Planning ahead

[ken-do-nim]

Hi all,

At some point, my child support payments will end.  Could be as little as 3 years, could be as much as 6.  When that does happen, I see these possibilities:

1. Max out my 401k
   
2. Build up my taxable account
   
3. Build up my taxable account to a certain point (maybe $500k?), then switch to maxing out the 401k.
   
4. Do both; split the proceeds and increase my 401k savings, as well as increase my taxable account input.
   

Your thoughts?

[crimsonghost747]

While I'd love to offer some awesome advice, I don't really understand your tax system well enough to have a full understanding of the different options.
But in general, I thought maxing out you 401k is kind of a "must do" since it helps with the taxes and you can grow the 401k without any tax consequences?
Taxes are not fun, so avoid them if you can.

[ken-do-nim]

(08-13-2022, 04:15 PM)crimsonghost747 Wrote: While I'd love to offer some awesome advice, I don't really understand your tax system well enough to have a full understanding of the different options.
But in general, I thought maxing out you 401k is kind of a "must do" since it helps with the taxes and you can grow the 401k without any tax consequences?
Taxes are not fun, so avoid them if you can.

Yes, my employer offers both pre-tax and ROTH 401k.  The 2022 max contribution is $20,500 and for those 50+ they get to contribute an extra $6,500.  Gotta figure by the time child support ends, the total will be well over $30k.  $30k+ going into a ROTH 401k, if I can swing it, does sound appealing.  

The problem is that 401k money is money i can't touch for 10 years.  What if I want to do a big project like convert my house into a 2 family?  Or what if I need my dividends to help me pay an auto loan that is say $1000/month?  That's why I'm thinking option 3 may be my best bet.  It's a whole new world for me now that company stock is no longer something I can rely on for big purchases.

[fenders53]

My investment accounts were never mixed with money I might need or want to spend. It sounds like you need a taxable account you can use for life events. You can always deem it retirement money much later.

[ChadR]

Always fund your 401k to the employer maximum match amount. If the 401k options are great, fully fund the 401k. If the options are not that good, fund the brokerage account. Also, like Fenders said, don't mix your investment money with money you might want or need to spend on non retirement activities. Fund that account seperately.

[rayray]

everyone has different situations and everyone's situations change

as a non-professional all i can tell you is what i did over the years

1) establish kplan--maxed out
2) established ROTH 1998
3) establish savings
4) established brokerage account
5) we have two traditional IRA's

everything is the same except i lowered kplan contributions from 16% to 6% because i wanted to build up our non-retirement account in case one of us leaves the work force before 59 1/2

yes--i'm aware of the 55 rule and the 72t--but it's something i'd like to avoid

[ken-do-nim]

So yeah, my 401k and ROTH IRA are strictly for retirement, my taxable account might end up being for retirement, it might not. I am 49 and a half years old today, so I am exactly 10 years away from being able to touch my retirement funds. So much can happen in 10 years. I'm at the 401k maximum match amount (6%). I think at this time it is prudent to make sure the brokerage account gets up much higher, so I can handle turning my house into a 2 family if I decide to, as well as putting a downpayment on another.

[rayray]

(08-18-2022, 08:57 AM)ken-do-nim Wrote: So yeah, my 401k and ROTH IRA are strictly for retirement, my taxable account might end up being for retirement, it might not.  I am 49 and a half years old today, so I am exactly 10 years away from being able to touch my retirement funds.  So much can happen in 10 years.  I'm at the 401k maximum match amount (6%).  I think at this time it is prudent to make sure the brokerage account gets up much higher, so I can handle turning my house into a 2 family if I decide to, as well as putting a downpayment on another.

Happy belated birthday ken!!

yes a lot can happen in 10 years

i'm interested to see what happens to my tesla and nvdia stock in that time frame lol

tesla has to be one of the most fascinating companies i've been looking at the last few months

aside from good stock picking

here's to better health and longevity

[ken-do-nim]

Just revisiting this topic ...

It's likely I will marry my girlfriend in the 2026-2029 timeframe. In the prenup, the plan is that my non-retirement brokerage assets are mine, with my daughter as the beneficiary. I will be able to choose to withdraw funds and merge them into our joint bank account, but I won't be able to add new money. She's going to do something similar with her assets. We will have very little in the way of joint assets at the start. So, I'm pretty much maxing out my brokerage account until then. After we marry, I will likely max out my ROTH 401k.

[ken-do-nim]

(08-13-2022, 03:03 PM)ken-do-nim Wrote: Hi all,

At some point, my child support payments will end.  Could be as little as 3 years, could be as much as 6.  When that does happen, I see these possibilities:

1. Max out my 401k
   
2. Build up my taxable account
   
3. Build up my taxable account to a certain point (maybe $500k?), then switch to maxing out the 401k.
   
4. Do both; split the proceeds and increase my 401k savings, as well as increase my taxable account input.
   

Your thoughts?

I've been child support free now for 1 month.  Ah, this post did not age well.  As if the money that had been allocated for child support would somehow, magically, be available?  Silly me!  No, it just got converted to doggy day care, uber rides, the increased food bill, and other payments.