Im 22 and ive just hit 30k for my emergency fund, i dont want to keep adding to it as im satisfied with the amount. I plan on maxing my Roth IRA by the end of the year and also have been contributing 6% of my paycheck to get my employer match. My monthly expenses come out to about 1.8k a month with a take home of 5.7k. Should I look to max out my traditional 401k? I’m not sure what I’d do next because I don’t have any big purchases I need to save for that would be coming up.
Posted by Flimsy_Cup_1632
3 Comments
Read the prime directive.
Emergency fund should be around 6months expenses. So how much that actually is, is up to you. Without providing details, we can’t say if 30k is too much or too little.
Maxing the Roth IRA is great.
For the 401k, you can absolutely put in as much as you like to try and max.
Also keep in mind, it depends on your income. If you’re in a lower tax bracket, it doesn’t make as much sense to max a Traditional 401k as the deduction won’t be as beneficial. If you’re in a higher bracket, then it makes much more sense.
So if you’re lower, it could make sense to split some into a Roth 401k too, if available.
But you’re also young, so its good to keep money for current expenses and just… life. You don’t need to invest 100% of what you make.
You can keep some in a taxable brokerage so its invested, but easier to access without penalty. Also an option.
And all those accounts should ideally be total market index funds.
You’re killing it at 22. One simple next step: gradually bump that 401k from 6% to, say, 10, 15% and see if your lifestyle feels fine, then adjust from there.