Author Topic: Full 401k Match. Now what?  (Read 2136 times)

RidetheRain

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Full 401k Match. Now what?
« on: January 20, 2017, 03:35:09 PM »
Help! I have zero investing smarts and I've maxed out my "easy answers"

I have my full employer match in my 401k, but I don't know where to put saving next. My employer offers a Roth option that I haven't taken advantage of and know nothing about. Should I do that or open my own IRA elsewhere? Traditional or Roth. How do I decide what's next? Do I need to worry about contribution limits?

Stats per Year:
Gross Income: 110,000
Personal Contribution to 401k: 6000
Employer Match: 6000

The employer plan is pretty nice. Mostly Vanguard Indexes.

For now, I'm planning on contributing another 6000/yr until I can purchase a house. The max I could possibly contribute at that point would be 12000/yr. Should that influence my decision?

If there is a website/book/blog/podcast/man-shouting-from-the-rooftops that would help me understanding this I'd love to hear about that too. I'm

RWD

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Re: Full 401k Match. Now what?
« Reply #1 on: January 20, 2017, 03:53:04 PM »

2Birds1Stone

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Re: Full 401k Match. Now what?
« Reply #2 on: January 20, 2017, 03:58:25 PM »
You should be maximizing available tax advantaged space.

Max out 401k

If you do not qualify for tax deduction for traditional IRA contribution you can do a Roth IRA

After that is where it gets tricky.

SeattleCPA

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Re: Full 401k Match. Now what?
« Reply #3 on: January 21, 2017, 07:01:59 AM »
You should be maximizing available tax advantaged space.

Max out 401k

If you do not qualify for tax deduction for traditional IRA contribution you can do a Roth IRA

After that is where it gets tricky.

+1

Malum Prohibitum

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Re: Full 401k Match. Now what?
« Reply #4 on: January 21, 2017, 08:03:02 AM »
Help! I have zero investing smarts and I've maxed out my "easy answers"

I have my full employer match in my 401k, but I don't know where to put saving next. My employer offers a Roth option that I haven't taken advantage of and know nothing about. Should I do that or open my own IRA elsewhere? Traditional or Roth. How do I decide what's next? Do I need to worry about contribution limits?

Stats per Year:
Gross Income: 110,000
Personal Contribution to 401k: 6000
Employer Match: 6000

The employer plan is pretty nice. Mostly Vanguard Indexes.

For now, I'm planning on contributing another 6000/yr until I can purchase a house. The max I could possibly contribute at that point would be 12000/yr. Should that influence my decision?

If there is a website/book/blog/podcast/man-shouting-from-the-rooftops that would help me understanding this I'd love to hear about that too. I'm

With a gross income of $110k, you should be able to put the full amount in an IRA with no cutoff.  The partial phaseout starts at $117k modified gross.

So you can do $18k in your 401(k) and $5500 in your IRA, unless you are 50 or older, in which case you can do more.

Your post says you are planning to contribute "another 6000/yr until I can purchase a house.  The max I could possibly contribute at that point would be 12000/yr."  I am not really sure what this means, but if you cannot save more than $1000 monthly ($12k max), then just put it all in the 401(k).  That would be $12,000 you, reducing your tax liability, and $6000 employer.

I would perhaps reconsider buying a house, however, if you think that is going to put you into a cash crunch as a single person with no dependents and a very healthy six figure income.

I would take a careful look at reducing expenses and increasing your savings rate.

MightyAl

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Re: Full 401k Match. Now what?
« Reply #5 on: January 21, 2017, 05:05:27 PM »
Do you have an HSA?  I just learned that it should be maxed first due to the benefits.  After that IRA. You can contribute up to $18,000/yr to 401k. Unless investment options are poor I would consider that after the HSA.

Looks like I am repeating some of Malum's post but I saw no mention of whether or not you had access to an HSA.

Ryland

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Re: Full 401k Match. Now what?
« Reply #6 on: January 21, 2017, 05:31:07 PM »
$6k match! That's better than pretty nice. That is bangin'!

With $110k in income, you've got to max out that 401k. It'll give you $18k tax free and $6k absolutely free. On top of that it will save you $4.5K per year in taxes (assuming in the 25% tax bracket).

You are in such an epic place to build wealth quickly with that $110k income. I highly recommend stashing +50% of that over the next number of years. This will give you some F- You money in ~5-7 years where you can start making decisions with less and less constraint from money.

Think... 1. max out 401k, 2. max out Trad IRA, 3. max out Health Savings Account (HSA), 4. add as much as possible to brokerage. At the very least, do #1 & #2.

I agree with the commenter about re-thinking home purchasing. Here is a great article from the legend, Jim Collins about the woes of home ownership. (Don't get me wrong, it can be a win, but it is not nearly as easy a win as the social norm makes it to seem.)

http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

If you're interested in real estate investing, definitely check out frugalvagabond.com. The blogger there is so informative and awesome. I've learned a ton, and think it will inspire and help you too.

Good luck!