What does everyone currently put their money in? Would assume if your company is matching, you are at least meeting that amount since it is free money, but what % are you throwing in your 401k? Do you have an IRA or a Roth, or do you just put money in a general taxable trading account. I am putting away 14% in 401k including company match, but it is in a standard Fido account with a selection of 20 or so boring funds. Thinking about whether it is best to cut my contribution (but still contribute enough to get company match) and put the difference in an IRA, where I have some more flexibility. Then comes the question about standard or Roth. Also possibly thinking of just opening a regular trading account and investing in there.
How do others approach this? Max out 401k contribution limits and then start with an IRA? Or put a little less in 401k and the rest in IRA so you can control the investments more?
In general, I think it’s a good idea to max out your 401k contribution, to the extent you can afford it. Roth depends on your income expectations. Though, I suspect a lot of people here don’t use Roth IRAs due to income limits.
I put the max $5k into a Roth IRA, since I expect/hope to be above the income limits in the not too distant future.
I need to up my 401k contributions to the max that my company will match. We have a pretty crappy match, but hey a match is a match. Even contributing the maximum that my company will match requires me to contribute only $3k this year. Contributing to a 401k is a backwards way to contribute to an IRA if you anticipate leaving your employer, since you can just do a 401k to IRA transfer
I will be getting back to having a regular taxable account soon to invest my excess cash because I have the enviable problem of having way more cash than I need and don’t have any debt able to pay down.
Any $1 in 401K will immediately pay you 10 to 40 cents back in reduced income taxes for that year (depending on your tax bracket.) OTOH, maybe you figure you’ll be in that tax bracket anyway at retirement, then might as well invest in a Roth IRA. Or if your current tax bracket is low to zero.
Other exceptions abound, e.g. in your case if the 20 funds are all crappy then ETFs/index funds in Roth might truly be a better alternative.
Krazykanuck contact me if you need help getting rid of excess cash
I put 10% in 401K to get the 10% match. Then the rest of my investments go between Lending Club and mutual funds – after all this CFA studying, I want to be able to start picking individual stocks again. But I simply don’t find myself with enough time to do it.
Well, picking a competitor salary is difficult given I’m on the ‘evil’ side currently in regulation. I never thought I’d end up in regulation – I was going to work for equity research. But my offer for this job got pushed up causing all kinds of timing problems, so I decided to take the job that I was certain I could pay off student debt quickly. Too many of my peers are under or unemployed, so I went the risk-averse route. I still keep in touch with the equity guys and they told me to let them know if I ever want to consider going back that route. I sometimes still have trouble sleeping at night though lol
That being said, it hasn’t been a bad gig so far. My pay is roughly equal or a little higher than the other agencies, without including the per diem and such I get from living in hotels. The 10% patch is split between two 401ks (each has a 5% match). The match isn’t affected by income level, so the people who are higher up really end up well off. I only work 40 hours a week, which makes it much easier to study for the CFA and keep my workouts.
