debating not saving for retirement for a couple of years...

**kork13** · 08-25-2020, 07:56 PM

It almost certainly will not be much more than a speed bump in your long-term plans -- if you need to throttle back to handle the possibility of reduced income, or simply to retain more financial flexibility, then do it. You're already in a strong position, and reducing your retirement contributions for 2-3 years will be a non-issue. In all likelihood, your current assets already generate well more than you could possibly contribute in a year anyway. No worries whatsoever.

Last note -- He can consider a SEP or SIMPLE IRA, or a Solo 401k, if you DO want to contribute more to retirement than the Roth IRAs will allow. They have limits independent of the Roth IRAs, driven by your husband's self-employment profits. If/when he hires more than a couple employees, those become less desirable... But until then, you do have options available if desired.

**rennigade** · 08-26-2020, 06:23 AM

This question or something similar pops up from time to time. Usually its a "am I saving too much for retirement." I guess the answer is different for everyone. $40k invested over a 14 year period where you earn 5% would grow to approx $80k.

If you already have $1.1 million in your retirement accounts, an additional growth of $80k over 14 years isnt going to move the needle much considering 1.1million over 14 years at 5% interest will grow to 2.2million. This is based off you never sticking another penny in those accounts.

**disneysteve** · 08-26-2020, 06:29 AM

I think your description doesn't really match your question.

If you will still be funding Roths, them by definition you are still saving for retirement.

Are you anticipating a drop in income and the inability to save more, or do you simply mean he won't have a 401k? If the latter, you can still save, just in a taxable account earmarked for retirement. I do that now as I max out my 401k and we aren't eligible for Roths so everything else goes into taxable accounts.

I think you'll be just fine no matter which way you go, as rennigade spelled out. Compounding alone will take you where you need to go from here.

**bjl584** · 08-26-2020, 08:31 AM

Dave Ramsey doesn't have an issue with delaying retirement in favor of debt payoff.
Your situation is different, but results are the same.
I don't think doing so will derail you

**rennigade** · 08-26-2020, 11:59 AM

This thread made me run some numbers on our own retirement savings. From my calculations based on 5% interest, we should really start to ease back on retirement savings after 5 more years. At least contribute to the match. Ill be 42 at that time, wife will be 41. This would work out well since we both want to retire in our early 50's. That would allow us to pad our savings to bridge the gap from when we retire to when we can start drawing from 401k's. We could also keep contributing to our taxable accounts and would continue to max our roth ira's (up until retirement) since you can pull out money you put in without penalty.

**james.hendrickson** · 08-26-2020, 12:02 PM

Originally posted by rennigade View Post

This thread made me run some numbers on our own retirement savings. From my calculations based on 5% interest, we should really start to ease back on retirement savings after 5 more years. At least contribute to the match. Ill be 42 at that time, wife will be 41. This would work out well since we both want to retire in our early 50's. That would allow us to pad our savings to bridge the gap from when we retire to when we can start drawing from 401k's. We could also keep contributing to our taxable accounts and would continue to max our roth ira's (up until retirement) since you can pull out money you put in without penalty.

Way to stay active and engaged Rennigade.

**disneysteve** · 08-26-2020, 12:57 PM

Originally posted by rennigade View Post

This thread made me run some numbers on our own retirement savings. From my calculations based on 5% interest, we should really start to ease back on retirement savings after 5 more years.

I ran some numbers a week or so ago. If we continue our current savings rate and earn 5% overall, we should be in a position in 4 years for me to cut back to part time work. I'll be 60. My plan all along has been 62 for retirement but if I can slow down a couple of years before that, that would be nice. And if we can average more than 5%, even better.

**sblatner** · 08-26-2020, 03:11 PM

We are around 60. Focusing on post tax retirement savings (beyond the Roth). We hardly put anything into a 401k now and put most into a brokerage account.

If you are saying you won't have the income to save in 2022 and 2023, you might be delaying your retirement. If you have the income but don't have access to pre tax savings vehicles, save in a brokerage account. Just because it isn't labeled "retirement" doesn't mean the money can't be used for retirement. Having funds outside of 401ks will be good when you retire so you will have various ways to fund your retirement to minimize taxes.

**~bs** · 08-27-2020, 01:40 AM

Not too sure what you're saying.... if you guys own a company, you can potentially save much more money assuming you can afford to. The max limits on SEP iras are much higher than 401ks.

up to you though. if you're over 1 mil, and another 15 years to retirement, that's a long time. statistically, you could probably invest zero and be ok.

**LivingAlmostLarge** · 09-01-2020, 08:45 AM

I don't think we'll be doing a SEP. We'll be taking a significant cut in income and so to make things work out we'll likely be cutting retirement savings. It will make life easier. We do have the cap space to save but i hesitate to tie up money when I don't know what will happen. What the plan will be that we live on a budget and then we determine what to do with any savings we have. We will have taxable savings but no 401k access in 2022 and 2023. 2021 we'll try to front load it while DH is working for a couple of months and max out what we can. We'll also do the Roth IRAs and ESA at that time.

But then the question is should we bother saving?

**Captain Save** · 09-01-2020, 09:54 AM

Originally posted by LivingAlmostLarge View Post

Tell me the pros and cons of not saving much for retirement for a couple of years. Let's say we only do a Roth IRA for DH and I = $12k and College ESA for 2 kids is $4k. So $16k for 2022 and 2023. 2021 my plan is DH will be quitting his job in March 2021. We will max out the 401k $19.5k and contribute to Roth IRA and ESA for 2021 so $35.5k within 3 months.

Now that takes care of 2021. But 2022 and 2023, I'm not sure how long he'll be a small company so probably without a 401k. Hence the Roth IRA. I mean we could do a regular IRA but I was thinking of just doing the Rorh IRA. What are the pros and cons of saving more? Should we do more? Is it okay? We've been regular contributors since 2006. Before 2006 we didn't save much and didn't make much but had a few small contributions. We are solidly over $1.1m between 401k and two Roth IRAs.

I don't think this will derail our plans for retirement in 2034.

is he going to work at a small company or is he going to start a small company? after he quits? the cons of not saving depends on what he'll be doing after he quits.. it can be a great thing that moves you closer to your goal ...or it could derail your savings for 2 years.

also would your have an opportunity to shift your life that can make everything more affordable (think moving to a different location, switching to remote working etc..)

**Captain Save** · 09-01-2020, 10:02 AM

Originally posted by LivingAlmostLarge View Post

I don't think we'll be doing a SEP. We'll be taking a significant cut in income and so to make things work out we'll likely be cutting retirement savings. It will make life easier. We do have the cap space to save but i hesitate to tie up money when I don't know what will happen. What the plan will be that we live on a budget and then we determine what to do with any savings we have. We will have taxable savings but no 401k access in 2022 and 2023. 2021 we'll try to front load it while DH is working for a couple of months and max out what we can. We'll also do the Roth IRAs and ESA at that time.

But then the question is should we bother saving?

I see this post answers my previous question.. if he's self employed , depending on what he does, it may propel him but of course he would have to succeed at what he does. Here is the formula for self employment.. work much more and harder in the beginning , to have a greater income later..

The cons are that that plan may not work, or he can run out of money before it gets to be fruitful.

The pros are that he will have more control over his earnings over time, to the point where when you guys are at retirement age, the business may bring you your retirement income. If that's the case it's as if you shifted from investing into the top 500 companies in the country, to your own .. where it actually produces income. It could also potentially have value, if it's set up properly.

This all depends on his line of work. some self employed businesses just do not have that potential.

**LivingAlmostLarge** · 09-01-2020, 10:15 AM

Not self-employed. It's a small company he'll be starting. We won't be moving. He'll be just one of the founders. Plan is only 2 years to make a go or give up. He'll then switch back to being an employee somewhere. I don't know if we'll move closer to goal. In theory it'll pan out and we'll cash in and then not saving will be taken care of. If not then we'll have a couple of years of lower salary and less savings. That's the gamble we are about to take. And it's a significant amount of money we're giving up. We are giving up about $400k/year to be honest. So 2 years means $800k in earnings potentially if not more. And yes there is potential for the reward to be greater than that. But who knows right? If he doesn't do this now we'll never do it. The one caveat is it may move him into the c suite in 2 years and a lot more money because of the experience.

debating not saving for retirement for a couple of years...