When to start taxable investments?

[jpg7n16]

Jim just likes the 15% as a goal. It's not a specific sign of financial health, just something Jim prefers to do.

I personally don't focus on the bracket goal as much as he does.

You should just look at your 401k on a dollar by dollar basis. Something like:

Would I like to contribute another dollar? Yes.
Am I maxed out yet? No.
If I contributed $1 more to my 401k, which bracket would I be saving taxes from? 25%
Okay I'd like to increase my 401k contribution.

Or:
Would I like to contribute another dollar? Yes.
Am I maxed out yet? Yes.
Are there other tax advantaged retirement plans available for me (IRA: Traditional or Roth)? Yes.
Have I maxed them out yet this year? Yes.
Okay - then my only option is a taxable investment account for me to save this dollar.


Then if you get to the 15% bracket, good for you, but if you don't, then at least you've still done as much savings as you can.

[jIM_Ohio]

Jim just likes the 15% as a goal. It's not a specific sign of financial health, just something Jim prefers to do.

I personally don't focus on the bracket goal as much as he does.

You should just look at your 401k on a dollar by dollar basis. Something like:

Would I like to contribute another dollar? Yes.
Am I maxed out yet? No.
If I contributed $1 more to my 401k, which bracket would I be saving taxes from? 25%
Okay I'd like to increase my 401k contribution.

Or:
Would I like to contribute another dollar? Yes.
Am I maxed out yet? Yes.
Are there other tax advantaged retirement plans available for me (IRA: Traditional or Roth)? Yes.
Have I maxed them out yet this year? Yes.
Okay - then my only option is a taxable investment account for me to save this dollar.


Then if you get to the 15% bracket, good for you, but if you don't, then at least you've still done as much savings as you can.

I focus on 15% because if you have 50k-60k on the table to save, there should be **emphasis** to get into 15% bracket.

The process JPG and I followed is the same, but the difference is this-

jpg:

Would I like to contribute another dollar? Yes.
Am I maxed out yet? Yes.
Are there other tax advantaged retirement plans available for me (IRA: Traditional or Roth)? Yes.
Have I maxed them out yet this year? Yes.
Okay - then my only option is a taxable investment account for me to save this dollar.

me

Would I like to contribute another dollar? Yes.
Am I maxed out yet? Yes.
Are there other tax advantaged plans available for me (IRA, HSA, FSA, Dependent care, other )? Yes.
Have I maxed them out yet this year? Are more plans available?.
Okay - then my only option is a taxable investment account for me to save this dollar.

My blue areas were looking for more ways to save 25%.

If you did not have $33k available in 401ks, you never would have entered the blue areas. Should be noted if either spouse has a small business, filling up 25% bracket with deductions is easier (higher plan contribution limits for SEP IRA).