Roth 401k Contributions: Balancing Savings and Travel Opportunities

Haley, as a teacher, balancing 25% Roth 401k and travel savings requires assessing future goals and considering pension benefits.

### Balancing Retirement Savings and Travel as a Teacher with a Pension
* 💰  As a teacher, Haley is considering reducing her **25% Roth 401k contributions** to save for travel, while still relying on her **pension for long-term financial security**.
* 🛡️  The hosts emphasize the importance of understanding the **trade-offs between current spending and future savings**, acknowledging the **opportunity cost of reducing retirement contributions**.
* 🏫  Teachers with pensions can count their employer's contributions towards their overall savings rate, potentially **exceeding the 25% recommendation**.
* 🌍  They suggest finding a balance by re-evaluating the savings rate with fresh eyes, considering the **employer's contribution** and potential intersections between **travel and long-term goals**.
* 👫  Emphasizing the value of creating memories with loved ones, they recommend planning **cost-effective travel experiences** that align with both **current budget constraints** and **future financial growth**.
* 💡  Bo and the hosts encourage Haley to think about **"bedazzling" her basic life with memorable experiences**, potentially with a group of teacher friends to create **lasting memories**.
* ✈️  They highlight that travel experiences can evolve over time, with the way one travels at age 50 likely being different from how they traveled at age 25.
* 🦸‍♂️  Ultimately, they give Haley permission to pursue her travel goals while encouraging her to **maintain a balance between current enjoyment and long-term financial security**.

[Music] Haley's question is up next. It says, Can I decrease my 25% Roth 401k contributions so I can save up to travel once a year? I'm a teacher, so I'll get a pension if I stay in this career long term. My budget is tight, but I still want to have fun too. What would you say to 'cuz I get it, I get what she's saying, but uh, what are her options and how does the pension factor in? How does bedazzling your basic life factor in? What do you think? Well, here's Haley. You've heard us say this a thousand times. I'm going to say it 1,001. Now, uh, money is nothing more than a tool that allows us to do the things that we want to do. So why do we recommend a 25% savings rate so that in the future you're able to live the life that you want to live on your terms, the way that you want to live it. But you said something really interesting, hey.

want to make sure that I'm doing stuff. Now I want to be able to travel. Now I want to be able to have opportunities. Now there's nothing wrong with that. I'm I'm not going to fight you on that but you just have to recognize. There's an opportunity cost if I'm instead of saving 25%. If I drop my savings rate today so that I can travel or spend money today, there's a good chance especially if you're young that that's going to work out. Maybe you drop from 25 down to 20, there's a really good chance that saving 20% as a teacher and then having a pinion later in life might work out for you but there is going to be an opportunity cost. There will be less dollars working for you for your future. What you have to assess is what does the hierarchy of my goals look like. How important is me being able to travel this year versus me being able to retire early have options fill in the blank on the other things that you may be giving.

up and you have to do a self-assessment in terms of okay. Where do I want to deploy my resources and do I understand the cost of doing that? Is it a cost I'm willing to bear? Well, I think it's like two things that popped in my mind. First of all, as a teacher, um, don't forget, especially if you're vested into your pension, um, you do get to count your employer's contribution as part of plus your contribution towards that 25%, especially if your household income is less than $200,000. So, I bet that you're actually saving and investing greater than 25%. Um, the second thing is that I think about how when I look at study happiness in general, a lot of times when I talk about blossoming memories and bedazzling your basic life, a lot of those memories are really with you taking into account the people you're doing these trips and these memories with, you know, because that's where the real fertile memory building is, as well with loved ones that can be

friends that can be family, that can be neighbors, and so if you know and I had, we had a question a few weeks ago where somebody said, hey, can I go do all this stuff because a group of friends of mine are going to Japan and this is going to be a once-in-a-lifetime trip. Um, can I do this even though it might mean I'm P got to pull back my savings? I was like, you have, I think it was a year, a year and a half before this trip even happened. I was like, let's see if there's an intersection point where you get to do both, where maybe. And so, Haley, I think that's where you are as well, is that I'm okay if you go and re-evaluate your savings rate because you kind of with fresh eyes you see that maybe a portion of your employer's contribution counts too. But that doesn't mean I immediately want you to say, okay, well now I'm going to just go burn money. I don't have a.

trip in mind. I don't have a memory-building opportunity in mind. It's just that I'm now going to say every year I'm going to spend $3,000 to do this. That might be valuable, but I'd rather you start thinking more of where you want to be and how you're going to bedazzle your basic life. And maybe that is the memory-building. You have a group of friends that you say, Hey, in the offseason, this us teachers, let's go to Europe or let's go here and let's do this every other year, let's do something where it lets us go create some awesome memories. I'm much more inclined with that because the why is tied into the friends and all those other benefits of that create happiness. And this probably seems like common sense and goes without saying, but the way I don't know why I'm assuming that you're a young person. Maybe you're not, but Haley assuming that you were a young, a younger person, the way that you travel

today does not have to be the exact same way that you travel in the future, but I'm going to say it differently. The way that you think you want to travel in the future does not necessarily need to be the way that you travel today. So if you said, Hey, things are tight and the budget is tight, I would figure out what are ways you can maximize traveling in the most cost-effective manner. A great thing is you just said, Hey, if you have some friends that can travel and you can all go split an Airbnb, like that's a great way to cut down your cost. So if you can think through those types of items to get the most out of your travel budgets possible, what you'll find is as you continue to advance in life and as your dollars do build up, your travel will probably scale up as well. I mean, that's been your experience, right? You travel very differently at age 50 than you did at age 25. And I covered that, you know, in when I went to Italy in my

20s, we did it super cheap, dragging the luggage down the cobblestone, getting ripped off everywhere, whereas now we can actually pay for the guided tours and the other stuff. So you're exactly right, Bo. And what's funny is when I tell my stories from going to Italy in my 20s, they're not too different from the people who are doing it in their 50s. Um, they just did it I would did it in a bedazzled basic way, and they've done it now in the more luxurious way. There's still a lot of commonality that those blossoming memories get better and better. So, Haley, I think that we're giving you permission to go create those memories. It sounds like you've been very disciplined, you've been a great financial mutant. Just make sure you're putting the effort in to do the why and you know how you're going to fund this. And I want you to go live your best financial mutant life.

Can I Slow Down Investing So I Can Travel Once a Year?

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The Money Guy Show

Balancing Retirement Savings and Travel as a Teacher

Haley wants to decrease her 25% Roth 401k contributions to save for annual travel and considers her future pension.

Reducing her current savings rate could impact her future retirement funds, so she needs to assess the importance of travel against her long-term financial goals.

As a teacher, she should carefully consider the trade-off between enjoying life now and ensuring financial security in the future.

Optimizing Resource Deployment and Cost Understanding

Considering your resource deployment, it's important to take into account your employer's contribution to your pension, especially if your household income is below $200,000, potentially allowing you to save and invest more than 25%.

When evaluating expenses for trips and experiences, it's crucial to prioritize building memories with loved ones, but it's also possible to re-evaluate your savings rate to find a balance between current enjoyment and future financial goals.

Rethinking Travel Budgets and Experiences

It's more valuable to invest in creating memories with friends through travel than just budgeting for a yearly trip.

The way you travel can evolve over time, and it's important to maximize cost-effectiveness, such as by sharing expenses with friends.

As you advance in life, your travel experiences are likely to change and scale up as your budget grows.

Evolving Travel Experiences from Budget to Luxury

Travel experiences have evolved from budget-friendly to more luxurious options over the years, allowing for guided tours and other expenses.

Despite the shift, the commonality of creating lasting memories during travel remains unchanged.

The advice given is to put effort into funding and to go live the best financial mutant life while creating new and blossoming memories.