Can we afford to do this?

[skives]

So my wife (35) and I (40) make $85k before holiday pay and overtime a year. We put 15% into our Roth 401ks

we also this year started contributing the full $7k each to our Roth IRAs

total retirement for both of us combined is roughly $425k

no debt no mortgage (house is paid off).

sinking funds for home repairs and vacations and new to us vehicle.

If you we us would you find it ok to cut back $300 total per month on the Roth IRAs? I ask this because I feel it would help us enjoy life more. Right now we only save $100 per month for vacations and usually have $100 leftover each month for fun or eating out.

we also don’t pay for any streaming services just internet. Everything has just gotten more expensive. Our homeowners insurance went up 27% this month.

[Fishindude77]

Short answer ..... Yes, that will be OK.
You guys are in great shape for your ages.

What's your house worth, out of curiosity?
Great job to be mortgage free already.

[skives]

House is worth $262k

[disneysteve]

You're currently doing 15% to the 401ks and 14K or another 16% of base pay to the IRAs so 31% total, plus whatever you're saving outside of retirement for vacations, EF, etc. I certainly think you can trim that back and still be just fine. "Only" putting $10,400 into the IRAs will still have you saving 27% for retirement. Plus, at the end of the year, if you find you've got a surplus, you can always dump more into the IRAs at that point.

[LivingAlmostLarge]

Yes trim it back. Have some fun and live a little. Maybe trim the 401k

[srblanco7]

You're currently doing 15% to the 401ks and 14K or another 16% of base pay to the IRAs so 31% total, plus whatever you're saving outside of retirement for vacations, EF, etc. I certainly think you can trim that back and still be just fine. "Only" putting $10,400 into the IRAs will still have you saving 27% for retirement. Plus, at the end of the year, if you find you've got a surplus, you can always dump more into the IRAs at that point.

I ran a quick retirement future value calc using your current $425k in retirement savings and $23k per year of contributions for 20 years. Assuming a 7% nominal rate of return, no future increases in savings rate, etc. This came out to $2.6M.

Sensitivity analysis
6% rate of return: FV = $2.2M
8% rate of return: FV = $3M

[LivingAlmostLarge]

I never calculate forward my savings rate and interest. I'm lazy and I don't like not knowing. But I just did and it's ridiculous. In 20 years saving our income at the same scaled back rate will give us a ridiculous amount of money. I'll be 65 and DH 67 in 20 years and 6% return. The amonut of money seems insane.

[skives]

Is it a stretch to say that we might not even need to save in an Roth IRA at all? Not that we shouldn’t but currently between all retirement we have $475,000

[Jluke]

Is it a stretch to say that we might not even need to save in an Roth IRA at all? Not that we shouldn’t but currently between all retirement we have $475,000

I would continue to save in the Roth IRA and would actually want to max that out and contribute less to the Roth 401k if that is your goal to reduce contributions.

two reasons:
contributions to a Roth IRA can be withdrawn
contributions to the Roth 401k are not tax deductible.

be sure you still get the full employer match.

finally, I am not the type to scale back savings because I never know what the future holds.

how are your current retirement funds invested - what is the stock vs bond allocation - 60:40, 70:30 other?

if you know your expenses take that amount times 25 and that should be your nest egg for retirement at 65. If you want to retire earlier you will need a larger multiplier

[skives]

I would continue to save in the Roth IRA and would actually want to max that out and contribute less to the Roth 401k if that is your goal to reduce contributions.

two reasons:
contributions to a Roth IRA can be withdrawn
contributions to the Roth 401k are not tax deductible.

be sure you still get the full employer match.

finally, I am not the type to scale back savings because I never know what the future holds.

how are your current retirement funds invested - what is the stock vs bond allocation - 60:40, 70:30 other?

if you know your expenses take that amount times 25 and that should be your nest egg for retirement at 65. If you want to retire earlier you will need a larger multiplier

100% stocks.

contributions to a Roth IRA aren’t tax deductible either.

[Jluke]

Yep. That’s another reason why I would be cutting back on Roth 401k in favor of the Roth IRA

[skives]

Yep. That’s another reason why I would be cutting back on Roth 401k in favor of the Roth IRA

I’m not understanding I guess. Contributions on both Roth 401ks and Roth IRAs aren’t deductible on taxes. So why does that point even matter.

[Jluke]

Today’s question was whether you should even contribute to a Roth IRA. I’m saying yes you should contribute to the Roth IRA and you may want to reduce your contributions to the Roth 401k so you can max the Roth IRA accounts and have more fun money. Just be sure you are still contributing 15% or whatever towards retirement. Shifts the contributions.

both accounts are equivalent except:

you can access the Roth IRA contributions, penalty free before 59.5.

you can access the Roth 401k money prior to 59.5 BUT there is a penalty/fee and potentially taxes to be paid.

[skives]

Today’s question was whether you should even contribute to a Roth IRA. I’m saying yes you should contribute to the Roth IRA and you may want to reduce your contributions to the Roth 401k so you can max the Roth IRA accounts and have more fun money. Just be sure you are still contributing 15% or whatever towards retirement. Shifts the contributions.

both accounts are equivalent except:

you can access the Roth IRA contributions, penalty free before 59.5.

you can access the Roth 401k money prior to 59.5 BUT there is a penalty/fee and potentially taxes to be paid.

OK, I worded my question wrong then. I was asking whether it was a stretch to only save 15% or do I need to be doing that in addition to some of a Roth IRA?

[disneysteve]

Is it a stretch to say that we might not even need to save in an Roth IRA at all? Not that we shouldn’t but currently between all retirement we have $475,000

I would back off on the 401k before I backed off on the IRA. The Roth IRA is a much better vehicle than the Roth 401k. Continue to fund the 401k to get the full company match but then max out the Roth IRA. Then if you still have additional savings to do, go back to the 401k. IRAs are all around better because you have complete control of the investment options rather than being limited to the choice offered by the company for the 401k.

There's no downside at all to funding the Roth IRA because contributions can be withdrawn at any time for any reason without penalty. It's super flexible. If you find you over-saved, you can just take the money out as needed.