Listeners explore taking a pay cut for a lighter workload to achieve financial independence. A couple plans retirement at 55 while upgrading lifestyle. Tim seeks advice on catching up on retirement savings. Matthew considers moving to the Pacific Northwest. The episode covers various financial planning topics and strategies for making life changes.
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Quick takeaways
Starting retirement savings in late 20s is not too late, emphasizing financial education and individual financial progress.
Balancing Roth and traditional 401(k) contributions can optimize tax efficiency and lifestyle planning for retirement.
Maximizing Roth accounts allows for larger contributions post-tax, supporting diverse savings goals and future financial stability.
Deep dives
Addressing misconceptions about late retirement savings
It is crucial to challenge the notion of being late to retirement savings, especially in one's 20s. Starting in your late 20s does not equate to being late. Tim sought advice on planning his retirement at 28, describing his delayed start due to low previous incomes and medical training. The idea that 28 is late for retirement savings reflects a common misconception, given the significant advantage of starting younger. Tim's concerns about being late underscore the importance of proper financial education and understanding individual progress in building a secure financial future.
Optimizing retirement account contributions for tax treatment
Tim and his fiancee are considering their retirement account contributions with a focus on balancing tax treatment and lifestyle goals. Despite past low incomes and delayed contributions, they are invested in fortifying their retirement savings strategy. Tim inquires about adjusting their contributions, weighing Roth and traditional 401(k) options. Maximizing Roth accounts while balancing traditional contributions could benefit them in tax efficiency and lifestyle planning, aligning with their aim to sustain current spending levels post-retirement.
Navigating financial priorities for a stable future
Tim seeks guidance on aligning financial priorities with savings goals, factorizing current income levels and future aspirations. Despite constraints like Roth IRA and traditional IRA limits in 2024, Tim aims to bolster savings for diverse needs. Considering considerations like property purchases and enhancing their retirement nest egg, Tim navigates a strategic approach to optimize tax advantages while ensuring a stable financial future amidst evolving income dynamics and lifestyle ambitions.
Maximizing Roth contributions
Putting as much money as possible into Roth accounts is advised to take advantage of the opportunity to make larger contributions due to its post-tax nature. Contributing to a Roth effectively means contributing more of your total compensation, allowing for bigger contributions, even with equal dollar amounts as in traditional tax-deductible accounts.
Considerations for relocating and real estate decisions
When contemplating relocating to a new city like Portland, Oregon, renting for at least six months to explore the area before buying is recommended. For those with existing property, such as a home in Florida, holding onto the property rather than selling it when moving can be advantageous, especially when considering potential return scenarios and holding a lower interest rate mortgage. It's crucial to enhance cash savings, minimize debts sensibly, and evaluate real estate options thoughtfully when planning such significant life changes.
#496: How much of a pay cut would you take for a lighter workload?
Today we hear from Paul, 35, who’s grappling with that question.
Paul’s boss offered him the chance to cut his hours and salary by 25 percent. He’d love to work fewer hours. He has a decent net worth, plenty of savings, and no debt. Should he grab the opportunity? Or stick with his long-term financial independence and early retirement plans?
An anonymous caller and her husband want to retire at 55. They also want a bigger home, a better car, and to start growing their family. Can they afford it all?
Tim spent his 20’s missing out on retirement savings as a medical student. He’s eager to catch up. What’s the shortest path to get there?
Matthew and his family dream of leaving Florida for the Pacific Northwest. Will they regret selling everything to start over?
Former financial planner Joe Saul-Sehy and I tackle these four questions in today’s episode.