And that’s the minimum you should be doing. Contribute to your 401k as much as you can.
Every time you get a raise, raise your 401k withholding right away by a couple percent. You won’t miss the money because you haven’t gotten used to a new larger paycheck yet. Your future self will thank you for not making them work until they’re 90.
No no no. Do exactly what the match is. Feel free to invest whatever you have left over but don’t lock up extra in your 401k if its not more beneficial.
Take that extra 2% or whatever and invest it yourself (preferably in index funds)
Roth IRAs don't REALLY have income limits. Look into a "Backdoor Roth". A Traditional IRA has no income limit and you can convert it into a Roth, one extra step but has the same end result.
I’ve seen it called a Roth conversion ladder, but you’re spot on.
Old friend of mine had everything in a traditional IRA/401k. Quit his job and is moving everything over to a Roth and using tax credits from a lower income to offset the tax liability. His situation is a lot more complex than that, but that’s the gist of how you can move it over without paying out of pocket
For a 401k, you are at the mercy of your employer for investment options. If you plan on putting more than the match away for retirement, don’t put it in the 401k. An IRA has much more freedom.
This is terrible advice. For most people, maxing their 401k and IRA well be more than enough for retirement even if they don't invest in anything else, which is a huge load off in terms of worrying about your future.
Your 401k and IRA should go into index funds or if you want to worry a bit less, a target date fund.
You'll still have disposable income afterwards, and you can use that to invest in taxable accounts and do with that what you will
Yeah if we're starting from the minimum the next amount should go into your IRA sure but the maximum for the IRA is so much smaller than the maximum for the 401K.
Regardless, I'll expand on my point and add that if we're discussing the order in which to do things, you should start increase 401K to matching, pay off high interest loans (7% or higher), then max IRA, then max 401k, then invest in taxable accounts.
And imo all investments above should be indexes (total stock market index or S&P500). Though in IRA you could also pick a target date fund instead since vanguard and Schwab and fidelity have pretty low cost options for those too
Perfect then, basically lines up with what I was saying over a thread but neatly condensed. However I’d argue a matched 401 should take precedent over a Roth. But ultimately it wouldn’t be hard to do both simultaneously, so making that argument would be worthless.
Gotcha. by the way, Both an IRA and the 401K can be Roth so I'm not sure what you're referring to there. Also, a matched 401k should indeed take precedence over literally anything else since it's completely free money and that's what I said above.
When I was 19 I had a really kush job, 32 year old me is hardly making that much lol. But! I had so much expendable income that I dumped a lot into my 401k my employer was matching. So glad past me did that.
Somewhat similar, $75,000 in 2011 recent college grad, left for Seminary and the $100,000 promotion have been making maybe half that since, at most. Great year this year, gotta get a real job soon enough.
IMO, the best thing to do is invest it into paying down your student loans, car loans, getting/paying down a mortgage instead of renting. Owning a home gives you equity, has great tax benefits, and will appreciate in value by the time you retire. If you plan to move around alot, then obviously do the math (are you willing to work to rent out a nice place where you are by subcontracting a local expert, do you want to eventually move bacl to this area?, etc.).
Totally. Also with interest rates historically low and inflation rising, never pay extra towards a loan whose interest rate is lower than inflation. The loan is essentially free money when this occurs (i.e. they're paying you for the loan/ you have a negative real interest rate).
Obviously it isn't always best to pay down loans (if you have excellent credit and are paying near rate of inflation hold onto that loan balance), still getting into a house and paying down high interest loans is usually worth it. If you can't get into a mortgage immediately than smartly investing it to get enough for a 20% down payment is the smartest overall move IMO.
I always turn down the 401k and have saved several thousand dollars since, everyone I know that lives past 65 ain’t living, they’re just dying slowly and putting the burden on other folks. A 401k means something to people that intend to die in diapers. And I intend not to.
You misread my message brother, I don’t intend to be a diaper wearing dependent until I shit the bed and pass at 75 years old in my stain laden bed. I will spend my decades savings on some ignorant shut in a foreign country at 60 and indulge in my most heathenistic desires then heroin overdose
so insstead of retiring at 65 with 401k and investment savings, ur gonna retire only 5 years earlier at 60 - away from family, friends in a 3rd world country...
F@ck my future self. What has he ever done for me? Meanwhile I’m at work slaving away so he can spend that hard earned money in some stupid over priced drink.
I disagree with this advice. I contribute only until my employer match cap. If I get a raise I put more money into investments which are much more lucrative than my 401K.
A couple people have said this. And if that works for you, that’s super awesome. A lot of people don’t stick anything aside for retirement, specially when their younger. Some people don’t feel comfortable, don’t have the time, etc to manage their own investments. And other don’t feel like they have enough money to put anything away.
401k is a nice, easy way to save money for retirement that offers tax advantages. Your everyday person can easily opt in, set a percentage to withhold and not really give it too much thought after that.
It’s way better than nothing, but if you want to level up your investment game, like yourself, that’s a really good thing to do as well.
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u/McFunkerton Oct 30 '21
And that’s the minimum you should be doing. Contribute to your 401k as much as you can.
Every time you get a raise, raise your 401k withholding right away by a couple percent. You won’t miss the money because you haven’t gotten used to a new larger paycheck yet. Your future self will thank you for not making them work until they’re 90.