I am 22 years old I I know I should be compounding hard at my age, what would you place these 3 accounts in order for priority? I have about 7k invested into an individual account 4K in savings and 2k in a Roth so far.
Roth IRA , if I max every year that will leave me with 11,400 left over to invest with my current salary.
I am in a probation period still this is a new job and I’m not sure about what options my company offers for 401k and I’m also unable to invest for another couple weeks until I’m officially hired on, but I know they don’t match on anything because they do pensions and I talked to hr about it.
Once I do figure out what options I have and I like them would you suggest I invest the remaining 11200 for now into the 401k? Or split between the 11200 between 401k and individual account? I do like the appeal of cutting out some taxes if I put the remaining 11200 into 401k that will save me roughly 1866 in taxes a year.
Im only making 52k gross a year atm but within 4 years I should be making around 110k or more depending on union contracts and OT So at that point would it be beneficial to start splitting between individual and 401ks? (Will be maxing Roth IRA still) Idk man I just want to hear some of y’all’s opinions on it I know there is a lot of fees I need to watch out for with my company 401k and other cons about it like the fees if I want to withdraw before 59 1/2 or (rule of 55)
I’ve been doing a lot of math as well and if I invested into just an individual account while reinvesting dividends and maxing Roth IRA I could net up to 1.73 million in just my individual account if stuff goes right with an avg modest return of 8% anual by the time I’m 45 with my journeyman salary (don’t plan on having kids tbh and I really don’t care about fancy things I want to keep my life super modest for now and I’m not sure if I really wanna work for a company until I’m 55 and am eligible for 100% of my pension I’d rather have my current side buisness be my full time job by at most 45) if that’s the case I was thinking I could take 3-4% of the return a year out my individual account live off that/ have it help me out with buisness cost keep maxing out Roth leave the rest in individual and let it compound and keep up with inflation. Then when im 60 my Roth could be around 1.3 million. I’m not sure and there is so many strategies to go about this I just feel overwhelmed.
Priorities Roth IRA 401k and individual taxable account?
byu/modestmanio inpersonalfinance
Posted by modestmanio
2 Comments
Always invest inside your tax-advantaged investment accounts before touching a regular taxable brokerage. The tax drag of a brokerage account (yearly taxes on dividends) plus paying capital gains taxes upon withdrawal make it less than ideal.
For now: max your Roth and then put your extra cash in a Roth 401k. Because your salary is low enough to justify the all Roth strategy.
When you’re making $100k, and well into the 22% tax bracket, max your Roth IRA and switch the contributing to your traditional pre-tax 401k.
And — you mention a pension. Pension jobs often offer a deferred comp 457b rather than a 401k?
The following provides a great foundation to build on.
[https://www.reddit.com/r/personalfinance/wiki/commontopics/](https://www.reddit.com/r/personalfinance/wiki/commontopics/)