Comment by 0xbadcafebee
12 hours ago
> Max out our 401ks
If there's any 20-somethings here that make 6 figures, listen carefully:
1. Max out your 401k, and invest all of it in a target date retirement fund. (Some companies are douches and will assign you mostly their own stock, which when it tanks, there goes your retirement... so check your allocation)
2. Get an HSA and max that out. Invest it all in a target date retirement fund. Do not use any of it, pay for medical expenses with cash and save your receipts. Get reimbursed for the receipts when you retire.
3. Contribute to an IRA and max it out (or backdoor roth when you make enough that that's necessary). Invest it all in a target date retirement fund.
4. Keep 6-12 months of living expenses in a high yield savings account.
If you start when you're 23, and you make $100k/yr, you can retire at 45. That may sound very old right now, and you might think, I'll just save later. But consider that when you turn 45, you may realize you have 20 more years of this shit job before you can retire.
> you can retire at 45
Kinda hard to do that when you've locked all your money up in a retirement vehicle that doesn't let you withdraw until age 59.5.
It takes planning but you can get your money out early via SEPP 72t disbursements and Roth conversion ladders. You can also just straight up pay the early withdrawal penalty. Depending on your effective tax brackets pre/post retirement - you may very well still come out ahead compared to a non-tax advantaged account.
How do you plan that? Particularly for an age 45 retirement?
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Yeah exactly. This is what makes RRSPs/401ks the absolute worst place to park your money. You are locking away your funds, and deferring taxes to 1) the stage in your life you probably want to pay the least tax possible, and 2) a time when the tax rate will probably be higher than it is now (after all, tax rates pretty much exclusively go up).
If your employer offers a match, you should absolutely contribute up to the maximum match (it's free money after all), but not a penny more IMO. There are much, much better vehicles for parking your money than retirement funds.
My friend, I'm not sure you've thought through this all the way.
Historically, tax rates have gone down over time, not up. Especially in recent history.
You do pay a reduced tax in retirement because you're able to blend your income. You defer taxes on the 401k until requirement, but you pre-pay taxes on a mega backdoor/roth, so if you need 100k of income in retirement you pull 50k from 401k and 50k on the roth and only pay taxes on half of it, putting you in a lower bracket.
Having the pretax money to grow before paying taxes on it is greater than having post tax money and having less to compound.
The alternative to tax advantaged places to park your money for retirement is strictly worse than non-tax advantaged. In a 401k you pay taxes only in retirement, for roth's you pay taxes only with your paycheck. In a brokerage, you pay taxes at your paycheck and then you pay taxes on withdraw for your cost basis.
A SEPP plan let's you get the money early and penalty-free from a 401k and an IRA. And the saved medical receipts let you take some money out of a HSA at any point for reimbursement, also penalty-free.
Even with this strategy, you're not retiring at 45 unless you are frugal, have cheap hobbies, and never have kids or a non-working spouse. Also take care that you don't have any parents, siblings, or extended family that come to rely on you. Also don't forget expect to live anywhere even remotely expensive, unless you like camping.
My wife and I have kids and live on a single income, and we're on track to retire in between ages 45 and 50.
We live in Ohio, and I suppose we would qualify as frugal and having cheap hobbies. But I certainly don't feel like we're missing out on a lot.
We also set aside over $1,000 a month for giving, with some of it going to various individuals and organizations automatically and some of it just waiting for when we see a need.
You're not wrong, a family is more expensive. But if both parents pull the same (or similar) salary, it is enough to still retire at 45. Requires using more tax-advantaged plans to play for college, and may not work well in expensive cities.
Re: cheap hobbies, I used to date a public school teacher. She would save to go on guided trips to Antarctica, Peru, the Galapagos, New Zealand. You can live an amazing life if you plan for it.
> non-working spouse
Does that mystical creature still exist? Or is it perhaps more likely if one of the pair has a high yield income?
The median household income in the US is $83,730 [1] - half of households are on less than that.
If you earn $100k and are willing to have the median lifestyle, and you can find a spouse that's willing, then the numbers work just fine.
Challenges include lifestyle inflation; housing costs if your six-figure job is in an expensive area; and finding a partner who's willing to be put in what is often a vulnerable and low-status position.
[1] https://fred.stlouisfed.org/series/MEHOINUSA672N
I know multiple coworkers in their late 30s to mid 40s, none of their wives work.
Not sure why this was downvoted; it doesn't say you shouldn't do all those things, only that they're no guarantee you'll be able to retire at 45.
Kind of crazy the negative feedback you’re getting from this. This is extremely valuable guidance for a fresh college grad into a good paying job.
What does any of this mean? Greetings from Europe.
I feel like this is a bit snarky, it simply means plan for your retirement and invest in your own future, take advantage of government / employer backed savings plans. Plenty of these exist over here. Don't waste your money.
Everything is not perfect in the singular country of Europe, I sure as hell don't want to be relying on only what the state decides it can give me in my old age.
All is fine in Switzerland, there is state part (1st pillar) where people give blindly and then during retirement get some payment; and then mandatory private part where employer contributes too, often the same amount (2nd pillar) which is the most important one. Also another optional private 3a pillar which otherwise behaves like 2nd. Obviously all of this is pre-tax, 2nd and 3rd can be used for purchasing primary property or start business etc. State is always a miserable manager of longterm funds. One can pick investment profile for those savings, or is voted by employees' assembly in case of 2nd.
No complaints, I know how much I saved, projections on how my pension will look like if I retire in year X, Y or Z. I don't expect more from a good social security system if one wants more it should be on them.
So far plan is retiring at 60, already I work on 90% and thus sporting 10 weeks of paid vacations yearly. That way, I don't thread the knife edge of burnout, in contrary and have plenty of time to unwind, have adventures (just came back from 2 weeks road trip in Dominican republic) and spend literal months on vacations with my kids and wife. There is no salary achievable in our field that would force me to consider it a better setup and instead working hard... these are best years of my remaining life and waste them just working would be tremendously stupid and shortsighted. To retire in 45, seeing my skills atrophied and being at the mercy of things like inflation... doesn't sound that great.
So there is another perspective to just chasing biggest paycheck at all costs.
At this point I am losing faith in my (european) pension system; state pensions will get emptied out for the boomer generation currently enjoying the returns of the good times, private / employer paid for pensions will likely get raided and tanked by big investors / capitalism. I don't feel like I can trust or rely on them for when I might be able to retire in my 70's.
(that's the other thing, state pension age is being pushed back as life expectancy increases. Not for the main boomer generation of course, they were already retired when the age started to creep up or only had to work a few months longer)
Retirement and health savings accounts.
they're pointing out that the US is insanely stupid when it comes to healthcare and retirement. the stuff we do in this country is so much extra work/effort/cost and all of it comes at the worker's cost.
they were being sarcastic.
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Save money for retirement early
I don’t think these methods are possible anymore in this modern economy of “fire everyone because of AI and then rehire them a few months later at half the salary”.
If you’re not one of the senior managers, I don’t think these kinds of long term investments are feasible anymore.
This assumes a lot of things that may not be true and would not map to whatever mental model you formed with this.
People are often quick to dispense technically correct (or mostly correctly) financial advice but rarely is financial mangement simply a technical problem to be solved in someone’s life
> 2. Get an HSA and max that out. Invest it all in a target date retirement fund. Do not use any of it, pay for medical expenses with cash and save your receipts. Get reimbursed for the receipts when you retire.
Very important detail, FSA is not HSA lol.
Are there any retired 45yos who were making around $100k and can attest to this advice being accurate?
It's incredible how out of touch this place is sometimes.
Good advice on saving HSA reimbursements until later. Also, after 65 there's no penalty for withdrawing from your HSA; its just taxed at regular income at that point.
Eh, I kind of disagree. Contributing until you hit the maximum employer match makes the most sense for quality of life.
Ah yes, the good old US of A where a 23 year old can start out making $100k/yr.
While here I am, 39yo, having been in this field for 17 years and worked my way up to a lead, and having worked at banks, fintechs, medtechs and consultancies, am 'only' making roughly €76k/yr.
And this is with pouring personal time into studying and applying latest tech in side projects to stay relevant.
Honestly if the financials of the US tech scene ever normalize to what the rest of the world has, you guys are in for a rude awakening.
It's an outlier, even in America. I live in the US and no 23 year olds at my company are making 100k/year, lol.
Most jrs in America are working jobs like this - https://www.indeed.com/viewjob?jk=0dcd3d05ab694ba8
Not really the case in any of the high cost of living cities - when I graduated undergrad in the mid 2010s, my peers where getting offers from Microsoft for 100-120K for their standard out of school dev positions, Amazon was better as was Apple from what I recall. Plenty of 23 year olds making that much?
And this will get you like $1M at 45? You can’t retire on that.
I definitely could. An american maybe couldn't.
$1.8M-$2.2M. Assumes 6%-7.5% annual return. Does not include employer contribution. Provides $72k-$88k /yr income. Assuming you pull social security at 67, your continued gains exceed your draw, and your fund perpetuates until you die.
If you retire at 45 won't that significantly impact social security?
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You can't live on $40,000 a year?
What about property taxes, the occasional $40k visit to the ER for a few stitches?
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lol good luck following any of this advice and also paying for basic living expenses.
> Get reimbursed for the receipts when you retire.
Holy crap, you can do this? I always assumed for some reason you had to pay for expenses with an HSA in the year they were incurred.
That's for an FSA (which is similar to but distinct from an HSA).