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  • How much retirement?

    Just switched jobs. The new job will allow me to contribute up to 18k with 18k match into their 401k. However, the issue is that because I am only working with them for 5/12 months of 2017, my base salary is only eligible to get $7500 as the "free match". I can salary reduce to do the full contribution and full match. And to throw a further wrench in, only Nov and Dec pay will be eligible to contribute so the entire my portion of $28.5k will be split between my Nov and Dec pay (I should note that the remainder will not allow me to float my monthly bills and I would either need to aggressively save in Sept/October or draw on savings). They will also allow me to customize the amount I would like to put into the 401k. (We are in the 33% tax bracket; no state income tax)

    I have about $16K contributed from my work in first half of 2017 to my SEP IRA. (I was contributing 30K annually before so the 7.5 + 7.5 free match will be a little more than what I was already doing)

     

    I guess my question is-

    How much is a pretax/tax deferred money worth? Should I stress the whole system to fully put away over $50k this year? Do a smaller sum?

    This extra toward retirement will mean we aren't funding other savings goals we had planned on doing.

     

    Thanks for your advice!!

  • #2
    This is a very personal decision.  You may be set up well for retirement and your other saving goals are your retirement home down payment, or your kids' 529 plans - both legitimate savings goals of course.  Clearly I'd favor not superfunding the 401k in that scenario.  I would first look at what allows you to achieve your goals and prioritize those goals.  Obviously, the pre-tax money can be worth a lot - especially if you're thinking about retiring early and doing a Roth conversion ladder.  You pay on the effective when coming out and save on the margin going in.  Do you think you'll be taxed at a 33% effective rate?  It's almost assuredly a win.  But despite those benefits, if it requires you to make substantial sacrifices somewhere else then this is where priorities come into play.

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    • #3
      Very difficult question to answer without knowing a lot more about goals, resources, plans, tax brackets, savings, age, etc.  Different people have different priorities and plans.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4


        This extra toward retirement will mean we aren’t funding other savings goals we had planned on doing.
        Click to expand...


        I'd fund the other savings goals. Sounds like a lot of work, perhaps it'd get you some slight advantage, but from my perspective, and without knowing all the details, at least you're saving.

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