We decided to embark on a quest for FIRE (Financial Independence Early Retirement) a few months ago and a consistent theme among FI content is to exploit all tax advantage accounts. For Mr. Quest, he was already maxing out his 401k from the beginning. As soon as he got his first full-time job out of grad school, he made sure he was getting his employer’s contributions.
For me, I held back. As a teacher, I am eligible for a 403b AND a 457. I know you FI readers right now are probably drooling over the possibility of how much I can save. However, I didn’t take advantage of it. Why? I didn’t get any contributions from my employer so I didn’t feel the need to contribute to it.
I was a damn fool.
Now, 4 years after I started teaching full time and really focused in on our FI plans, I opened a 403b and I am currently contributing the max amount of $18,000/year. I can also have a 457 and save another $18,000/year, but I am holding back.
For the both of us combined, here is what we can potentially save per year in our tax advantage accounts if we take advantage of everything.
Mr. Quest’s 401k-$18,000
Mrs. Quest’s 403b-$18,000
Mrs. Quest’s 457-$18,000
So why not go all in? Why am I holding back on that 457?
Our goal is for Mr. Quest to hit F.I. first. We want enough money in our investment accounts so that we can pull what is necessary to cover his salary. It’s kind of a lofty goal in that he makes way more than me. He’s in the 150k salary range and I’m in the mere 70k range. The reason for that is because he really wants to be a stay at home dad and do side projects/part-time jobs here and there.
For me, I’m content at my job and don’t feel the need to retire from teaching. Teaching gives me a great work-life balance. If I contribute fully to the 403b and 457, we can’t touch that money until almost 30 years later. We decided to do just one for now and then maybe sign up for the 457 later down on the road. We’ve also discussed contributing to the 457 but maybe not the full $18k. Right now, we feel hesitant since we are expecting our first baby in November. We don’t know how much we would really spend on the baby and want to have some more liquid cash.
Please share your thoughts with us. Do you have suggestions on how we can better invest so that Mr. Quest can hit FI first and I’ll slowly join later? Would love your insight!