Currently, we are counting on my husband’s pension (he is a police officer), and possibly a second pension if he goes into a second career thru early retirement as he is planning, to be the main amount we retire on. Very doubtful we will have any where near 1 million invested with an 8% return (we had only just started seriously investing in his 457(b) 5 years ago. I am 40 y/o…we have lost about 25% so far). We also plan to downsize to a much smaller house once our youngest leaves the nest (10 years time).

We have been investing in a Roth consistently since 1997, and its present market value is also below our contrubution amount.

We are in deep $*** if he somehow loses his pension benefit. We will not get a SS benefit.

But remember to change your investment. Who the hell pays a 5.75% front loaded fee? If all of the funds are like that, two words: ROTH IRA. Get on it! Good luck!

But then these pro-Roth people are also those who argue that the Feds will impose higher taxes on us down the road. But, as has been stated, they should also realize that there is always the question of whether our (expensive) Roth distributions will remain untaxed in the future.

2. What everybody else said, ESPECIALLY about using the card you’re carrying a balance on to pay daily expenses.

3. JT, assuming smithee has the ability to invest in a traditional IRA and receive the tax deduction for it, I’m no longer convinced that investing in a Roth is the unquestionably smart thing to do. Yes, there is a lot of uncertainty with what the tax structures are going to look like 20, 30, or 40 years from now. And, if taxes are going to be hiked significantly, I don’t think Roths will be safe from them — there’s absolutely nothing prohibiting congress from enacting a law that would pass a levy on the Roth.

So… assuming the brackets have some resemblance to what we have now, consider this: We make our Roth contributions at our marginal tax rate, but we won’t pay our marginal tax rate on our 401k/IRA withdrawals. Assuming one fully retires (which is why we have this stuff in the first place) one must remember that in today’s dollars, for those married filing jointly, the first $18,700 we withdraw incurs no tax liability! (That’s the standard deduction for MFJ, and two exemptions.) Today, the 10% bracket tops out $16,700 and the 15% bracket tops out at $67,900. For the sake of discussion, assume most MFJ’s are comfortably in the 15% bracket. That means any Roth contributions are being taxed at the 15% rate. If a couple were living off of IRA/401k withdrawals alone, they would incur no tax liability for the first $18,700 in income/withdrawals. On an income of $35,400, they’d pay a 10% tax on only $16,700 (or a total of $1,670) This would “feel” like a net tax of 4.7%!

Keeping in mind that tax brackets, deductions, and exemptions are indexed for inflation, some reasonable calculations for my own personal situation suggest that I might have a required minimum distribution of $133,000 in the year in which I am forced to make my first RMD. I estimate a tax bill of $9,700 on that income, or 7.3%.

Even if taxes are hiked a few percentage points over the years, I’m far from convinced that Roth contributions are an unquestionable must over anything else. If taxes do go up, they likely won’t increase drastically overnight — that means your future contributions are going to be taxed at a higher rate, too. So even if the tax rates doubled and the brackets stayed the same, I’d still pay an effective 14.6% on my 401k withdrawals, while you could be paying 30% on your contributions! (It’s interesting to note that even if the tax rates doubled by the time I withdrew, my net effective tax is still less than what I would have paid TODAY on my Roth contributions.)

I realize that I make a lot of assumptions in my scenario, but those have more to do with tax brackets, standard deductions, and exemption amounts. For me, (and for most of the middle class) too many things have to change before a 401k/IRA becomes the wrong choice. And that’s not a bet I’m willing to take.

This still doesn’t solve the problems highlighted by the previous 5 or 6 commenters concerning your addiction to credit.

We have the numerous vet bills as well. I feel your pain. Thanks for sharing.

Needless to say, we still tell my oldest to become a dentist! LOL

The smart people would have told you to stop contributing last year when you lost your match; especially if you’ve already got sizable credit card debt. The minute I lost my employer match I stopped all of my contributions. If you don’t get a match then the order of operations should be to max out your Roth first then move to a 401k.

To be honest, 401k’s are the scam of the century. You have no options, or at most a very few, and you can’t do anything about it. The only good thing is the match. The pretax thing is okay, but it’s just going to come back to bite you 40 years from now. I’d much rather pay my taxes up front considering we have no clue what tax rates will look like decades from now; I’d argue they’re going to be much higher, if anything.

I don’t think the extra $100 per month is really the issue. If you really want to get out of debt, you have to stop borrowing money period. Change your mindset.

We all have expenses like vet bills and car repairs (although I would argue that those are NOT unexpected expenses at all — if you have a pet, they will need to visit the vet, and if you have a car, it will need work.)

Changing your mindset means that when you are presented with a bill you hadn’t prepared to pay, you will reach for extra work instead of for your your credit card. Or you’ll ask if there is any way to reduce the bill. Or you’ll sell some stuff. Or you’ll use your emergency fund. You’ll do anything other than borrow.

Don’t you love how everyone has a better idea?