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> 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 ret
by 0xbadcafebee 6mo 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.
- tempaccount5050 6mo agoIt's incredible how out of touch this place is sometimes.
- paulryanrogers 6mo agoEven 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.
- kmoser 6mo agoNot 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.
- lynx97 6mo ago> 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?
- michaelt 6mo agoThe 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 https://fred.stlouisfed.org/series/MEHOINUSA672N
- irishcoffee 6mo agoI know multiple coworkers in their late 30s to mid 40s, none of their wives work.
- 0xbadcafebee 6mo agoYou'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.
- nfriedly 6mo agoMy 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.
- shimman 6mo agoDo you understand you are very likely in the top 15% of the country in income earners, how do you expect people making less than $80k (of which there are plenty of programmers that make this amount)? Do you understand that your extreme massive privilege is something very few people will ever able to obtain? What should they do? Work until they're 80 and die on the job?
- nfriedly 6mo agoYes, I absolutely understand that. I'm refuting the idea that it's not possible to do with a family and kids.
- OkayPhysicist 6mo agoIf you're a programmer in the United States making less than $80k, hell, $100k, step 1 to your retirement plan is start looking for a new job immediately.
- hirvi74 6mo agoI'm one of these programmers, and it's not that easy. Maybe at one time, it was. However, I am thankful to even have a job at this point.
- Izikiel43 6mo agoThey should live within their means and save 15% of their income if possible.
- phyzix5761 6mo agoGood 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.
- rcbdev 6mo agoWhat does any of this mean? Greetings from Europe.
- babylon5 6mo agoRetirement and health savings accounts.
- chrneu 6mo agothey'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.
- unmole 6mo ago> the stuff we do in this country is so much extra work/effort/cost and all of it comes at the worker's cost. The GP described tax optimizations for the highest earners. The idea that they would be better off in Europe is plainly ridiculous.
- distances 6mo agoMy reading was that nothing of that applies in Europe. No earning 6 figures, no way to invest pre-tax or in any other tax advantaged way, no way to optimize healthcare costs, early retirement unlikely.
- urxvtcd 6mo agoRetirement accounts are a thing in Europe though. In Poland for example there's IKE and IKZE. IKE is a bit simpler of the two. If you hold your money on IKE until you're 60 you're not paying taxes on that. Can invest in stocks or bonds.
- distances 6mo agoYes, as always it depends on the country. Germany and a bunch of others have nothing except completely useless insurance/capital guaranteed options. For investments, you invest post-tax and pay capital gains when withdrawing.
- what 6mo agoAnd this will get you like $1M at 45? You can’t retire on that.
- a96 6mo agoI definitely could. An american maybe couldn't.
- 0xbadcafebee 6mo ago$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.
- hrimfaxi 6mo agoIf you retire at 45 won't that significantly impact social security?
- 0xbadcafebee 6mo agoIt just means you draw ~$2500/month instead of ~$3800/month. That makes your $77k/yr income into $107/yr, but more importantly it helps your retirement account keep growing so it outlives you.
- dwedge 6mo agoYou can't live on $40,000 a year?
- rogerrogerr 6mo ago> 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.
- mambo_giro 6mo agoThat's for an FSA (which is similar to but distinct from an HSA).
- jcims 6mo ago> 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.
- no_wizard 6mo agoThis 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
- incognito_robot 6mo agoAh 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.
- astura 6mo agoIt'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 https://www.indeed.com/viewjob?jk=0dcd3d05ab694ba8
- buildbot 6mo agoNot 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?
- 0xbadcafebee 6mo agoWell there's always the possibility of increasing your salary over time, to over 100k, and save more that way. You might not retire at 45, it may take longer. Still worth starting as young as possible.
- bradknowles 6mo agoI 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.
- joenot443 6mo agoAre there any retired 45yos who were making around $100k and can attest to this advice being accurate?
- silverquiet 6mo ago> 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.
- nfriedly 6mo agoA 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.
- parliament32 6mo agoYeah 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.
- malfist 6mo agoMy 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.
- hungry-facet 6mo agolol good luck following any of this advice and also paying for basic living expenses.
- JTbane 6mo agoEh, I kind of disagree. Contributing until you hit the maximum employer match makes the most sense for quality of life.
- bikelang 6mo agoKind 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.
- vedaba 6mo agoEven ignoring enjoying your youth and funding things that would provide that, most youth who make six figures are barely cracking that, and likely live in HCOL cities that eat so much of that.
- selfmodruntime 6mo agoI am so incredibly envious of American tax-advantaged retirement funds. Our government mandated retirement fund in Germany is a massive sham on the verge of collapse. There is no way for the average employee to retire before 65/67. Even if you have contributed a lot to the government pension scheme, they will comp you 0.5% of your lifetime pension for each month you go into early retirement. We have nothing like the 401k/roth/IRA and it sucks.