Are you a gov't employee? I have a 403b but thought they were limited to us bureaucrats.
What about a Roth IRA? With the demands the Baby Boom generation is going to have on Social Security and the political power such a large voting block will have (making it political suicide even today to shrink benefits), the smaller work force of tomorrow may well not be able to pick up the tab. Taxes may well have to be much higher, including on the retired. The question are:
1. What will my tax obligation likely be when I retire? Is it better to pay the taxes now or later?
2. Will the growth of my pretax dollars in my tax-deferred plan now outweigh higher taxes later?
If you figure that one out, PLEASE let me know ASAP!!!
I'm not familiar with those two plans, but I think a mix of pay now and pay later are good, especially if you have a long time before retirement. I have a 401k, which is tax deferred. What I've noticed as an immediate perk is that it reduces my current taxable income, which saves me taxes on each paycheck and especially at the end of the year. This plus 20+ years to retirement, the compounding effect of deferring adds up quickly.
I recently started a Roth too, and I like this after tax approach as well since you have less restrictions on withdrawls, etc.
Originally posted by cappuccino: I'm not familiar with those two plans, but I think a mix of pay now and pay later are good, especially if you have a long time before retirement. I have a 401k, which is tax deferred. What I've noticed as an immediate perk is that it reduces my current taxable income, which saves me taxes on each paycheck and especially at the end of the year. This plus 20+ years to retirement, the compounding effect of deferring adds up quickly.
I recently started a Roth too, and I like this after tax approach as well since you have less restrictions on withdrawls, etc.
Sounds like you are pretty well versed in this stuff. Thanks for replying. How would you change that as you get closer to retirement... say 10 years out? Are you concerned about unexpectedly huge future tax burdens as Uncle Sam tries to accomodate all us retiring Boomers and, if so, wouldn't Roth's help there?
I don't have any hard advice, but I'm sure there's a formula somewhere. I'm not worried about the tax burden, cause hopefully if I've played my cards right, I'll have saved enough to pay any taxes(although keeping as much as possible would be a priority). I think of it as a "free" loan that I can keep the interest and let it accumulate. Kinda like being able to keep frequent flier miles for personal use when traveling on business.
Other philosophies are saving more is better than less, now is better than later. And my favorite is what my parents always told me, "if you can't afford to pay cash for it, you can't afford it".
Closer to retirment, risk becomes a bigger factor, but I'd guess 10+ years still leaves you lots of room to grow! Do both and save lots!
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