What is your retirement number...and what do you do when you reach it?

[StormRichards]

What do you mean that people are "locked out"? Are you referring to the contribution limit being low, because I certainly agree with that, but that doesn't mean you can't accumulate a decent amount.

My wife and I currently have just over $254,000 in our Roths. That's not a "tiny little Roth" by my measure.

Curious to see if you get a response to this because based on post history I assumed he was referring to not being able to contribute due to income. Hopefully that was not a correct assumption.

2008 is the first year we started contributing and our combined total in our Roths is over $100k.

[rennigade]

2008 is the first year we started contributing and our combined total in our Roths is over $100k.

I assume you guys werent maxing for a couple years?

[StormRichards]

I assume you guys werent maxing for a couple years?

Correct. I just checked our accounts and 2007 was the first year, not 2008. We did not contribute anything to our Roths in 2009 & 2010. We did major home improvement projects each of those years. In hindsight, we should have adjusted our 401k contributions (that well exceeded company match) to free up money to max out our Roths.

[disneysteve]

We have maxed our IRAs since we started them. Of course, back then the max was $2,000 so it wasn't that big of a challenge. But every time the limit went up, we kept up with it. And when we each turned 50, we bumped up to the higher limit so we now have 13K going in each year. It definitely adds up. As I said, we have $254,000 in our Roths and we also have traditional IRAs that are dormant from before Roths existed (yes, we're old). Our total IRA balance is a lot more than the 254K.

[rennigade]

Correct. I just checked our accounts and 2007 was the first year, not 2008. We did not contribute anything to our Roths in 2009 & 2010. We did major home improvement projects each of those years. In hindsight, we should have adjusted our 401k contributions (that well exceeded company match) to free up money to max out our Roths.

Ah ok. I was just going off when we started ours (2006) but we did max each year...and have north of $160k. I didnt know if you had some really bad years in whatever it was invested in..but not investing for those 2 makes more sense.

We have maxed our IRAs since we started them. Of course, back then the max was $2,000 so it wasn't that big of a challenge.

It is unfortunate that the roth ira limits are so low. Wish it would be about double what it is currently.

[corn18]

If you have a 401k, you can check with your plan administrator and see if they allow in service roll overs of after tax contributions to a Roth IRA (not all do). I started doing this and I can get an extra $16k/year into a Roth IRA. I also do $11,500 of backdoor Roth. So I am socking $27,500 into Roths each year.

[disneysteve]

It is unfortunate that the roth ira limits are so low. Wish it would be about double what it is currently.

I've said that for years. All we ever hear about is the 401k but the reality is that only about half of all workers in this country have access to a 401k. The rest only have the IRA to work with. So half the country gets to put 15K (or whatever the limit is) in a 401k while the other half only gets to put 5.5K in an IRA.

[LivingAlmostLarge]

Tom are you sure that it makes the most sense to backdoor a roth? I am not sure because you are paying such high taxes with the bracket you are in right now. I think MM and I have pointed this out before. It might not make sense because depending on when you retire and how old you could instead be pulling from accounts where you pay very little tax think 10-15% bracket when you withdraw instead of your 39% now.

Anyway we started in 2005 officially DH couldn't open a roth IRA before that year and I contribute $2k in 2004. We right now I think around $300k. Maxed out every year. We have quite a bit in a 401k as well. So a late start and we're still okay. And this also includes no 401k for me since I didn't have one from 2002 to 2010 and didn't work since 2010.

[rennigade]

TWe right now I think around $300k. Maxed out every year.

Dear god what were you invested in? Thats some serious gains since 2005.

[corn18]

Tom are you sure that it makes the most sense to backdoor a roth? I am not sure because you are paying such high taxes with the bracket you are in right now. I think MM and I have pointed this out before. It might not make sense because depending on when you retire and how old you could instead be pulling from accounts where you pay very little tax think 10-15% bracket when you withdraw instead of your 39% now.

Anyway we started in 2005 officially DH couldn't open a roth IRA before that year and I contribute $2k in 2004. We right now I think around $300k. Maxed out every year. We have quite a bit in a 401k as well. So a late start and we're still okay. And this also includes no 401k for me since I didn't have one from 2002 to 2010 and didn't work since 2010.

All of my Roth contributions are after tax, so I have paid the tax already. I could put it in taxable or Roth, so I choose to put it in a Roth as it is not needed and is designated as inheritance. And no RMD's means I can leave it their until my wife and I are dead, growing tax free and passed on tax free.

[MonkeyMama]

Tom are you sure that it makes the most sense to backdoor a roth? I am not sure because you are paying such high taxes with the bracket you are in right now. I think MM and I have pointed this out before.

Is nothing that I have said.

Backdoor ROTH is smart, for all the reasons Tom mentioned. I've maybe chimed in before in a situation where it didn't make much sense.

[Captain Save]

If I decide that during retirement:

1. we want $80k/year, and
2. think that it'll earn 5% in those years and that
3. we'll live for no more than 25 years, and that
4. SS shouldn't be counted on...

that computes to a certain specific number. (In this example, $1.15M.) Thus, "can't wait to become a millionaire".

I'll preface this by saying.. since you're in this forum talking about this every day ..chances are you'll be fine than most..
Also..I should take it a step further and say we should focus on net income and not a retirement number



is 80k a year before or after tax ?
how much of your income would be for expenses and how much is for play?
5% is the what you expect to earn on average .. but you won't get a consistent 5% year over year... how do you plan for a correction especially in the early years... can you take a 20% hit and still withdraw 80k a year.. if you can't withdraw 80k .. are you able to still live fairly comfortably on a reduced income?
what if you live longer..? will you be ready? better yet .. as your "number" is dwindling down.. by say year 20 .. do you have a peace of mind , knowing that you 'll probably run out of money in 5 years?
I know your expenses might be less by then, but what about your health, it it likely to get better or worse?

that's tax risks, sequence of return risks, market risks .. and longevity risks...

If you focus on net income, you would focus on minimizing all these risks as much as you can..

If 80k is your net income .. your number would be different depending on which retirement vehicle it's in.

[Captain Save]

I agree with you. Just yesterday I was talking to a friend about her 401k. I pulled my 401k calc and explained if she didn't change anything, or get any raises, but put the same in for 30 years ($230 a month with 100% match) it would be around 700k at 8%. I said ignore the wow factor, let's look at what that really means. If you use that number with a 3% return that is less than 2k a month. 30 years from now, that 2k a month is going to be probably closer to 1k a month in today's money. You will not be able to do that. If you just live off the balance you might get 10-12 years and then you are out of money. Case in point, you need to aim much higher. They doubled their 401k to 6% with 100% match, and they are looking at paying off their debts much faster to save more. Win.

they get a 6% match at 100% ? ... where do they work ?

[Nutria]

Also..I should take it a step further and say we should focus on net income and not a retirement number

is 80k a year before or after tax ?

Before tax, obviously.

If you focus on net income, you would focus on minimizing all these risks as much as you can..

If you have any sort of functioning neurons, you're going to protect your nest egg no matter what!

If 80k is your net income .. your number would be different depending on which retirement vehicle it's in.

Hmm, let's see: if I need more income, I need a different number? SHOCKING!!

[sv2007]

Look into the back door roth. And mega back door roth.

Aren't you taxed on the transfer? If you are very high tax bracket; what was your rationale for do it?

We've been looking at converting since my retirement; but unfortunately, we've been making enough money during my 2-yr retirement to be in the high bracket. So never had a chance.