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Hi Blinders, personal finance newbie here. College didn’t teach us well with this lol Putting 15% into Roth + 10% into 401K, company does 7% match. Is that the right move? Using Fidelity. How should I do the 401K play? Currently 100% in Blended Investment (Fidelity Freedom Index 2060 Fund- Investor Class) by default. TC—$120K (sales, so it fluctuates, recently got to $10K/month) YoE—6 months Edit: 15% to Roth to make up for the first couple month of 2021 since I didn’t have any due to low income Really need help with 401 K funds selection, thanks much guys
Rich you shall be, my young padawan.
Roth has some annual contribution limits to work around. You can do backdoor/mega backdoor to get around this, probably.
While you figure things out, at least move your money out of that nonsense target date fund and put into an sp500 type index fund
Open a BrokerageLink account with Fidelity to get more fund options.
Do Roth 401k (the one you put money after you are taxed instead of regular 401k which is pretax). Your TC is quite low at the early stages of life so make use of lower tax bracket and do only the after tax Roth 401k. Any income made from these are tax free. I personally would suggest doing this till you make double your TC and/or marry. Max out annual contribution limit $19,500?(if that’s too much, do the minimum to get max employer match). Back door Roth is too early for you. Enroll in ESPP with max contribution if that’s possible. If you still got funds left over, look at investing on stocks or do index funds. But do your research. Roth back door is only if you have like more than $20k spare to save for retirement.
Appreciate the detailed explanation PTC How do I get access to Roth 401K? Does the employer have to offer it? Or Fidelity? In the change contribution section there’s only 401K and Roth :/ Maybe I’m dumb 😂 is Roth and Roth 401K the same thing?
Usually when someone says Roth it means Roth back door. Roth 401k is not the same as Roth back door. Roth 401k is offered as part of your retirement plan(I am sure your employer has this). You need to change your contribution % from traditional 401k to Roth 401k in fidelity and usually takes effect in 1 week for your paycheck to reflect the change. Please look around your fidelity contribution and see if you can manage the contribution. Watch some YouTube videos on investing Roth 401k vs traditional 401k, it will help you understand the system better. Keep in mind if you try and take money early there is a huge penalty in all 401k accounts. Now for the Roth - this means after tax and after you reach the annual contribution limit. Then you choose to put more funds into retirement account which is called Roth back door and can do a total of $55k? Like mentioned earlier, too soon for you. Get to 250k TC and even then you probably get better returns if you invest in stocks or real estate because this plan offers no tax benefits, just excess funds to sitting in an account untouched for 30+ years.
definitely agree with maxing out pre-tax employee matches first - this is free money! I also wanted to say AWESOME work for looking into this now. your future self will thank you! for 401k funds, look into the best ROI with least fees - also your employer will have different funds from everyone else. I am in the standard 2055 retirement target date fund - i'm fine with it for now. With that said,I follow a few diff things philosophies: 1) Mr money mustache forum: http://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 2) bogleheads investing order of operations, which starts with tax privileged retirement accounts: https://www.bogleheads.org/wiki/Prioritizing_investments 3) I generally consider and weigh long term tax advantaged accounts with compounding interest vs opportunity cost of cash on hand. 4) I use Wealthfront as a roboinvestor. (competitors are betterment, personal capital, citizens bank, etc.) 5) http://discord.gg/rdGNaa2AzD is a pretty good chat room, I've enjoyed it a lot - it's mostly techies and some others focused on financial independence, personal finance, investing, etc. I think having a peer group you trust and you can work with is really helpful. 6) look into FIRE philosophies. Mr. Money mustache is a great one to start off.
You can't put 15% into roth, I believe yearly max is like 6 or 7k I would do 401k up to match Then max out roth Then save the rest for house downpayment
Absolutely, doing 15% to make up the first couple month. I only made $5K and couldn’t save till now lol GS how exactly does backdoor work?