401K question / argument
Let me set this up for you:
Me and the boss are 33 years old
I work for the State, she is a Teacher.
We invest 1,500 in stocks bonds and other funds per month post tax
Our current tax liability is 11% (1 child, 2 years old)
Before our child it was 22%
I say, keep putting the money in like we are doing. My Mom tells me to put it in a 401K.
I argue not to because:
My tax rate now is 11%. After I retire, I am all but assured to be in a higher tax bracket.
Both the boss and I will be eligible for retirement at 50. And will be unable to access all of our funds for about 10 years between retirement and 58.5
Mom argues to put it in the 401K because it is tax free until you draw it out. and thats what suze orman said to do.
I come back with: I am assured to pay 11% right now on the money I put in, after my kiddo drops off my income tax, my tax rate will increase to at least 22% (if not higher). I want to be able to get to all of my money without penalty.
What say the financial heavy weights of 2cool?
house payment: 560/mo (pay 750-1000 though [5.875%] owe less than 80K)
no car payments
RV payment 200/mo (6%, we are way upside down owe 12K)
no credit card debt