Hi all MMMers!
I'm 25 and am just getting started with FIRE. I read JL Collins "The Simple Plan to Wealth" in a weekend and am ready to get started but am confused on why I should be maxing out my Roth 401K vs investing more into VTSMX / VTSAX.
Currently I have a Rollover IRA with just under $4K in it, a brand new Roth IRA account with $350 and I also have a Roth 401K with $7,300. I currently am finishing paying off my last student loan and should have it done by the end of the year (woohoo!), so this is all planning for what happens when that is done.
When I'm done with my loan, The most I'll have to invest each year is $25,650. So following the order in what to invest in, I'll max out the Roth IRA at $5,500 and then max out my Roth 401K at $18,500. That leaves me only $1,650 to invest in VTSMX / VTSAX each year. I'm wondering why it should be done in that order because if I were to retire in 20 years or so like I'd like to do, I wouldn't have very much in the VTSMX / VTSAX accounts, only the Roth 401K and IRA which I'll get penalties on drawing early. I'd like to not touch that IRA or Roth 401K until there's no withdrawal penalty which makes me think I should just keep investing up to the match in my Roth 401K, hit the max on the IRA, then invest the rest of the $26,650 into a VTSMX / VTSAX account.
Can someone walk me through why I should be maxing out the 401K vs investing all I can into VTSMX / VTSAX? Appreciate any and all help!