I graduated college this past may, and I make about 80k. For the time being, I have little expenses outside of minimal student loan debt and food etc…
So far I’ve maxed out the Roth IRA, and maxed out the match with employer 401k, as well as building up my brokerage account.
Outside of continuing brokerage contributions, am I missing something?
I want to take advantage of the time of having little to no major expenses, and the opportunity to build up my finances
Am I doing everything right?
byu/OrdinaryShake1597 inpersonalfinance
Posted by OrdinaryShake1597
5 Comments
Unless you are using the brokerage account to save for something specific (house, car, open a business, etc.) that is long-term but not for retirement, I recommend maxing out all tax-advantaged space (HSA if eligible, Roth IRA, all 401k contributions including mega backdoor Roth strategy if available) before saving in a non-tax advantaged brokerage account. If this money is just for “build wealth”, then it will build more wealth in a 401k than a brokerage account.
Edit: Don’t forget to save your emergency fund though, in a liquid asset like Treasury ETF. If that’s what your brokerage account is invested in, then yes, continue with that until you have 6-12 months’ expenses saved, and then max tax-advantaged accounts.
You should look into if your 401k supports mega backdoor Roth if you have more to save.
See the flowchart:
https://www.reddit.com/r/personalfinance/wiki/commontopics
Have you built up a reasonable emergency fund? If no, get to 6-12 months of expenses saved.
Do you qualify for an HSA? If yes, max contributions. If no, consider if (as a presumably healthy 23-year-old) you may be better off with an HDHP.
Interest rate(s) on student loan debt? If >~5%, pay off early rather than invest after-tax.
Maxing 401k contributions will be more tax efficient than investing after-tax (unless you have a specific pre-retirement goal like NotSoFiveByFive pointed out).
Keep saving 20% of your paychexk for rainyday!
If I were you, I would take advantage of investing in an HSA, you can let the money grow without taxes into your retirement years or use it now. It is the most tax advantageous thing you can invest in. After you get to a certain amount, you can have it put into a stock fund or some sort of investment vehicle.