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General Discussion / Re: Guidance for One Getting Started Very Late
« Last post by gocurrycracker on May 21, 2022, 09:14:10 AM »Paying off a house and sending 4 kids to college is a heck of an accomplishment, congrats!
The difference with a later starting date is you have less time for compound interest to do its thing. Otherwise the principles are all the same.
Key principle: If your expected withdrawal marginal tax rate is higher than your current tax rate, then it is better to contribute to Roth accounts. If the opposite, then contribute to Traditional.
Most of your SS income will be tax-free. (I assume the $2,200/month is for both of you, either from spouse's own benefit or 50% spousal benefit.)
That puts a tax rate of 0% on a large chunk of other income due to standard deduction. 0% tax space shrinks a bit when the inevitable happens (switch to single from MFJ.)
With 0% tax rate in the future and 12% tax rate now (MFJ, $50k gross income) that says to contribute to Traditional accounts (take the tax deduction now), e.g. 403b
8% is a bit optimistic for real returns for 20 years, I'd plan for a percent or two lower - which means more of your nest egg needs to come from direct savings.
The difference with a later starting date is you have less time for compound interest to do its thing. Otherwise the principles are all the same.
Key principle: If your expected withdrawal marginal tax rate is higher than your current tax rate, then it is better to contribute to Roth accounts. If the opposite, then contribute to Traditional.
Most of your SS income will be tax-free. (I assume the $2,200/month is for both of you, either from spouse's own benefit or 50% spousal benefit.)
That puts a tax rate of 0% on a large chunk of other income due to standard deduction. 0% tax space shrinks a bit when the inevitable happens (switch to single from MFJ.)
With 0% tax rate in the future and 12% tax rate now (MFJ, $50k gross income) that says to contribute to Traditional accounts (take the tax deduction now), e.g. 403b
8% is a bit optimistic for real returns for 20 years, I'd plan for a percent or two lower - which means more of your nest egg needs to come from direct savings.