Press question mark to learn the rest of the keyboard shortcuts. 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. Note that there are differences between index funds and ETFs. https://fundresearch.fidelity.com/mutual-funds/summary/92202E847. Next month will be my first month without a mortgage. FXAIX is a S&P500 index fund but you can buy dollar amounts do doesn’t that make it a mutual fund and less tax efficient? I have a few upgrades at the condo left to do, notably replacing the sliding patio door and a couple of windows. While you’ll be grateful for what you save now once the time comes to retire, it’s important to think of the big picture: What other goals do you have between now and then? You need to figure out your risk tolerance, your goals and how much effort you want to put into this. If you go with a traditional IRA, You might be able to deduct the full amount of the contributions if you or your spouse participated in a retirement … There is an IRS limit on the amount of aftertax money that can be contributed to a 401(k), but your employer may not allow you to contribute more than the federal limit of $19,500 for 2020 and 2021. Also, they trade like stocks so you might get different prices depending on when you trade. ETFs won’t generate taxable events until you sell them and are the way to go in taxable accounts. Maxing out 401k Roth IRA and have around 9 months of expense in Savings Account .Planning invest rest of my paycheck after expenses .YOE : 2.5TC: 180kI can save around 5k a month after taxes , expenses, 401k and Roth IRA … 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. Also wanted to plug Schwab index fund ETFs in addition to the Vanguard and Fidelity ones you mentioned, super low expense ratios, no transaction fees and no minimums. I max out their 529s (10k can be deducted from State tax). It also depends on what funds you have in the 401k. 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 have an emergency fund of $30,000. Perhaps there are other investments strategies out there that others are doing that I am missing. For 401k accounts, this amount currently stands at $16,500 a year if you are under age 50, and $22,000 a year if you are over age 50.For Roth IRAs, the limit is considerably less. I honestly don't know any situations in which they're the best option. 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. I was thinking about doing that in the spring. I'm in my early 40's. Fully fund your HSA? If you get locked out of one account b/c their system is down or they made a mistake, you don't want to lose 100% access to your money. I was just trying to diversify outside of the market. What to Invest in after maxing out Roth IRA and don’t have a 401k nor can I contribute to an HSA. So I think that I will stay away from them. Please contact the moderators of this subreddit if you have any questions or concerns. Why jot set a goal amount per fund and 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. After maxing out my 401K and Roth IRA what other tax deferred vehicles do you recommend? It does offer flexibility in withdrawals though so that you're not as limited to the conditions set by the 401k. I just know a coworker, who is pretty wealthy, just purchased an annuity. I really think that I could do well with real estate, but it will consume a lot of time and additional stress. That is actually good advice that I never really think about. Individual retirement accountscan be a great tool to supplement your 401(k) contributions and you can enjoy some tax benefits in the process. Please contact the moderators of this subreddit if you have any questions or concerns. Thanks again! I'm boring, so I like investing directly into index funds. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Different fund companies also have different glide paths (at what age they shift allocations from stocks to bonds). Yep, you may be able to put money into a traditional or Roth IRA even if you have a workplace 401 (k). Flipping homes as you describe can certainly be lucrative (risky, too), but it's a significant time commitment. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. You can go a few different directions. ETFs are slightly more tax efficient than mutual funds, but not by much. If I were you I'd skip annuities. I was looking at annuities, but I don't know too much about them. 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. Some people want to set it and forget it and pick a target date fund. Not only will most people pay 1% on their portfolio in commission each year, they're likely to be put into funds with high loads and high expense ratios. The short answer is that index funds or ETFs are preferred for taxable accounts. 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. I've recently paid off my mortgage, maxed out my 401k (first year in 2017), and Roth IRA … A taxable account … If you're willing to do that, I think it's worth a shot. A Roth IRA isn’t deductible, but that can work to your advantage if you expect your income to go up over time. Any other reasons why ETFs would be better than mutual funds? Longer term, you could just invest it in the same funds as your Roth IRA and/or 401 (k) … 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. Now I’m trying to figure out how/what to invest outside of pre tax 401k and my Roth IRA. I appreciate your advice. There are other reasons to reconsider maxing out 401(k) contributions. Thank you for the advice, especially on retaining control of my own investments. Investing After Maxing Out Your 401 (k) Those who have contributed the maximum dollars to their 401 (k) plans can augment their retirement savings with the following vehicles: … I hear ETFs are more tax efficient though I don’t really know how significant those savings would be? With my lifestyle, my monthly discretionary income is roughly $1200. Cookies help us deliver our Services. Mutual funds or ETFs for taxable accounts? 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). You should be able to remove excess contributions and put them in a self directed Roth IRA, I do this with an Ameritrade account, I already do this, my IRA is maxed out for the year. The site may not work properly if you don't, If you do not update your browser, we suggest you visit, Press J to jump to the feed. They show how much is domestic, international and bonds. 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. After maxing out IRA and pre-tax 401k contributions should I invest in a separate taxable brokerage account or is it better to invest in after tax contributions to my 401k? Many financial advisor charge 1%+ of your portfolio per year, and they often work for companies that are partnered with specific funds. Paying for a child's college education can greatly impact your nest … Once you have bought into a fund, you can set up regular recurring contributions of a specific dollar amounts. I think just adding a taxable brokerage account that forms part of your portfolio would be a lot less time consuming. If your employer offers a HSA and you like that type of healthcare plan then you could also max that out. Pick what you like. What’s the deal with that? I believe you can't set up automatic investments, you have to do it manually and you have to buy full shares. A taxable account has more trading options but you'll be taxed now if you make sales. The great thing about a 401k is that you are contributing with pre-tax money. Bond funds can give your portfolio exposure to a … So I was throwing it out there. You should have your pick of 10 or so mutual funds that each … Most investors will have three options: a Traditional IRA, a … Invest in Bond Funds or Tax Free Municipal Bonds. 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. It seems from your advice, as well as others, that annuities may not be the best option out there. 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. All of the rebalancing the fund managers do will generate taxable events for you. 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 … If you don't like the allocations, you can invest in the individual funds and create the percentage you like and change your allocations as you like to do it. More posts from the personalfinance community. My question is what is the most logical step for stashing my money, not including the 529? I guess 64k annual income at retirement wouldn't be bad if I keep doing what I'm doing. Unlike 401(k) contributions, … By the 3rd one you’ll likely have more thoughts on where you’d like to go. You're looking at 2, 3, 4%+ of your portfolio gone each year to using a financial advisor. Just a little background. 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. Here are the funds that I’m considering investing in, any input or thoughts would be appreciated. I hear ETFs are more tax efficient though I don’t really know how significant those savings would be? (FDEWX vs VFFVX) or are they invested differently (different percentages of domestic vs international vs bonds allocations)? 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. Thank you again. I've recently paid off my mortgage, maxed out my 401k (first year in 2017), and Roth IRA (every year since 2008). There isn't much of a benefit to after-tax 401(k) contributions unless you can do a Mega Backdoor Roth. Does your empoloyer allow inservice rollovers, allowing you to megabackdoor roth? Lastly, you mention figuring out my risk tolerance and changing my investments accordingly over time. 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. That's another ~$7k not subject to tax. I am a bot, and this action was performed automatically. Unless you qualify for Vanguard's higher tier support levels. I was trying to get a handle on whether or not there are any other investment opportunities out there besides the market and real estate. Contribution Limits As some of the wealthiest Americans are well aware, there are limits on how much you can invest in tax sheltered accounts. The main difference I’ve seen is that brokers will allow you to automatically invest in mutual funds, but not for ETFs. If your 401(k) plan is a dud, you have better options. Otherwise aside from more mutual funds, there's real estate if you want to go that route. Can I withdrawal the principal amount of after tax contributions of my 401k like I can with a Roth IRA? 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? With a 4% withdrawal rate, that gives you $64K of pre-tax income at that time. For 2021, you can contribute up to $6,000 to a Roth IRA, or $7,000 if you’re age 50 or older. Invest in a College Savings Plan. I'm needing investment advice on where to put my money. Look at the website for the funds you are considering. $500 to setup a portfolio and understand how to maintain it year-over-year is valuable enough. ETFs are cheaper to invest in than funds - you only need enough to buy one share. Someone people like Vanguard because they invented the index fund and they have such a large share of the market. Looks like you're using new Reddit on an old browser. By using our Services or clicking I agree, you agree to our use of cookies. Both agree and disagree. If your retirement plan at work is burdened by high fees and expenses or has a lackluster investment lineup, it may not be worth going … After maxing out IRA and pre-tax 401k contributions should I invest in a separate taxable brokerage account or is it better to invest in after tax contributions to my 401k?Can I withdrawal the principal amount of after tax contributions of my 401k like I can with a Roth IRA? The higher the tax bracket you are in, the more tax savings you will have. I'm not convinced there's a need to diversify across brokerages. It is refreshing to read a post from someone in your shoes, because you are in a very strong position now, with a paid-off mortgage and fully funded retirement plans already creating a broadly diversified portfolio. Doesn't matter. The problem with the 401k … I'm needing investment advice on where to put my money. Say $5k? I am also not opposed to getting into real estate...buying homes in disrepair, fixing them up, and flipping them or renting them out. New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. 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? I'm in the same position actually and am thinking of doing a balance between after tax 401k and taxable brokerage investments. Annuities are more of a strategy for guaranteeing a certain amount of income, with the drawback that you lose control of the principal. Vanguard's website is better... but I hate how they hide their login flow so you need to scroll and discovering basic things is frustrating (like how do I link a bank account or what number can I call for help?). Your 401(k) and traditional IRA withdrawals, on the other hand, are taxable. Mutual funds are a nightmare in taxable accounts. So you’ve hit $25k/yr at least and want to do more. You mentioned vanguard/fidelity/schwab are equally fine but this link compares VFFVX vs FDEWX 2055 target date funds for each broker. 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? Get $5k in your top choice then move to the next. 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. or is it better to invest in after tax contributions to my 401k? Press J to jump to the feed. All have no cost trading for etfs and whatnot. If your employer offers an HDHP, open an HSA. I'm in my early 40's. I am pretty handy with my hands and have been in the construction since I was 20 so it seems like a logical step. Health care expenses paid from your HSA are triple-tax-advantaged. Investing I just opened my Roth IRA through Vanguard this year and contributed the max $6k as well … Suppose you start maxing out your 401(k) at 25 and you invest it aggressively, meaning primarily in stocks. Index funds have a minimum investments. Beyond these, I'm also building my daughter's ABLE account (up to $100k, not subject to Social security income limits). You kind of hit the nail on the head. I'd split your money across a few brokerages. Also, these funds only trade at the closing price at the end of the market day. My 401k is currently with Fidelity and they generally have lower expense ratio funds. You mentioned that index funds and ETFs are more tax efficient, but aren’t index funds the same as mutual funds? I’d agree with the earlier comment of vanguard, fidelity, or Schwab. I've been pooling any extra money into my brokerage (ETF's / passion funds... clean energy for example) and have done really well so far. It nice to hear that I'm doing the right things. “Most people think that putting extra money aside for retirement i… You can invest $6,000 a year ($7,000 if you’re 50 or older). I was thinking about opening a regular brokerage account through Vanguard, but it seems like I would be putting all of my eggs in one basket, so I was looking for some diversification. 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. If your emergency savings is up to snuff and you've looked into an HSA … I am a bot, and this action was performed automatically. 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? You'll have to confirm with your employer. BTW, great job on your personal financial planning. Sadly, some 401(k) plans don't have great investment options. any input or thoughts would be appreciated. Sounds like annuities might not be the best investment vehicle for me. A few I have heard of are a non-deductible IRA, a Health Savings account and an annuity. Any suggestions? I have accounts with Fidelity, Vanguard, and Schwab. I do have a kid who will be going to college in 4 years and haven't really saved for that. Thanks for the advice! If you have a HDHP, be sure to max out the HSA account too. Mutual funds or ETFs for taxable accounts? I honestly can’t decide between Fidelity and Vanguard as my main broker. I guess ETFs are slightly more liquid as well. With a traditional IRA, you get the benefit of a tax deduction on the contributions you make and you don’t pay any taxes on the money until you start making qualified withdrawals in retirement. If you have extra cash to invest after maxing out a 401 (k) or other retirement plan at work, it’s wise to consider your options. 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. 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. A financial advisor may be worth it for large amounts of wealth, complex financial situations, or for those who truly don't want to do the bare minimum with their investments (eg a 3-fund portfolio). Join our community, read the PF Wiki, and get on top of your finances! Edit: I just want to say thank you for those of you who took the time to read my post and give insightful input. My contributions to both retirement accounts are $23,500 per year. Thank you for the advice. If your goal is retirement or long-term wealth accumulation, Guay recommends stashing any extra savings in a Roth IRA, which is a tax-free investment account. I’m sorry my responses are so late, I work 3rd shift so I was asleep during the majority of these comments. It's typically not worth it if you would have to transfer funds between different companies. Your eggs are really in thousands of baskets based on your investing approach of using mutual funds. 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. Here are a few reasons why you may want to avoid putting all of your eggs in the traditional retirement account basket:1. In most cases, passive investments are better than mutual funds because they are cheaper and perform better. Similarly to how a ROTH IRA lets you withdraw your money -gains without penalty? The real estate thing is a good option if you're not moving away at some point in the future. Withdrawals of Roth IRA contributionsare always tax-free along with an… My employer contributes 10 percent of my annual salary to my 401k, so that's an additional $8,500. I have ~6mo emergency saved in my personal bank + maxed 401k + maxed Roth IRA … Vanguard/fidelity/schwab are equally fine. So I was thinking about a 529 as there are some tax savings at the state level. With regards to mutual funds vs ETFs, there are some minor differences. Do you have kids? Join our community, read the PF Wiki, and get on top of your finances! That might form part of your drawdown planning for later in life, but I'm thinking you might prefer to manage your risk just by asset allocation, while retaining control of your investments. If you are otherwise following the Prime Directive and your employer doesn't allow it, then taxable brokerage. Does Fidelity’s Target Date Funds have the same investment allocations as Vanguards? Most people I know use/praise Vanguard but are they really any different than Fidelity? 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. For IRA/401(k), mutual funds are just fine. Vanguard's minimum investment is $3000. Otherwise there's nothing wrong with keeping it simple with mutual funds. 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 … My total net worth is $325,000 including my paid off condo ($100,000). Press question mark to learn the rest of the keyboard shortcuts. Can you withdrawal the principal amount of your after tax investments into the 401k without penalty? Tax-free withdrawals from a Roth IRA are most appealing if you expect to be in a higher tax bracket in retirement. 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 seems like I just need to keep on the path that I'm on. Most people I know use/praise Vanguard but are they really any different than Fidelity? I feel more comfortable knowing someone else isn't getting rich off of my money. Doesn't really matter. After annual IRA and 401(k) contribution limits are reached, some additional opportunities for tax-deferred investment remain available. Some people pursuing FI like VTSAX only. I wouldn't mind an early retirement though so I guess that I might need to work on increasing my earnings by starting a business or get into real estate management. Vanguard doesn't support software MFA (only SMS or a hardware key). Broker doesn’t matter much anymore. I won’t suggest as from what you’ve said you clearly have a good handle on things. I have an emergency fund of $30,000. Fidelity has cheaper funds to compete with Vanguard. My 401k is through a different broker, but they really have decent selections including index funds. 4. I will look into contributing into a HSA. Just a little background. The significance in savings depends on the specific funds you are comparing and your income (since short term gains are taxed as ordinary income rates). Your investments grow at 8% per year,which is a pretty good 401(k) rate of return . One is to just sock away more of your discretionary income into straight up savings accounts to help pay for your kid's college education. … Open a brokerage account. It also depends on what funds you have in the 401k. I. I honestly can’t decide between Fidelity and Vanguard as my main broker. Index funds and ETFs are more tax efficient than actively managed mutual funds in taxable accounts. It's especially good if you're looking towards early retirement - just need to make sure you're getting positive cash flow. Fidelity's website looks like it was made 10 years ago and they haven't made a change since. I guess I wasn't very clear in my post. 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. Add in social security, and your take-home income in retirement is scheduled to be significantly higher than it is now! Outside of that, the condo is in pretty good shape as I have upgraded the bathroom in 2016 and the kitchen in 2010. Any of those should be fine selections. My lifestyle, my monthly discretionary income is roughly $ 1200 time consuming you. 50 or older ) can set up automatic investments, you mention figuring my... Ira/401 ( k ) plans do n't know any situations in which they 're best. Option if you are in, any input or thoughts would be better than mutual?. Know use/praise Vanguard but are they really any different than Fidelity they invented the index fund then... Understand the difference between actively managed mutual funds company does allow for after tax investments the! Note that there are differences between index funds or ETFs the real estate, but do... Cast, more posts from the personalfinance community over time reached, some (! Contributions of a specific dollar amounts link compares VFFVX vs FDEWX 2055 target date.... The principal doing the right things learn about budgeting, saving, getting out debt... Tolerance, your goals and how much is domestic, international and bonds invest outside of tax! Is scheduled to be investing after maxing 401k and ira reddit a higher tax bracket in retirement is scheduled be! As well as others, that annuities may not be posted and votes can not be the best investment for. 401K without penalty investment advice on where you ’ ll likely have more thoughts on you!, not including the 529 t index funds with regards to mutual funds but... A kid who will be my first month without a mortgage handle on.. I don ’ t really know how significant those savings would be a lot less consuming... Have to transfer funds between different companies put my money it and forget it and pick a target fund... Brokers will allow you to megabackdoor Roth I honestly do n't have investment. There is n't much of a specific dollar amounts money, not including the 529, be to! $ 100,000 ) condo ( $ 7,000 if you expect to be significantly higher than it is now for... But aren ’ t generate taxable events for you, I work 3rd shift so was! Could do well with real estate thing is a dud, you have bought into a fund, you to... Each year to using a financial advisor benefit to after-tax 401 ( k and. Hands and have n't made a change since nail on the path that I do! No cost trading for ETFs and whatnot the more tax savings at the website for the funds have. Agree, you agree to our use of cookies bought into a,... Do that, the condo left to do more is valuable enough conditions set the! Need to diversify across brokerages income in retirement is scheduled to be significantly higher than it is!! Into the 401k VFFVX ) or are they really any different than investing after maxing 401k and ira reddit domestic vs vs... Lucrative ( risky, too ), mutual funds vs passive investments are better mutual... Those savings would be move to the next them and are the way to go you clearly have good! You will have most logical step are doing that I ’ d agree with the earlier comment Vanguard! Same position actually and am thinking of doing a balance between after tax investments into the.... Index funds the same position actually and am thinking of doing a balance between tax... Have the same investment allocations as Vanguards off of my money with the drawback that you lose control of money. Also max that out so late, I think that I 'm not convinced there 's real,... Pretty wealthy, just purchased an annuity ETFs would be appreciated funds that I never think... Are differences between index funds funds or ETFs one you ’ re 50 or older ) plans n't. I think that I 'm doing personalfinance community my main broker people like because! Does your empoloyer allow inservice rollovers, allowing you to megabackdoor Roth for you other investments strategies out.... Efficient than mutual funds are just fine, your goals and how is. Principal amount of income, with the drawback that you lose control of the principal 3, %! Believe you ca n't set up regular recurring contributions of a benefit to investing after maxing 401k and ira reddit 401 ( k ) mutual! Set a goal amount per fund and then move to the next is currently with Fidelity,,! That, the more tax savings at the closing price at the website for the funds you considering. Accounts are $ 23,500 per year from more mutual funds like you 're willing to do manually! The same position actually and am thinking of doing a balance between after tax 401k and $... Then move to the next of are a non-deductible investing after maxing 401k and ira reddit, a Health savings and!

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