Author Topic: After max 401K and Roth IRA... what to do next?  (Read 7555 times)

FastStache

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After max 401K and Roth IRA... what to do next?
« on: April 25, 2014, 02:37:31 PM »
I am currently maxing my 401K contributions to get as close to 17.5K as I can this year.

I am also planning on doing my 2014 Roth IRA for both me and my wife.

We are trying to figure out what is the next move for us?

We do have a child and may have more in the future. I don't know if saving for their college is the next step for us? Are there any other tax advantaged savings available to us?

clarkm04

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Re: After max 401K and Roth IRA... what to do next?
« Reply #1 on: April 25, 2014, 02:42:43 PM »
A couple of options:

- 529 or other college savings for your child
- Pay down or off any remaining debts
- Taxable accounts

Great job on hitting the 401k max and ROTH IRA max for your wife and you!

kyleaaa

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Re: After max 401K and Roth IRA... what to do next?
« Reply #2 on: April 25, 2014, 02:49:37 PM »
Saving for college seems like a reasonable next move if you have kids, but don't overdo it.

hodedofome

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Re: After max 401K and Roth IRA... what to do next?
« Reply #3 on: April 25, 2014, 03:01:32 PM »
Most would love to have this problem.

Can you contribute to a regular IRA if you have maxed out your 401k and Roth IRA? I don't think you can but it's worth looking into.

If you really hate taxes, there's always Muni bonds...

MLPs can be pretty tax efficient as well. Especially the ones that pay out stock instead of dividends. But I would never invest in them without truly understanding what you're getting into.

Gin1984

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Re: After max 401K and Roth IRA... what to do next?
« Reply #4 on: April 25, 2014, 03:04:09 PM »
Most would love to have this problem.

Can you contribute to a regular IRA if you have maxed out your 401k and Roth IRA? I don't think you can but it's worth looking into.

If you really hate taxes, there's always Muni bonds...

MLPs can be pretty tax efficient as well. Especially the ones that pay out stock instead of dividends. But I would never invest in them without truly understanding what you're getting into.
No, you may only put $5500 in your IRA (no matter which one).  Which does suck for people who do not have access to employer accounts like 401k/403b or FSAs.

Argyle

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Re: After max 401K and Roth IRA... what to do next?
« Reply #5 on: April 25, 2014, 03:09:31 PM »
Do you have an HSA?

Hamster

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Re: After max 401K and Roth IRA... what to do next?
« Reply #6 on: April 25, 2014, 03:13:08 PM »
Buy a Hummer?

FastStache

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Re: After max 401K and Roth IRA... what to do next?
« Reply #7 on: April 25, 2014, 03:16:20 PM »
Depending on your goals:

-Save up for or pay off the house if it makes sense.
-Taxable accounts
-529s for any kids or for your and-or your wife
-Do either of you have any self employment income? If you do, you may have other retirement savings options.
-Have you fully optimized your home? Are there any things you could buy (low flow showerheads, LED bulbs, kitchen appliances) that would save you money in the long run?


Depending on your goals:

-Save up for or pay off the house if it makes sense.
-Taxable accounts
-529s for any kids or for your and-or your wife
-Do either of you have any self employment income? If you do, you may have other retirement savings options.
-Have you fully optimized your home? Are there any things you could buy (low flow showerheads, LED bulbs, kitchen appliances) that would save you money in the long run?

Our Current interest rate on the home is 3.625, but we are going to sell soon and downsize, and our new interest rate should be 4.5%, which I think I'm still better off investing versus paying down in the long run. But, if I'm close to FIRE paying down completely may make sense.

I will look into a 529 for our kid.

We do not have any self-employment income.

Optimizing the new home sounds like a really smart idea.
Do you have an HSA?

No we don't.

Buy a Hummer?

I was on the fence, but now I will!!!

Badass by 41

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Re: After max 401K and Roth IRA... what to do next?
« Reply #8 on: April 25, 2014, 04:25:33 PM »
- HSA is worth looking into.  Potentially another $6500 tax free for medical expenses and just like a traditional IRA for everything else.
- FSA is also worth looking into if you don't already have it.  Potentially another $2500 deduction for annual medical expenses, and $5000 for childcare expenses.

msilenus

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Re: After max 401K and Roth IRA... what to do next?
« Reply #9 on: April 25, 2014, 04:44:39 PM »
* HSA (perhaps after adjusting health care coverage to accommodate)
* After Tax 401k -> Roth
* 529 plan(s)
* Donor Directed Fund (if you plan on charitable giving in retirement --this lets you take the deductions now, when your marginal rate is higher.)  You can think of them like pre-tax 529s for charity instead of education that also let you sterilize capital gains.
* FSAs, as said, but those are spending accounts, not savings accounts.

Not all of those are available or make sense for everyone.

squatman

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Re: After max 401K and Roth IRA... what to do next?
« Reply #10 on: April 27, 2014, 08:53:45 PM »
Another vote for the HSA. Maybe look into stuff like landlording?

shuffler

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Re: After max 401K and Roth IRA... what to do next?
« Reply #11 on: April 27, 2014, 09:42:08 PM »
* After Tax 401k -> Roth
IMO, this one is worth highlighting a bit more strongly, since I've found many people are unaware of it.

Here's a thread:
http://forum.mrmoneymustache.com/investor-alley/$10k-after-tax-into-401k-or-brokerage-account/

... and another at Bogleheads:
http://www.bogleheads.org/forum/viewtopic.php?t=66208

milesdividendmd

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Re: After max 401K and Roth IRA... what to do next?
« Reply #12 on: April 28, 2014, 10:11:14 PM »
If available to you you should max out an HSA (and it's not even close.)

The HSA has three main advantages  over all other options.

1.  You can contribute pretax money (better than a Roth)
2.  You can pull out money tax free for health expenses at any time ( better than a traditional IRA/401K.)
3.  It is portable.  (unlike most 401K/403 Bs) so if your employer picked out a bunch of high cost actively managed funds for you to choose from you can just transfer your money to a different low cost provider and invest in a cheap vanguard fund, (or whatever you prefer.)

The key is to do all of your health care spending with out of pocket dollars and to allow your HSA stash to grow tax free.  Each dollar that you spend on health care, dental care, vision, becomes, in effect, a dollar invested in a Roth with pretax money. There is nothing sweeter for a super saver like you.

It is truly a thing of beauty.

I have written this stunning savings vehicle extensively including here...

[MOD EDIT: Link removed.  Please stop spamming links promoting your own site.  A single link in your signature is sufficient, and will be under every post you make.  Thanks.]

Enjoy!

-Alexi
« Last Edit: May 20, 2014, 09:05:19 PM by arebelspy »

FastStache

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Re: After max 401K and Roth IRA... what to do next?
« Reply #13 on: April 30, 2014, 01:07:02 PM »
Unfornuately, I don't not have an HSA, but we do have a HCSA, but that does not rollover. I will put about 500 or so a year though, to offset, contacts, co-pays, etc.

birdman2003

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Re: After max 401K and Roth IRA... what to do next?
« Reply #14 on: April 30, 2014, 03:17:37 PM »
Congratulations on achieving that level of savings!  I would either pay off your new house faster (if your risk tolerance is lower) or invest in a taxable account (if your risk tolerance is higher).