“This may be a little optimistic, but I don’t plan to work until I’m 59. Hence, I’ve started investing a little in a taxable account. I do tend to do more buys and sells in the 401k so I don’t have to worry about the tax implications.”
We went out at 55/54. Taxable accounts can be valuable for that. There are no restrictions for age associated with withdrawals.
By the same token, a Roth can be valuable there also. Contributions can be withdrawn tax/penalty free. The first contribution must be held 5 years prior to taking a distribution. Earnings(growth) can not be taken (in normal circumstances) until 59 1/2. It is all tax free. Also Roth IRA’s are the only tax advantaged account that is exempt from Required Minimum Distributions (RMD) starting in the year you turn 70 1/2.
A taxable account will create some type of taxable event for a sale or dividend payment.
“Are there any advantages to an IRA (roth or not) over a 401k especially in regard to early retirement? I’ve always seen them as somewhat interchangeable.”
401K accounts normally have higher management fees associated with them compared to IRA’s. (Ours have none)
401K’s do offer pre-59 1/2 distributions if you retire from the company.
IRA’s can also be tapped early if you use a SEPP (72t plan) of periodic payments.
I don’t think that is optimistic at all. Should be realistic for most people earning average wage, but, here is the important part, living within their means.
In interest of not straying too far off topic, I recommend checkiing out the FIRE Wannabe board. Also take any advice Gene has to offer.
That is approximately annualized, and I think that with help and guidance, it will gradually improve over time. I don’t expect overnight improvement, especially as the market is slow and I’m not taking great risks.
I don’t think it’s actually that bad. Here’s an article that discusses 15 years (and that is close to the amount of time I have been involved with the stock market). I started in '99, tech bubble, oh yeah, that hurt.
I want to strongly emphasize Gene’s Roth IRA recommendation. The younger you are when you start it, the more valuable it becomes and NO TAXES AT DISTRIBUTION assuming you follow the rules. I made my daughters start Roths early in their teens with the first paychecks they received.
I don’t think it’s actually that bad. Here’s an article that discusses 15 years (and that is close to the amount of time I have been involved with the stock market). I started in '99, tech bubble, oh yeah, that hurt.
I started in 1999 also. I didn’t really learn what I was doing until I joined Stock Advisor in 2005. Since 2005, my XIRR is around 15%. It peaked a year or two ago around 20% and my goal is to get it back up to that.
One more thing to consider is contribution limits. My wife and I (combined) exceed the IRS’s threshold to even contribute to a Roth (excluding recharacterization), and the contribution limit is currently $5,500. But through my employer, I can make Roth 401k contributions up to 15% of my income (I believe), with no threshold. Even with limited choices, that’s a huge advantage over what the IRS allows me to do individually.
Good point Mr TBS – a good thing to note for anyone who wants to max out their 401k. If you contribute 18,000 before tax (traditional), that’s significantly less than contribution 18,000 after tax (Roth).