@takeonme In the end no matter what you have to pay taxes on all investments. Some are taxed deferred. Some are not. It also depends on how long you hold an investment and reinvest dividends. If you hold long term. It is not considered regular income like a paycheck. I could be wrong
@takeonme Do you know what your life costs? If so, you can multiply that by 25 to see what your FI number is. Then you can use calculators to see where your current tax deferred savings will be in the future. If you’re already on track to hit your FI number via pretax investments, it’s not a bad idea to start pounding the after tax options to give yourself flexibility and start building a bridge to your pretax savings.
@takeonme When you aren't worried about taxes and you don't want to wait until your pubes turn grey to retire.
Or if you are able to stay debt free, live comfortably and still invest and save on low yearly wages..
My cousin doesn't have a roth or 401k but has a taxable account that by the time he's my age will be worth a substantial amount. However he already owns his own home, doesn't go on cruises or anything like that. he makes around 34-36k a year and is able to invest I believe he said about 10k or so of that.
His situation actually got me thinking about just taking the hit, cashing out my retirement and throwing it all into my taxable account being I already live off of my dividends anyhow.
@ntopcat From what I’m gathering from this thread, I might want to start doing this. Potentially for dividends in the future, but also to bridge from early retirement to social security/medicare.
And, in several years, if it makes sense, I could use some for an investment property.
@takeonme I believe the most important part is make a plan and stick to it..you may have to make adjustments but never abandon a plan entirely after you have thought it out and came to the conclusion that it's what is best for you
@takeonme I'm almost 50 and have never felt the need to have a taxable account either. Besides checking and emergency savings, all my money is in tax advantaged accounts - traditional IRA, Roth IRA, 401(k), HSA, and 529 plan. For me personally a taxable account has never made sense.
@takeonme There’s a reason for all types. Roth & Traditional have their tax benefits. Taxable accounts have their flexibility in how you use the money, as well as getting a tax loss if /when needed. The older I get and closer to retirement I get, the more I’m interested in building my taxable accounts and have a larger percentage of funds in cash or money market. Of course, you don’t want to ignore the tax advantaged accounts - especially when young.
@takeonme I max all my tax advantaged accounts first and then hit the brokerage. The order of operations I've seen most often is:
1. 401k up to match
2. Max Roth IRA
3. Max HSA
4. Max 401k
5. Brokerage
@takeonme I think you are well set up here. Max tax advantaged accounts. Do back door Roth. Then start contributing to taxable brokerage. I did the same.
@takeonme Max your 401k and max your Roth. Ensure you have 6 months living expenss in cash (I’d do a money market fund which is paying 5.25%). Next, I’d keep any experiences you KNOW you need in the next 3-5 years also in the money market fund. Beyond that , you may as well put the rest in a taxable brokerage. Over 5+ years it’s likely to earn a lot more there than a HYSA
@takeonme I believe i've over funded my retirement accounts so I now fund a taxable account so I can retire earlier. I believe that is one time when it makes sense.
@takeonme American foreigners who live and work abroad often cannot fund IRAs because we are using the Foreign Earned Income exemption and have no adjusted gross income left over. However, we always have a choice to invest in taxable.
@takeonme Max 401K, max HSA, max Roth IRA (backdoor). After that, then you think about taxable. If you want to retire early, investing in a taxable can help you get there faster. Also, if you do a Roth ladder later in life you can't touch the funds from the first year of the ladder for five years.
Also, if you retire early you can mix selling long term capital gains with a Roth ladder to get your income to the minimum for free ACA.
