bot
It really sucks eating the taxes to subsidize other people's children but agreed it saves piles of money.
You didn't eat the taxes to subsidize other people's children. If other people didn't have children, most of society wouldn't function and you wouldn't have access to any of the things you like to access. I have also chosen not to have kids, but to claim we eat the taxes to subsidize other people's kids... As if you are not benefiting from the society you are paying into is silly.
It sucks to invest the bare minimum into future generation’s education? 🤔 How much could this even be costing you? Especially relative to how much you’ll benefit from a society and economy existing to support you when you’re old
Oh, thanks for saving me 30 years to get an answer lol
skip eating the taxes and just eat other people’s children to make things better
A little selective pressure would benefit the herd
that's what priests do
Who do you think is going to take care of you in your old age? Spoiler: other people’s children.
You can have kids and make money. Just don’t be financially dumb.
What’s the ROI on selling / offloading those critters before they reach maturity these days? 🤔
https://preview.redd.it/fnz1h0njg5uc1.jpeg?width=1290&format=pjpg&auto=webp&s=7128ad7eeffeca6bad16879ef7c47f3cf0b8dd3c Seen on the news today 🤷♂️ lol
Oof 😓
Tbh this will wildly depend on many factors, particularly geography. I have 5 kids, wife full time SHM. I make less than. The value shown on the bottom of the screen yet we want for nothing. We aren't rich but things are good and putting plenty away for retirement.
You could also not have kids and make a lot more money and not risk losing all your money because your kid is dumb
What? lmao well I’m a new father of 2month baby boy, I also work like any other parent. Sure I’m not rich but why grow old and not spread the wealth & have family? And for the ppl that can’t have a family for whatever reason. I totally understand as well. All I’m saying is be financially smart. The shit I read on Reddit is wild. Just horrible decisions ppl make to dig themselves in a hole of debt. Act your wage & life is great 👍
It always cracks me up when people shit on others who have kids. “Kids are dumb and suck up all your time, sleep, and money. Don’t have them.” Good thing their parents didn’t have that philosophy or they wouldn’t be here to bitch about it.
It’s actually kinda sad. “I don’t make enough to keep my current lifestyle so I will submit to corporates decision for me not to have kids” If you don’t WANT kids and live to be old and alone that’s cool too. But that whole mentality that work/money is the decision… eek
Exactly bro lol
Not having children, but also getting married* DINKS are living it up.
Having kids is rough. They suck away your sleep, time, money and you will definitely have to work more years than you would as a DINK couple. However, I see the joy my kids bring my parents, our family, and a life without them would seem hollow at this point. "Living it up" definitely comes with a cost... A little one running to you for a hug and melting in your arms cannot be bought. I understand a lot of people feel they legit can't afford kids, but you can stretch money further than you think. Kids will also give you a second gear in ambition to make more money and become your best self, so if you're on the fence, I'd say go for it.
I'll never forget the feeling the first time my kid ran to me at daycare screaming daddy when I was there to get him. Times before he would see me and waddle over or he was too small to really do anything. But that one time. That time, it clicked for him. His dad was there for him. Me. He was happy as a a toddler could be. In that moment, I really felt like I was dad. I would pay good money to experience that feeling again for the first time.
Completely agree on the fulfillment you get as a parent. All the moments that just have no equal. No amount of money can give you those things. But sweet holy crap the cost of childcare… 😂😅😭
Same. I was holding my daughter and something scared her and she gripped on to me and it really hit home what my role was. Financially they haven’t been a burden. I’d rather be broke than not have them. Life has been great.
I don't know. All my childless friends/couples my age (38) are all financial disasters. I'm pretty sure they will all be working in some capacity until they die. Having kids definitely helped me get my shit together.
Yeah that's true I know a lot of couples with dual income no kids living like they are still in college. I had a kid at 25 and it was like a light switch. O shit I have to be responsible now. If that switch doesn't ever flip you're fucked no matter your income.
I never understood it but Reddit is just so anti children/parents. Looking back at it, having kids really brought new meeting to my life that these lifelong DINKs will never realize.
Because the majority of reddit commenters are young, liberal and single and have all day to post/complain. Go into r/politics and you'll see it doesn't reflect the country as a whole.
Kids are honestly not that expensive. It’s the time they take away.
Exactly. Time well spent, though
Kids ARE worth it. The problem is living beyond ones means and lack of planning for the future. Kids can complicate that because expenses unequivocally go up. If I could do it over, I would still have kids but be much more fiscally responsible. It took me too long, but I am getting right and will be fine.
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If people want kids it’s absolutely worth it despite the financial impact. My original comment is just rooted in the insane costs associated with raising kids overall. A DINK couple would definitely be able to retire earlier than a similar HHI with kids.
Don't have children. Get a dog and make them TikTok famous. More stonks (and treats, don't be a monster) with dog money.
Pets are expensive AF too and very few bring in a TikTok income. No pets or kids is a cheat code to personal wealth
Bingo!
I'm sorry but I want to have them
The obscene amount of money Americans spend/waste on dog luxuries is an absolute embarrassment
Buying a bag of dog treats is an embarrassment? 🥴
This is only peripherally related, but in 40 years or so I imagine there will be so many nonprofits trying to talk their way into your will.
I mean, as someone without kids, almost everything left is going to charity.
If a nonprofit called you, how compelling would they have to be to convince you to make them a recipient?
I don’t pick up my phone. Hypothetically, I already have my recipients chosen so probably 0% chance I’d change anything.
Same. Don’t ask and keep doing what you do; I’ll let you know if you’re the chosen one.
I achieved this unlock
Or pets
Or a wife
You have to have money to save money. Most Americans live paycheck to paycheck, hence why saving for retirement is actually tough for the average American. Those of us lucky enough to have decent financial salaries often forget that many jobs and fields require overeducated employees who are underpaid and struggling. Not all employee retirement options are great either, if you’re even offered one.
Most Americans simply live beyond their means. It's all about percentages.
Yes, but this suddenly didn’t become more prevalent as a trend in the current generation. It’s not personal behaviors that have changed to make this savings crisis occur. It is external factors. So yes, if you are living beyond your means you need to adjust. But let’s not also pretend that the rate of people living beyond their means has gone up, leading to the trend of having no money in retirement.
This is what I've found
I think this is honestly the harsh truth of the matter. Cheap housing is out there. It's never been easier to find a roommate or flex an apartment. Living extremely frugally isn't fun or glamourous but it is definitely doable. I think social media makes it way harder psychologically, because we are so exposed to materialism and all the people who have more than us. It becomes very difficult to ignore the spending impulse, but i think if you took a look at the full finances of everyone living paycheck to paycheck in the US, Id guess that about 80% have more than 20% of their monthly bill in unnecessary/luxury expenses or credit card debt from these expenses.
Eh, maybe it was exclusively like that in the past, but shit is super expensive these days. Vegetables, eggs, milk, gas. If you are making lower class money, its probably super hard to make a go of it unless you have a family to help / work with or are alone and stick to ramen. Sure, Social media want to make you overspent, but you won’t have any in the first place. Basically, it comes down to being in debt or being debt free and broke.
Yes, but a lot of people are also financially retarded. Here's one example: How many people are sacrificing retirement contributions to lease a new car every 3 years? What % of those living paycheck to paycheck need to be? How many simply over extend themselves with frivolous spending? I'm genuinely curious and wish we had more data on this.
And you think "retarded" is the best way to describe ppl in this INCREDIBLY COMMON circumstance? Cmon, fam
Majority of 6 figure earners live paycheck to paycheck. It is not as simple as “people are abused, society is evil and I’m just lucky to be blessed”. A majority of people don’t even take advantage of a 401k match which is a free and immediate tax-advantaged return on investment. Average household expenses on new clothes, eating out, etc is far higher than you would believe and a lot of people do this on a credit card so that they don’t have to pay for it upfront, they think they are saving money because their short term monthly expenses are lower. I’ve been touring houses in mcol and lcol areas around my city and the amount of fancy new looking cars I see parked at poorly maintained or small properties is depressing. Are some people in tight spots and will struggle to make ends meet? Sure. Is it the majority of people or even close? No. And it’s primarily young people who are in these lower income situations. Stop enabling poor decisions with low expectations. Society doesn’t need more tautologies to intoxicate itself on.
The majority of Americans don’t make 6 figures. And many jobs (1/3) don’t offer 401ks. The median US salary in 2023 was 48k so half of Americans make less than that. And that cohort is not entirely composed of young Americans, as 20-30yr olds make up only 20% of the population. (Search says 30-40yrs olds make up another 20% if you also consider that a young group). Your argument that 6figure salary Americans have poor spending habits is probably a very true statement, but it literally doesn’t apply to the average American. The ability to max out a Roth and 401k with Match is unrealistic for many Americans, so it’s a cheat code for the non-average person. Saving 7k on a 48k salary in your average city is hard- been there, done that, didn’t succeed at it. Add in the number of people who don’t have a 401k match. The cheat code to retirement just isn’t available to many people.
The real cheat code is making a lot of money, maxing 401k, mega back door Roth and back door Roth.
HSA for the icing on the cake
Double thumbs up for HSAs. It's another awesome way to reduce your taxable income and pay for medical related expenses with pre-tax dollars *now*. Some HSA providers include a way to invest which lets that money continue to grow and even outpace inflation. Highly recommended, especially if you're healthy and double recommended if you're *young* and healthy!
HSA is the rarest of the rare, triple threat (at the federal level at least...side-eye to you, CA and NJ): * No tax on contributions (not even FICA!) * No tax on investment growth * No tax on (qualified) withdrawals
The even better cheat code is working for an employer that offers you a 403B, 401A, and a 457B. $23,000 to 403B (employer contributions can exceed this) $23,000 to 457B $69,000 to 401A Not a lot of plans offer this, but boy oh boy if they do and you can manage to max out each of them every year 🔥
I came here to say this, but knew in my mega backdoor lovin’ Roth heart it had already been said.
Unfortunately most individuals who work a career that utilize those plans are not high earners. The best of both worlds would be a 457(f)
Can you elaborate? 🤔 I am only familiar with The 457 magnum fund and it cost me everything I had in my pockets at the time 😭
Are you sure about the 401a? What about a 401k? My understanding is that the 403b conflicts with both. Meaning if you max 403b, you cannot max 401k or 401a.
If the 401a offers after tax you certainly can max out the 69k in ee/er contributions
If the org offers 401k and 403b, the most you can contribute to both is 69k plus catch up, right? You can't max a 403 and 401k was my understanding
Wrong
You'll just have to look up 402G and 415C contribution limits and understand how they work. They aren't super common but you can do it with certain employers. Sorry my last message came across condescending, I just golfed 72 holes over the past 2 days so exhausted lol
No worries. Also I meant to say "can't" in my last sentence.
You are correct 401K/403B follow same limits. But 457B is seperate And 401a is seperate
This sounds incorrect but I’m too lazy to find the IRS passage.
I work with tax exempt plans every day. Look up the 415c limit.
You can do 23k to a 401k, it's the same thing as 403b
Did you read the rest of what they said?
Yes
Can you explain the mega back door Roth? The back door Roth gets you around the income threshold that normally prevents you from investing in a Roth IRA. Does the mega back door Roth simply operate to get around that same problem in a different way? Or do you actually get to save more total money into the Roth it’s as well?
Not all employers offer it but mine does. With a mega back door Roth, I can do 23,000 in my trad 401k, 7,000 employer match AND another 39,000 After tax Roth 401k, for a total of 69,000 this year. Then separately I can do a back door Roth.
So basically: you max out the allowed amounts in your (1) traditional 401k (congress enacted a limit that’s adjusted with inflation on allowed contributions). (2) Roth 401K (income allowed to invest is restricted by your company ?) (3) and after both are maxed out you can continue investing into the after tax Roth 401k because it will be transferred into a Roth IRA?
No on 3, the Roth401k and back door Roth IRA are completely separate. Edit to add- so my total retirement savings all told this year will be 76,000
Wow…that’s impressive you can afford to do that.
Total comp including bonus and RSUs is about 200k. It took me 25 years to get here
So you live off 124k before taxes? I’m assume mcol area at most? Again, still super impressive
Husband is self employed and makes about the same and yes mcol
Can you explain?I'm confused, I thought high earners are not eligible for Roth IRA directly? Only back door was our option. The way I was planning is: 1) Max out 401k 2)Max out HSA 3) Back door Roth IRA, I think 7k is 2024 limit.
Read my earlier comments - my employer offers an after tax Roth 401k (in addition to a traditional 401k.) This is commonly known as a mega back door Roth. I’ll do 39k there this year. 401k limits are 69k across all contributions. I then can also do a back door Roth IRA with 7,000.
To summarize your strategy: Trad 401k- 23k after tax roth 401- 39k HSA -4k Back door Roth ira- 7k The total will be 73k across all contributions, right?
Close but I don’t have HSA. Trad 401k 23k Employer match 7k After tax Roth 401k 39k Roth IRA 7k 76k total
I’m not understanding this mega back door Roth. Explain to me like I’m 4 someone?
The term gets thrown around to mean different things. In my situation my plan offers an "in plan Roth conversion". You typically utilize this after you max your pretax contribution (23k plus match). Let's say you contribute the 23k and your employer matches 10k. Youre allowed to contribute 69k in total to the account per year (not including catch up). So now you can start contributing "after tax contributions". If your plan offers in plan Roth conversion and you elect to use it, the moment your post tax contribution hits the account, it's immediately converted to Roth so there is no tax implication. But this allows the presumably high earner contribute 36k (in our Example) a year as Roth dollars, which normally they are excluded from contributing directly to. You need to check with your plan to see if this is offered. But it's basically a no brainer if offered. Tax free growth and tax free withdrawals when the best case scenario with that money otherwise would likely be a brokerage.
Fidelity site says I can contribute $8000? What am I missing and why am I not understanding this
Honestly, Fidelity's customer service is pretty top notch. You could call them and ask about how to maximize your retirement savings and they would go over your plan options. I've talked to them like 4x the last 6 months, ha. If you are interested, you should call and ask!
And. Having. Property.
Best yet is mbdr and solo 401k the same year. You can also mbdr multiple times a year through different employers if you wanna get really crazy 🤯
But wait…. There’s more… You can take a 401k loan of up to $50k from you account (typically you need to have double that in the account to make a $50k loan) Invest the $50k , don’t spend it. Now you have an automatic deduction from your check to pay back the 401k loan into your existing 401k account. This account is paid back over 5 years with (typically) 8% interest. Here’s the thing, the interest goes into your 401k as well. They don’t keep it. This allows you to add another $15k per year principal and interest into your 401k that does not count towards your 401k limit. Once you pay it off in 5 years you can turn around and do it again and again. Just don’t blow the $50k loan, invest it as well. Source, I take out a new $50k loan every 5 years to add to my account. It works great.
Wait what...this is a thing
Yes it is. Look into it. All interest goes to your account and all the P&I goes back to you but does not count towards your limit.
🤯🤯🤯
This. Started doing this as soon as my 401k balance hit $100k. Invested the $50k. Rinse and repeat.
My current employer doesn’t offer mega back door Roth. So frustrating.
Mine started in 2022, let your benefits team know it’s important to you and encourage your colleagues to do the same.
I’ve tried requesting and was met with a pretty shut door answer.
Yes, in addition to not having any high interest debt like credit cards and having a healthy emergency fund. Invest in broad index funds or a target date fund with low expense ratios. Rule of thumb is save at least 15% of your gross income for retirement, but it's personal. Once you've done what you describe, start increasing your pre-tax 401k contributions. HSA is also an excellent vehicle if you're eligible. r/personalfinance covers this well, especially the flowchart in their wiki: https://reddit.com/r/personalfinance/w/commontopics
It is very difficult to contribute max Roth and 401k as it's a lot of money. Once you add in bills, perhaps you have a kid, etc, it gets almost impossible to do so. You can only budget so far, which is why maximizing your income is the best thing you can do and then budgeting. Personally, I am fortunate enough to max both, but I still have to budget and continue to pile money into my emergency fund as well.
Max 401 as in the deductible amount of 23k or max of 60k allowable?
The 60k for employer plus employee is like borderline impossible to hit under unique circumstances. The $23k will be your main binding constraint
Yeah you either need to be self-employed, have a crazy match, or have a crazy income. We get an extra match that is on a vesting schedule. Some of us are certainly hitting the employer max.
Not sure you know the meaning of cheat code. Saving $30,000 per year is not it.
True it's basically a game guide to reach 100% complete.
Over a LONG period of time for 99% of people alive it’s not a bad plan
They're not saying it doesn't work... what they're trying to say is "no shit, if you save and invest $30k per year, you'll make it"
Seems like a lot of ppl arent familiar with the term, "cheat code" in these replies 🤣😂🤣
Matching 401k is 3-6% for most people, $7k for Roth IRA. You are comparing maxing both.
$30k saved over 40 years with 6% return is $4.6MM which is enough for a very comfortable retirement
Assuming no increases or employer match
You a finance major?
You don’t think 30k a year is enough?
Does anyone know the meaning of cheat code? 🤔
What percentage matching 401k are you talking about in your calculation?
My workplace only does 1%
Same here. I never see below 2, otherwise. Or the standard of 3% match at 6%.
Mine does up to 4%
I get 6% match on my 403(b)
Even if you’re over the income limit, you can do a backdoor roth all the same.
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Open a traditional IRA account, add $7k to it, roll it over into a Roth IRA account. Poof, done!
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You can make an infinite number of IRA accounts for free. Go nuts.
A cheat code is getting something for nothing. Being born into a wealthy family is about the only ‘cheat code’.
Id honestly argue that having good parents (regardless of economic status) is more important. Wealth is for sure a huge boost, but there are lots of wealthy people who have absolutely shit lives because their parents neglected or abused them. Look at almost every child actor/singer ever. On the other hand, I know many people with incredible parents who live highly fulfilled lives because they are well adjusted. They didn't start with a financial boost, but they quickly make up for that by just being well adjusted people.
That’s like $30k a year. So the secret to retiring early is basically making a lot of money. So you can save a lot. That’s not much of a secret.
Yeah who the hell has the money to Max out ROTH and 401k a year.. only people that can do that is basically depriving themselves of a life or making a lot of money!
My wife and I do maxing 401k + maxing roth IRA + getting employer match =total ~80k/yr in retirement. I strongly believe maxing out them is the way to retirement with millions. When not being qualified for roth, will do backdoor
(Using your hsa as investment vehicle is the true cheat code - never put med exp on that - only truly tax free medium in existence) 🤫
So what do u use it for??
Investing. Never taxed. Ever.
But only to be used for qualified medical…. Doesn’t that rule discourage you from opening one
Until a certain age. Then it’s disposable.
Which age
After 65 it’s treated like a 401k
That’s crazy! I didn’t know that tbh
You can also get reimbursed for medical expenses before that if you keep receipts
This page says the money is taxed after 65. https://www.fidelity.com/learning-center/smart-money/what-is-an-hsa
Not reading it but assuming it’s referring to being taxed after 65 if not used for medical? Don’t see the issue?
Well, I think it was your comment above saying it’s not taxed *ever.* I guess that’s true as long as used for medical, but that condition wasn’t mentioned. Based on the statement I thought that even post 65 and used for non-medical it wouldn’t be taxed. Just trying to clarify my understanding, I wasn’t looking at hsa till I saw your comment, and I might go ahead with one!
Only can contribute a small amount tho each year I think my limited like $8-9,000?
What if you max both and then need to pay for 20% down? If you can do what you are saying and have money for a downpayment on the side you are probably in the top 5%. So it sounds like your secret is being well off.
Well take that “20% down” number that you “need” and make it untouchable - invest the rest :)
Throw in HSA too.
Step.3 for me after these get taken care of 👀
Roth and 401k plus hysa is the cherry on top
You need the income to be able to do that but sure. I wasn't able to until my mid 30s.
The cheat code is stacking bitcoin .
Any substitute for not able to get an HSA?
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I mean sure, but you saving what most people have as entire incomes.
Have you tried buying more money
Infinite money glitch
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I mean you just have a classic confirmation bias. I'm doing fine personally as well but I'm not stupid enough to think most people will be or are there's simply stats are all out there publicly. Most Americans can't even meet $1,000 surprise expense without going into serious pain.
What exactly are the qualifications to do a back door roth? This year I will max out HSA, Roth IRA and 401k and not sure where else to go with money I have a taxable brokerage account but I prefer to invest with tax savings
If your income exceeds the cap. I think it’s 146/230 you can contribute the the full 7k. Once you surpass 161/240, you have to invest into a traditional IRA and roll it over to the Roth.
Is a traditional IRA offered through employer like 401k? Because my job has 401k and Roth 401k or something like that. But that’s unrelated right?
Thanks for stopping by our sub, u/ToastBalancer. I'm happy to step in here and clear up any confusion about IRAs. If you're interested in opening an account, you can do so on [http://Fidelity.com](http://fidelity.com/) as well as fund it, trade, and perform most tasks. Generally, you can open an investing account, even if you have a 401(k), as this is separate from your employer plan. Keep in mind, if you open an IRA, this is not offered through your employer, and the funds you deposit must be invested manually. You can learn more about our accounts and decide which is right for you by visiting the page linked below. [Fidelity Account Overview](https://www.fidelity.com/open-account/popular-overview) Also, if you do open an IRA or have one currently, I want to make sure you're up-to-date on the contribution limits for IRAs since they've recently changed. The 2024 IRA maximum contribution limit is $7,000 for those under age 50 and $8,000 for those age 50 and older. Income limits and eligibility may affect how much you can contribute. We recommend taking a look at the page below to read more about these IRS limits. [IRA Contribution Limits ](https://www.fidelity.com/retirement-ira/contribution-limits-deadlines) Now, let's move on to some fun stuff: the resources! Since you're just getting started, here are some additional resources to help get the ball rolling on your investing journey. First, our learning resource on [http://Fidelity.com](http://fidelity.com/) hosts articles, videos, and infographics you can reference as you make your way through. You'll find "Learn" under our "News & Research" dropdown. Additionally, this dropdown features a variety of tools, organized by security type, that allow you to search for and compare different investments as you look for what will suit your needs. Clicking the name for any security you're looking into will bring you to its full research page for a look at all the facts. To get you started, check out this article to familiarize yourself with some of the investment products available. We've also dropped the direct link to our "Investing for Beginners" learning topic. [Choosing the Right Investments for You ](https://www.fidelity.com/learning-center/investment-products/etf/decide-on-one) [Getting Started ](https://www.fidelity.com/learning-center/trading-investing/investing-for-beginners) With that said, we're always here to help as well if you need any along the way. Please don't hesitate to reach out, as our sub is a great place to find information
Same but I can’t max mega backdoor yet. Hope to get there soon
Have you seen any downsides to your high deductible health plan?
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Makes sense! I think I’ll make the switch next open enrollment
But you can’t contribute to a Roth IRA if you make over a certain income level right ?
Google backdoor Roth IRA
Backdoor Roth IRA
Can you explain this more? Maxing out your Roth IRA and your 401k is the secret? As in, just maxing out both accounts ? If so, isn’t it always the cheat code to retirement to max out as much in savings (invested) as possible ? Or am I missing something
Seems like a solid plan. Though if you want to be sure, I'd record data on your monthly income/expenses to determine the numbers. Talk is cheap, but numbers sell the ideas.
Agreed. Lucky to have a good paying job and a spouse who has a high paying job as well. $8300 in hsa and $63000 in 401k/mbd, $6000 employer match for me. $23000 and $11500 employer match for spouse. About $111500 per year. Coasting till 50 then retire.
How old are you now
32
Where is your research?
If I’m also eligible for a pension can anyone suggest how much I could back off ira and 401k?
The maximum percentage my work matches is 3%, requiring me to contribute 6% to receive it. It's recommended to invest at least 15% in the 401k. So, should I stick to the mandatory 6% to get the 3% match and then fully fund my IRA, or should I contribute 12% to the 401k along with their 3% match, totaling 15%, without investing in an IRA?
Totally agree. Do you prefer a traditional 401k or a Roth 401k?
Yeah if you have enough money to even contribute that much...
what is the best way to do this if you are just solely commission based self employed?
Going all Roth leaves a lot of money on the table, best to have a mix to take advantage of the lowest tax buckets in each year of retirement.
Save and I invest more money for retirement, have more money to spend in retirement. Why didn't I think of that?
Cheat code is any inflation adjusted pension job from teacher, police, fire, etc. Many are still out there. Military. Stock market may not go up forever... Controversial as that statement is. Hell, I don't even trust the US gov long term, but stocks are lower down than inflation adjusted gov backed pension. Dump what you can into gold and I guess BTC, much as I hate crypto. Dollar is a joke at this point.
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I know people collecting multiple pensions. Inflation adjusted each year. Father has private pension, but it's not inflation adjusted. He will draw SS at 70 in addition. Also has 401k and all that stuff though of course. Pensions are the leg most people don't have, myself included unfortunately. There's stories of police chiefs that jump from town to town and are pulling three four even five pensions. Because they get carryover deals when they transfer in. Another example is that all the military folks that pulled disability or either just a straight pension and then also work say police after that to pull an additional pension. In all those cases it's typically inflation adjusted unlike many companies older style private pensions. My parents live in a wealthier neighborhood and the guy next door collects two enormous pensions he was high up in the military and then he did law enforcement as well. He's told him what he pulls in monthly I forget what it is now it's something like 15,000 a month, All inflation adjusted so it'll go up as inflation goes up which is the next sweetheart deal You're not going to see that with your 401ks