I was told at a job fair by a financial advisor to open a Roth IRA as fast as I could. Is that better to start with over a 401k? What else should I look into or open asap?
If you could explain it to me like I’m 5 that would be much appreciated. Thank you!
I’m 18 and about to start my first job. What should I do?
byu/Turbulent_Turtle_ inpersonalfinance
Posted by Turbulent_Turtle_
13 Comments
First, good for you for even asking this at 18. That alone puts you ahead of a lot of people.
Think of your money in buckets.
Bucket 1 is your checking account. This is where your paycheck goes and where bills come out. Don’t keep all your money here forever, but keep enough so you don’t accidentally overdraft.
Bucket 2 is your emergency fund. This is boring money, but it matters a lot. Open a high-yield savings account and slowly build up at least $1,000 first. After that, work toward 3 to 6 months of basic expenses. This money is for real problems, not fun purchases.
Bucket 3 is retirement money. If your job offers a 401(k) match, start there first. A match means your employer gives you extra money when you contribute. That is free money, so try to contribute enough to get the full match.
After that, a Roth IRA is a great idea, especially at your age. A Roth IRA uses money you already paid taxes on, and then it can grow for decades. When you retire, qualified withdrawals are tax-free. At 18, time is your superpower.
A simple order would be:
1. Avoid credit card debt.
2. Build a small emergency fund.
3. Contribute enough to your 401(k) to get the full employer match, if offered.
4. Open a Roth IRA and invest the money, not just deposit it.
5. Keep building your emergency fund.
6. Increase retirement contributions as your income grows.
The most important part: when you open a Roth IRA, the money does not automatically invest itself. You have to choose an investment inside the account. A broad, low-cost index fund or target-date retirement fund is usually the simple beginner option.
Also, don’t let anyone at a job fair sell you something complicated. You probably do not need whole life insurance, annuities, or expensive financial products right now. You need simple accounts, low fees, and consistency.
At 18, even small amounts matter. If you can invest $25, $50, or $100 per paycheck and leave it alone, future you will be very happy you started.
If your employer had a 401k or similar retirement plan with a match, you’ll want to contribute enough to get that. It’s free money.
Calculate your monthly expenses and then you’ll have to have 3 months of expenses in a savings account for emergency’s.
Then after that I would contribute to a Roth IRA as long as you don’t have any high interest debt.
If your new job offers a 401K with match, pick that. It’s free money! This is how it works: you put in a certain amount of money pre-tax (they do all this for you) and then they match how much you put in! Now you need to decide how much $ you want to put in.
If job has 401k and matches a certain portion of your deposits. Do that with as much as you can comfortably contribute each month.
If job does not have 401k look into roth IRA and contribute to that and find a investment plan you like. i use fidelity for my ira and i follow general r/boglehead advice for investments.
Number 1 save some money on side for emergency fund (car issue, fired, hospital visit, etc) general rule 3-6 month salary is good. Put that in a high yeild savings account if you can. I use wealthfront but do some research.
Good job thinking about this so early. If you stick to it you will thank yourself later.
Tldr: save money for emergencies first, if job contributes to 401k do that if no 401k open roth. Contribute only what you can afford monthly and dont touch anything you put in 401k or roth savings unless it is mega emergency
Two eyes, two ears, one mouth. Use in same ratio.
Get full employer match first, then pay off any high interest debt, then invest in a a Roth IRA.
This guide will be helpful to you.
https://www.bogleheads.org/wiki/Prioritizing_investments
You may not be able to contribute to a 401k until you are 21. Your plan administrator should be able to tell you the specific rules for the plan, but as far as I’m aware, that’s pretty common.
start with a roth IRA if you can, take any 401k match your job offers and just focus on saving a little consistently while avoiding debt.
Yes open the Roth IRA first and max that out. Also contribute to your companies 401K up to the match.
I’ll take a stab a trying to explain…
main difference between:
roth ira: after tax
401k: before tax.
To really compare these you need to know the tax brackets
|10%|$0|$11,925|
|:-|:-|:-|
|12%|$11,926|$48,475|
|22%|$48,476|$103,350|
|24%|$103,351|$197,300|
|32%|$197,301|$250,525|
So we are assuming later on in life you will be making more and needing to pay more taxes.
right now maybe you are in the 10 or 12 range… so if you pay the tax now you are only paying 10 or 12%. Later on when you make more money 22-32 range… maybe you want to put more in 401k because you think once you retire your income will be lower and you pay less tax %. That is my understanding anyways.
but as others have said you need to take employer match and I would also take planned spending like car, school, house into consideration.
oh yeah For 2026, the maximum Roth IRA contribution is **$7,500** for individuals under age 50… if your are getting roth through 401k the limit is $24,500 for 2026.
Oh yeah…. there is a penalty for 401k early withdraw, but there is no penalty for withdrawing the PRINCIPAL of the roth ira… there IS a penalty for the earnings.
GLHF
In a perfect world everyone would start investing as soon as they come out the womb and buy a house 20 years ago at 3% interest… But this is not a perfect world. Some of the advice people give seems a bit out of touch with reality. Lets talk numbers:
First job at 18 likely salary: 15-40k/yr (less if part time student)
Average Cost of life: College 100k, Car – 20k, Living expenses – varies heavily by person
If all of the money you have goes to the expenses life throws at you right now, how much left over can actually go into investments you wont see or touch for decades? Its more practical to plan for life in stages although learning a ton now prepares you immensly.
Step1 Open a checking account to recieve your money. Pick a good bank! This does matter.
Step2 Create a budget that outlines all your income and expenses so you know on average what your net is. Its as simple as +1000 (check) – 20 (bus fare) – 100 (food) etc
Step3 Get a credit card. Your credit is affected by the age of your credit history, starting early gives you an advantage. Use your CC as if its a debit card (never spend what you dont have). Pay statments in full automatically and keep spending minimal. Build credit.
Step4 Look into guarenteed investment/saving options. Savings accounts offer like .01% a year. Get a high yield savings account instead (FDIC insured) and earn 4%/year. When you dont have a lot of money you can’t afford to lose any or lock it away. Before investing in anything risky or locking your money in an investment you cant pull out of for decades first create your emergency fund!
People talk about employee backed 401ks and IRAs like theres 0 risk or like theres 0 opportunity cost to allocating that money to other important life moments. Life will through a bunch of obstacles your way that you cant see coming right now. Before planning for the future when youre 50-65 plan for your now, plan for your 20s. Only after being in a solid place should you start looking into 401ks and IRAs. Of course if you are lucky enough to have all your life expenses paid for by your parents then of course things are different but I feel like everyone who jumps at that advice misses that important caveat. Having rich parents jumps you ahead finacially by decades by starting you off early with a clean slate and free money to invest early on.
I do believe a few hundred bucks saved now could turn into thousands by retirement…so that as a start is a better step.
401K
If you do not invest they do not match.
Again, IF YOU DO NOT INVEST THEY DO NOT MATCH.
Don’t overthink Roth vs Traditional at the start, just contribute something and get the match. If you’re early in your career and expect to earn more later, Roth usually makes sense.