No. of Recommendations: 4
When my wife and I were relatively young, we lived on my salary, which was larger, and invested all of hers--at the time that was able to be 100% into a TIRA. We lived small, so of my salary we maxed out contributions to the 401(k) the company for which I worked had, and we maxed out my TIRA contributions. That was good for roughly 10 years with our combined income being in the neighborhood of $43k-$68k in today's dollars. When I changed jobs, and my wife drastically upgraded her employment, she had the larger salary, so we did the same thing, only living on her salary rather than mine.
When either of us got pay raises, we used half of the delta to increase our standard of living, and committed the rest to those retirement programs as their annual limits rose and to taxable investments after we'd maxed the contributions. When Roth IRAs, and then Roth 401(k)s, came available, we switched our contributions to those rather than TIRAs and regular 401(k)s. As we changed employers, we rolled those 401(k)s into our existing TIRAs or Roth IRAs, as appropriate, for the greater flexibility in investments and RMDs (they're long-range in TIRAs; they're plan-dependent in 401(k)s, which usually are very similar to IRS' TIRA requirements, but not always).
Your son doesn't have a wife, yet, but all of those techniques apply just as well to a single income. Since he's starting out with Roths available, my suggestion is that he use those rather than the traditional plans. So far, heirs get favorable tax treatment with Roths relative to the traditionals.
Eric Hines
