Great reminder, Daniel! I wish I could have understood this concept intrinsically years ago. I'm preaching it now! All three of my young adults have retirement accounts and two of them are active savers. (We're working on the third!) It took me awhile when I was younger to get on board with my hubby, who has always put away for the future. But it has truly paid off and it sure feels great later to have the dollars when you need them! We are about 7 years from retirement, and seeing how the interest has grown over the years fuels me to keep it up. The FOO really works!!
Thanks Daniel. I work with young military straight out of high school and college in a financial literacy book club I teach. I don’t reach as many as I wish but seeing the light bulb turn on when we start running through some numbers is amazing.
I have persuaded more than a few to delay buying a muscle car for a decade because of the millions it will turn into by their retirement. I often have some of your materials printed out for those interested in personal finance but without the flexibility or time to make my book clubs.
Not really relevant to this article, but I would love to see a write up on Roth vs Traditional 401ks. I’ve been reading conflicting recommendations with some people saying a Roth almost never makes sense for various reasons (taxed at the highest marginal rate now, limited tax breaks with TCJA, etc). There’s a number of Reddit articles addressing this. I still definitely lean towards Roth as I’m hoping/planning on higher income in retirement and the unknown of future tax rates.
Could you possibly address both sides and simplify a conclusion for why one should be prioritized over the other?
If you know that you will be taxed at a higher rate in retirement, contributing to pre-tax now would mean having more dollars in your 401(k) in retirement (after taxes). There are some problems with this, though; tax rates could go up overall, pre-tax money affects Social Security taxability and Medicare premiums, and no one really knows exactly what their tax rate will be in retirement.
Great reminder, Daniel! I wish I could have understood this concept intrinsically years ago. I'm preaching it now! All three of my young adults have retirement accounts and two of them are active savers. (We're working on the third!) It took me awhile when I was younger to get on board with my hubby, who has always put away for the future. But it has truly paid off and it sure feels great later to have the dollars when you need them! We are about 7 years from retirement, and seeing how the interest has grown over the years fuels me to keep it up. The FOO really works!!
Thanks Daniel. I work with young military straight out of high school and college in a financial literacy book club I teach. I don’t reach as many as I wish but seeing the light bulb turn on when we start running through some numbers is amazing.
I have persuaded more than a few to delay buying a muscle car for a decade because of the millions it will turn into by their retirement. I often have some of your materials printed out for those interested in personal finance but without the flexibility or time to make my book clubs.
Thank y’all for the work you do!
Hi Daniel - Great article!
Not really relevant to this article, but I would love to see a write up on Roth vs Traditional 401ks. I’ve been reading conflicting recommendations with some people saying a Roth almost never makes sense for various reasons (taxed at the highest marginal rate now, limited tax breaks with TCJA, etc). There’s a number of Reddit articles addressing this. I still definitely lean towards Roth as I’m hoping/planning on higher income in retirement and the unknown of future tax rates.
Could you possibly address both sides and simplify a conclusion for why one should be prioritized over the other?
Thank you!
Check out this article I wrote about Roth 401(k) vs pre-tax: https://fyi.moneyguy.com/p/should-i-contribute-to-roth-accounts
If you know that you will be taxed at a higher rate in retirement, contributing to pre-tax now would mean having more dollars in your 401(k) in retirement (after taxes). There are some problems with this, though; tax rates could go up overall, pre-tax money affects Social Security taxability and Medicare premiums, and no one really knows exactly what their tax rate will be in retirement.
Great stuff Daniel. Really is pay yourself first concept. It is a miracle and if you can leverage saving pre tax it is the best wealth builder ever.