My job matches 100% up to 3k a year and then after that it is 20% into our 401k.
Should I only invest in my 502k then, so I get the extra free money? Or is the 20% so negligible that I should only contribute up to 3k and then put the rest in my Roth IRA?
Ex. I invest 3k, they match 3k into the 401k
I invest 4k, thy match 3.2k into the 401k
Should I only invest in my 401k?
byu/cmanster inpersonalfinance
Posted by cmanster
6 Comments
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
Free money is free money.
Max out all available employer match.
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Sounds like you are asking about a framework for what to do with money.
Start with reviewing the Prime Directive in the PF Wiki. It will answer your question and many other questions you didn’t realize you should be asking.
* https://www.reddit.com//r/personalfinance/wiki/commontopics
I would put in all required, if possible, to get free money. It’s like a guaranteed return on your investment
Ideal scenario is to contribute whatever it takes to max out the company contribution.
If you’re not at 15% of gross saved, then contribute to an IRA until max contribution ($7,500 or $8,600 if 50+).
If you’re still not at 15% of gross saved, then continue with your 401(k) until you reach that point.
I would contribute the IRS maximum to the 401(k). The IRS max doesn’t include company contributions.
Only after that would I contribute to an IRA.
There’s a great article (as well as book) that gives you a great heirarchy of “what order to invest” or “what to do with your next free dollar”. Search for “Financial Order of Operations”.
Thats an instant 20% boost compared to putting it somewere else.