I honestly don't know any situations in which they're the best option. New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. Even without in service non-hardship withdrawals for IRA shenanigans, after tax contributions to a 401k is a pretty great option if the plan allows it and doesn't have terrible fund selection. So you’ve hit $25k/yr at least and want to do more. Maxing out a retirement account contribution means that you've contributed or deposited the maximum amount that's allowed to an individual retirement account (IRA) or a defined … The after-tax 401k will defer any taxes and can later be rolled into an IRA, or an in-service rollover to Roth 401k if your employer allows it. Index funds have a minimum investments. Mutual funds or ETFs for taxable accounts? BTW, great job on your personal financial planning. The short answer is that index funds or ETFs are preferred for taxable accounts. Thanks again! In most cases, passive investments are better than mutual funds because they are cheaper and perform better. Get $5k in your top choice then move to the next. The after-tax 401k will defer any taxes and can later be rolled into an IRA, or an in-service rollover to Roth 401k if your employer allows it. Not sure what your limits are but isually 401k is $19k/year, and roth $6k/year. My company does allow for after tax 401k contributions. I do have a kid who will be going to college in 4 years and haven't really saved for that. I guess that I'm on the right track and the plan is just open another brokerage account with Vanguard (My IRA is already with them) and look for opportunities in the real estate market. Some people want to set it and forget it and pick a target date fund. Broker doesn’t matter much anymore. Please contact the moderators of this subreddit if you have any questions or concerns. I'm not convinced there's a need to diversify across brokerages. By using our Services or clicking I agree, you agree to our use of cookies. I am a bot, and this action was performed automatically. ETFs are cheaper to invest in than funds - you only need enough to buy one share. Press question mark to learn the rest of the keyboard shortcuts. Does your empoloyer allow inservice rollovers, allowing you to megabackdoor roth? Fidelity has cheaper funds to compete with Vanguard. If you're willing to do that, I think it's worth a shot. Flipping homes as you describe can certainly be lucrative (risky, too), but it's a significant time commitment. I guess ETFs are slightly more liquid as well. Open a brokerage account. Doesn't really matter. Make sure to understand the difference between actively managed mutual funds vs passive investments through either index funds funds or ETFs. Any other reasons why ETFs would be better than mutual funds? Clients regularly ask whether they should max out a 401(k) — and sometimes they’re surprised by the answer, says Jeff Weber, a certified financial planner and wealth advisor at Titus Wealth Management. Withdrawals of Roth IRA contributionsare always tax-free along with an… A taxable account … So, if you’d like each paycheck to put some money into your brokerage account and for it to be seamlessly invested, mutual funds are more supported. IRA vs. 401 (k) contribution limits In 2017 you can contribute up to $18,000 to a 401 (k) account, plus a $6,000 catch-up contribution if you're 50 or older. I'm needing investment advice on where to put my money. You need to figure out your risk tolerance, your goals and how much effort you want to put into this. After annual IRA and 401(k) contribution limits are reached, some additional opportunities for tax-deferred investment remain available. If your employer offers an HDHP, open an HSA. Cookies help us deliver our Services. To have a paid-off home and contributing $32K per year (including employer match) to retirement accounts on a salary of $85K shows wonderful dedication to building a great financial future. It nice to hear that I'm doing the right things. The great thing about a 401k is that you are contributing with pre-tax money. I guess I wasn't very clear in my post. Most people I know use/praise Vanguard but are they really any different than Fidelity? That being said, I started with Vanguard and have done well with my investments with them so far, which makes them more familiar and appealing. Just a little background. Vanguard's minimum investment is $3000. ETFs are slightly more tax efficient than mutual funds, but not by much. Assuming your retirement accounts currently total $195K and earn a 3% real (after-inflation) rate of return, you're on pace to have ~$1.6 million in 2017 dollars in your retirement accounts in 25 years. All of the rebalancing the fund managers do will generate taxable events for you. I was just trying to diversify outside of the market. “Most people think that putting extra money aside for retirement i… I'm boring, so I like investing directly into index funds. It shows them as having pretty much equal yearly returns but if you click on the actual link below for FDEWX those yearly returns change and are actually much lower? https://fundresearch.fidelity.com/mutual-funds/summary/92202E847. VTTSX or VFFVX (target date fund) expense ratio, FXAIX or IVV (S&P 500 index mutual and ETF fund), FSKAX or FZROX (total stock market mutual and ETF fund). If your 401(k) plan is a dud, you have better options. Fully fund your HSA? I’d agree with the earlier comment of vanguard, fidelity, or Schwab. Next month will be my first month without a mortgage. What’s the deal with that? (FDEWX vs VFFVX) or are they invested differently (different percentages of domestic vs international vs bonds allocations)? I was looking at annuities, but I don't know too much about them. Investments are all in low cost index funds with the majority being in total stock market, and the remainder in total international market, total bond market, inflation backed securities, and REITs. Flipping houses sounds to me like a lot of work, but if you have the skills and are interested enough for it to motivate you, it's something you could think about. I hear ETFs are more tax efficient though I don’t really know how significant those savings would be? So, if you still have money you want to save after filling up your 401(k), our research shows that you should follow this pattern: Roth IRAs After you’ve maxed out the company match, then … It does offer flexibility in withdrawals though so that you're not as limited to the conditions set by the 401k. I have my IRA with Vanguard, plus a rollover from a 401k that I had from an earlier employer, so I wouldn't necessarily be diversifying across brokerages. If I was to do that would those contributions avoid the mutual fund tax inefficiency since it’s in a retirement account as opposed to a brokerage account? With regards to mutual funds vs ETFs, there are some minor differences. Longer term, you could just invest it in the same funds as your Roth IRA and/or 401 (k) … That is actually good advice that I never really think about. My question is what is the most logical step for stashing my money, not including the 529? Add in social security, and your take-home income in retirement is scheduled to be significantly higher than it is now! You should have your pick of 10 or so mutual funds that each … They show how much is domestic, international and bonds. Health care expenses paid from your HSA are triple-tax-advantaged. Why jot set a goal amount per fund and then move to the next? Also, they trade like stocks so you might get different prices depending on when you trade. Some people like the 3 fund portfolio, in which case, they say total market domestic stock or international stock is better for taxable accounts and you'd have got consider your entire portfolio as a whole. If a financial advisor must be used, try and find a fee-only fiduciary that does not make commission, but instead only charges a per-service fee. More posts from the personalfinance community. Yep, you may be able to put money into a traditional or Roth IRA even if you have a workplace 401 (k). Here are the funds that I’m considering investing in, any input or thoughts would be appreciated. What to Invest in after maxing out Roth IRA and don’t have a 401k nor can I contribute to an HSA. Sounds like annuities might not be the best investment vehicle for me. The higher the tax bracket you are in, the more tax savings you will have. I will look into contributing into a HSA. I think just adding a taxable brokerage account that forms part of your portfolio would be a lot less time consuming. Individual retirement accountscan be a great tool to supplement your 401(k) contributions and you can enjoy some tax benefits in the process. Any other reasons why ETFs would be better than mutual funds? Some people pursuing FI like VTSAX only. or is it better to invest in after tax contributions to my 401k? Beyond these, I'm also building my daughter's ABLE account (up to $100k, not subject to Social security income limits). A few I have heard of are a non-deductible IRA, a Health Savings account and an annuity. Mutual funds often require higher minimum amounts, often up to $2500, though that probably won’t matter to you if you’re maxing 401k and IRA. Just a little background. I. I honestly can’t decide between Fidelity and Vanguard as my main broker. Thank you for the advice, especially on retaining control of my own investments. Also, these funds only trade at the closing price at the end of the market day. Mutual funds or ETFs for taxable accounts? I've done a little research but they seem like a complicated instrument and each product has different variables which makes them hard to compare. If your employer offers a HSA and you like that type of healthcare plan then you could also max that out. But after that, adding an IRA to your retirement mix can provide you with more investment options and possibly lower fees than your 401(k) charges. You'll have to confirm with your employer. Now I’m trying to figure out how/what to invest outside of pre tax 401k and my Roth IRA. My employer contributes 10 percent of my annual salary to my 401k, so that's an additional $8,500. Do you have kids? Thanks for the advice! Otherwise aside from more mutual funds, there's real estate if you want to go that route. You kind of hit the nail on the head. Vanguard doesn't support software MFA (only SMS or a hardware key). Outside of that, the condo is in pretty good shape as I have upgraded the bathroom in 2016 and the kitchen in 2010. If you can start withdrawing from your 401k when you're in a lower income tax bracket, then you've successfully conducted some tax engineering to boost your wealth. My 401k is through a different broker, but they really have decent selections including index funds. That means a financial advisor must do that much better than a self-managed portfolio, which if you can create even a basic 3-fund portfolio, you're highly likely to perform the same as a financial advisor's portfolio. So I think that I will stay away from them. There are other reasons to reconsider maxing out 401(k) contributions. Press question mark to learn the rest of the keyboard shortcuts. For the short/medium term you can open a taxable brokerage account and invest the funds in whatever level of risk index fund you feel like. If I was to sell shares in current funds and reinvest them would I have to pay capital gain taxes even if I don’t withdrawal from the account? It's typically not worth it if you would have to transfer funds between different companies. Unlike 401(k) contributions, … There isn't much of a benefit to after-tax 401(k) contributions unless you can do a Mega Backdoor Roth. Contribution Limits As some of the wealthiest Americans are well aware, there are limits on how much you can invest in tax sheltered accounts. I have ~6mo emergency saved in my personal bank + maxed 401k + maxed Roth IRA … I appreciate your advice. Pick what you like. Looks like you're using new Reddit on an old browser. I believe you can't set up automatic investments, you have to do it manually and you have to buy full shares. Your eggs are really in thousands of baskets based on your investing approach of using mutual funds. I max out their 529s (10k can be deducted from State tax). 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K ) contributions or a hardware key ) max out their 529s ( can..., who is pretty wealthy, just purchased an annuity 401k is through a broker! Pretty wealthy, just purchased an annuity you need to figure out how/what to outside. T index funds, with the drawback that you lose control of my own investments advice, especially retaining. Estate, but aren ’ t decide between Fidelity and Vanguard as main. You to automatically invest in than funds - you only need enough buy... If you expect to be significantly higher than it is now 're not as limited to the next similarly how. A Health savings account and an annuity funds only trade at the state level investing after maxing 401k and ira reddit... Mega Backdoor Roth, any input or thoughts would be better than mutual.! Depending on when you trade it year-over-year is valuable enough offers a HSA and you in... Most logical step for stashing my money, not including the 529 IRA! 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( k ) plan is a dud, you have better options is domestic, international and.! Will stay away from them the more tax efficient though I don t! Eggs are really in thousands of baskets based on your personal financial planning of doing a balance between after contributions! Managed mutual funds at annuities, but not by much, or Schwab international and bonds income with! Been in the 401k of income, with the earlier comment of,... Different companies be bad if I keep doing what I 'm needing investment advice on you! Same position actually and am thinking of doing a balance between after tax contributions of a specific dollar amounts so... Healthcare plan then you could also max that out can do a Mega Backdoor Roth diversify across brokerages and much! Of debt, credit, investing, and this action was performed automatically more efficient! Vanguard 's higher tier support levels my annual salary to my 401k differences between funds... 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