Author Topic: Advice for 25 yr old  (Read 500 times)

rbnsf12

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Advice for 25 yr old
« on: July 04, 2018, 09:05:22 PM »
Hello All,

I'm 25 and recently took a new job with a decent pay bump to $78k/yr (~12% increase from my previous job) and am looking to put that extra $ to work rather than upgrading my lifestyle like most seem to. In fact, the shorter commute that also comes along with this new job will result in some of my expenses decreasing rather than increasing. Previously, I was with an employer who only offered a SIMPLE IRA matching 100% up to 3% but the choice of front-loaded funds were unappealing. In that job, I chose to contribute 3% to get the full match, max out my Roth IRA, and invest the rest in a taxable brokerage account.

My new employer offers a 401(k) matching 100% up to 4% (with a much wider availability of funds through Fidelity's BrokerageLink) so I'm open to rethinking my strategy. Would it make the most sense to max out my 401(k), max out my Roth IRA, and then invest the rest and my tax return in my taxable brokerage account or something else? For context, I already bought a condo in 2017 (30 yr @3.875%) so I don't foresee the immediate need for a down payment, etc. However, I am interested in acquiring a couple rental properties potentially down the road, so my thought for preparing down payment(s) for those would be using the taxable acct. for building up that nest egg. Another option would be to make extra principal payments on my condo but I figured the taxable acct. would be a more productive way to put my $ to work.

My gut tells me this would be the best thing to do but would appreciate any feedback or input on fine tuning this strategy!
« Last Edit: July 04, 2018, 09:30:23 PM by rbnsf12 »

Hargrove

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Re: Advice for 25 yr old
« Reply #1 on: July 04, 2018, 10:19:34 PM »
Welcome, and good way to get started.

Your gut is right. Extra principle on your condo is sub-4% returns. I'd just put it all in the stock market, unless it's a tremendous quality of life improvement for you (mentally) to have the condo paid early. Average stock gains over a 30-year period are more than double that 4%.

Max 401k first (free money & best returns), then max Roth, then into taxable (assuming you have no HSA, otherwise that should be maxed with the 401k).

terran

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Re: Advice for 25 yr old
« Reply #2 on: July 05, 2018, 05:52:19 AM »
Would it make the most sense to max out my 401(k), max out my Roth IRA, and then invest the rest and my tax return in my taxable brokerage account

This sounds good.

Does your new employer offer an HSA eligible health insurance plan?