Knowledge Is Retirement Power
Followers of the Financial Independence Retire Early (FIRE) movement strive for complete financial freedom —earning and investing enough income to stop working for a paycheck in their thirties or forties. The goal? To spend the years before they turn 65 doing what they love most: traveling, volunteering, or living simply without financial pressure or uncertainty. Whether or not FIRE works for you, studying its principles can help you have a healthier relationship with your finances. For more information, check out playingwithfire.co (there is no “m” at the end of the URL). You can also learn more about it via Wikipedia or perform an online search of “Financial Independence Retire Early.”
Q&A
What is the difference between a Roth 401(k) and a traditional 401(k)?
The main difference is that contributions to a traditional 401(k) are pretax, meaning they are deposited before your income taxes are deducted from your paycheck. However, during retirement, withdrawals are taxed at your then-current income tax rate. Conversely, there is no tax savings or deduction for contributions to a Roth 401(k). However, the contributions can be withdrawn tax-free during retirement if at least five years passed since your first contribution to the Roth 401(k). Consider consulting with a financial professional to determine which strategy may be right for you.
Tools and Techniques
Getting a clear picture of your current financial state can help prioritize actions you might need to take to help achieve your financial goals. To get started, take a quick 10-question survey developed by the Consumer Financial Protection Bureau to receive your personal financial well-being score. You can also compare your score with others’ by age, household income and employment status, and discover ways to take the next steps toward achieving improved financial wellness. To access the survey, go to: www.consumerfinance.gov/consumertools/financial-well-being.
We are happy to help, if you have any questions or would like additional insight, please feel free to reach out to me at joe@diversifiedfa.com or 800.307.0376.
Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. Investment Advice and 3(38) Investment Fiduciary services offered through Diversified Financial Advisors, LLC, a Registered Investment Advisor. 3(16) Administrative Fiduciary Services provided by PISTL Service Corporation. Discretionary Trustee services provided by Printing Industries 401k Trustees. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
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