Ah, it’s just not a good week unless we have a healthy article from Mr. Money Mustache taking on another ridiculous article stating how impossible it is for a middle class family to retire. You should head over to read the original article, wherein the author states that a family with a $150,000 income would take 110 years of work to retire; or the reply from the ‘Stashe about how absurd the tone of the article is and how it draws a populist CEOs-get-paid-too-much-and-that’s-the-problem conclusion.
January turned out to be a volatile month in the markets, with a correction from the huge upswing last year. For our family, it turned into being the month of expenses: with the biggies being the bill that came due for the rebuilt Nissan Altima transmission and the down payment on the new CX-5. Our auto budget is blown out of the water for the year and we just started! We’d been operating under our typical insurance/gas/maintenance before and haven’t had any huge maintenance issues or new car purchases in a very, very long time – so I suppose our auto bill was likely underestimated as a result. This will certainly cause some budget adjustments on my end.
Yikes, we had one heck of a vacation. As regular readers already know, we had a sick baby over Christmas – leaving us with no sleep and lots of family parties to attend. And then on top of that our family car had the transmission go just a couple days later. This is actually the second car to have a busted transmission in the past few months (my winter beater, a 2002 Dodge Neon went back in September). Then my wife and I managed to come down with the cold our son had, and we went car shopping and took delivery of a new car on the day of a huge winter storm!
Needless to say, things didn’t go as planned.
Seeing as I espouse frugality and avoiding debt, the fact we bought a new car may strike you as odd. Or at least against the normal advice. And I agree partially, but I figured I’d go through the thought process here.
A 401k is a tax-advantaged retirement account sponsored by an employer. The tax implications differ based on whether the 401k plan is a “traditional” plan or a “Roth 401k”. When not otherwise stated, most people refer to traditional 401ks as simply a “401k”, as Roth 401ks are newer and less common.
A traditional 401k allows an employee to save for their retirement using pre-tax money – thereby reducing their taxable income in addition to putting money aside for retirement. The money is taxed when withdrawals are made from the account. Using this type of plan, you are deferring your taxes until retirement.
I’m not sure if anyone else noticed, but Wade Pfau is at it again – coming out with a very counter-intuitive proposal for asset allocation strategies in a paper named Reducing Retirement Risk with a Rising Equity Glide-Path. (You may remember hearing his name linked to safe withdrawal rates and savings rates).The big take-away? Well it up-ends the asset allocation strategies that advisors have been parroting for everyone to move away from stocks as they get older.