Retirement Goal vs. Just Adding to the Pile

I believe I am as cloudy as you about it all, but i get what you are saying...

i think..

are you talking about just storing money away versus having some type of "official" retirement account?

right now i have just been using savings (awful interest), but will be opening a retirement account with Vanguard

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For retirement, Take advantage of tax advantaged retirement accounts till they're maxed, after that, keep everything in taxable accounts.

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what do you mean by this....

take advantage of tax advantage? as in the pre tax accounts?

Since it's Memorial Day I'll tell a true story about my Aunt who was a child of the Depression.

She worked as a telephone operator. Saved her money and got social security when she retired. Her husband served in WWII and got military benefits. Then worked as a manual labor in the oil fields and saved money.

He died at 60. She lived till 85. They never went on vacation. When he died she never bought a car. They lived in a tiny house and she only had 3 changes of clothes.

She put tin foil in the windows during the summer to keep her one window AC unit more efficient at cooling the house.

She kept accumulating too much savings for a bank to take it so she started putting it in CDs from different banks.

When she died she had $2M about $5M in today's money. She had no kids so left it all to cousins, nieces and nephews (no, I didn't get any).

A lot of people would say she was an idiot for not spending her riches. But to her, retirement = having enough money to never have to borrow. Security. The one thing that was lacking in the Great Depression.

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I don't retirement accounts bc well I plan on retiring well before and I don't want a penalty to withdraw my own money. It's your choice what you wanna do with your life, if you wanna go by the book then get a retirement account, if you think you're gonna make some moves and retire early, then stay in taxable accounts.

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Unless you plan on dying by 60 years of age, this approach/advice makes no sense at all.

You are passing up tax benefits for no reason, as if you cant keep enough money in taxable accounts to last you till traditional retirement age and then switch sources when your taxable assets run dry.

Thanks for the story, Zach.

It's interesting how each of us formulate the "ideal" in our mind. Obviously, she achieved hers! She enjoyed her money the way she wanted.

Her and my ideal are worlds apart. My spending is relatively conservative, although my dad might disagree.

Lately our biggest weakness is not taking the time to properly invest the incomes we've finally achieved... or even the decent incomes we've enjoyed up to now. Our checking accounts are swollen and the only debt is our house.

Therefore, I'm trying to sort it out while there might be time...

Kudos to your aunt!

Can regular IRAs and Roth IRA's take a hit like 401k's if the stock market tumbles like in '09-10?

Here's my plan.

I have a ROTH IRA, wife has a traditional. She also has a 401k.

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Can regular IRAs and Roth IRA's take a hit like 401k's if the stock market tumbles like in '09-10?

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Anything you invest in can take a tumble. Absolutely anything.

But keep in mind that IRAs and a 401 are types of accounts, they are not investments in and of themselves. Just like with a regular brokerage account, once you put money in the account you may want to invest in something, and that is what may go up or down.

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If you plan to retire early then there's nothing stopping you from investing some money in these accounts anyway. You can live off "regular" accounts until you hit retirement age, then off retirement accounts after that and still get the tax savings.

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Not to muddy the waters, but you can access retirement accounts prior to 59 1/2. You just need to utilize a 72t strategy in an IRA which can be done at any age or the Rule of 55 allows penalty free access to funds in an employers 401k plan provided you work there until the year you turn 55.

Key here is to build up enough of a nest egg, relative to your retirement income need,so that retiring early doesn't creat an environment where you run out if money.