32 years old currently here’s my breakdown:
I currently am putting 11% into my 401k which has 160k in 9 years. My company is only matching half a percent up to 3 percent for my 401k
I also have had an individual brokerage account with vanguard since 2019. I wasn’t super consistent with contributing the first 3 years but I’ve been putting money in weekly consistently for at least 4 years now and it is sitting at 54.6k investing in VWUAX. I put $75 per week into this account. I’ve gained 20.7k and have a 12.6% rate of return.
Here’s what I want to change:
Recently I’ve been getting the urge to lower my 401k down to 6% so I still make full use of the company match and then open up a Roth IRA with vanguard and invest in VOO or one of the other popular index funds and riding that out.
Is this a good idea? Should I just stick to what I’ve got going on? Is there another better option?
Getting the itch to change how I’m investing I need some advice
byu/SnooCalculations4033 inpersonalfinance
Posted by SnooCalculations4033
4 Comments
I would redirect the money going into the taxable brokerage account into the IRA instead as a first measure. If you do that, does that allow you to max the IRA and keep your 401k contributions as is?
The financial order of operations goes like this:
1. Contribute to your company retirement plan up to the match
2. Max out your HSA if available
3. Max out your IRA
4. Max out your company retirement plan
5. Contribute to a taxable brokerage account
I would stop contributing to the taxable brokerage and redirect so you are following the financial order of operations.
Yes plan on maxing out your Roth IRA after you get your company match on your 401k.
I would suggest reallocating your $75/week into your Roth IRA instead of your brokerage. I think it’s worth potentially using some proceeds from your brokerage account to fully fund the remaining amount.
I do think opening a Roth IRA makes sense if you qualify for it income-wise, but I personally would be careful about cutting retirement contributions too aggressively just to chase a different account type. You could even split the difference and slowly fund the Roth while keeping the 401k fairly strong.