Here's another item on Money magazine's list of 25 rules to grow rich by. This time we'll be sharing their thoughts on where to put your retirement savings:
All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
Good, basic advice, and I agree with it 100%. And I use it myself.
I end up maxing out my 401k and still contribute to a non-deductible IRA as well. I'm trying to get as much money away from taxes as possible. I figure that 25 or so years of not paying taxes on the gains is something that's worth an awful lot. ;-)
For more thoughts on saving for retirement, see Best of Free Money Finance: Retirement Posts.
I agree. I love my 401(k). The best part is that I can tinker with the allocation online.
Posted by: John Wilks | November 08, 2006 at 09:11 AM
Curious what your thoughts are on Roth 401(k)s. If your company offered a Roth 401(k), would you just fund it to the max right off the bat, and if you exceeded that start up a Roth IRA?
Posted by: Wendy | November 08, 2006 at 12:05 PM
For the next 3 years or so I will have the problem (don't hate me) of making too much money to use most retirement vehicles (probably have an AGI of around 180K a year, I am married to a stay at home mom). After this project ends, I will most likely go back to my normal salary of less than half of that (both the opportunity will likely end and the extremely high hours will make me ready for a change).
Giving the short-term nature of this, I have not increased my standard of living (I realize that would just lead to disaster after this project ends) and so just want to use this as an opportunity to create a nice nest egg that will have another 20 years to grow and hopefully lead to an earlier and more secure retirement. The problem is I no longer have the options available to me to do this that I am used to. My 401K does not match, and I am an HCE that can only contribute 4% of my weekly pay to it. I do not qualify for an IRA. I have a HSA since I have to provide my own health insurance anyway and that seemed a good way to lower the tax bite even before this new job. So that leaves me with a $8K 401K contribution and a $5K HSA contribution for a total of $13K tax advantanged savings. What should I do with the other $60K/year I should be able to save after taxes other than just invest in non-retirement account index funds as I have started doing? Any help is much appreciated, I've never been in the position of making too much before and don't want to blow this opportunity.
Posted by: Strick | June 11, 2008 at 09:11 AM
Strick --
I'll post your comment in a couple weeks. Check back to see what readers suggest.
Posted by: FMF | June 11, 2008 at 11:06 AM
Thanks much FMF, I've already learned so much from your site since I discovered it last year.
Posted by: Strick | June 11, 2008 at 12:21 PM