Current Events > Want to start a 401k and/or Roth IRA but are overwhelmed. Simplified tips ITT

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-401k, you sign up through your job and pick from their investment options ( your investment will be taken out of your paycheck pre-tax). ALWAYS pick either the target retirement date fun or Total Stock Market index fund.

-You can completely ignore 90% of all investment options, you'll have people try to convince you to do small caps, real estate funds, gold metal index blah blah blah. You're in the top 5% investors just by picking one of the two options I listed in my first paragraph, if you want to spend significantly more time researching just to try to hit top 4 or 3% more power to you.

-Roth IRA is something you set up that isn't connected to your job, use someone like Vanguard, Schwab, Fidelity. You put money into it manually so post-tax, and you have almost the same exact investment options as a 401K.

-Do the same thing you did before, pick the target retirement date fund or Total Stock Market index. If you use Vanguard for example pick VTSAX, it's Vanguard's specific fund and will have the lowest expense fees.

-Expense fees are the cut your 401k or Roth provider takes, this is another reason why you pick one of the two funds I've recommended as they tend to have the lowest expense fees.

-Finally in terms of which one you should use if you can only afford so much. First priority is checking to see if your company matches any of your 401k contributions, whether it's 1, 3, or 5% you set your own contribution to match theirs unless you like giving up free money. Then once you do that you shovel everything into your Roth IRA. If you happen to max that you can then put any remaining money towards your 401k.

Let me know if you have any questions

I actually started a new Roth IRA with a company called Aspire Capital. The reason why I'm starting a Roth is because of an old 401k account that is cut off from contributions (leaving employment), so I was wondering if I add contributions and determine the investments in the Roth. I guess I want to try real estate investment trusts.

Good advice in this topic. Especially this:

BignutzisBack posted...

You can completely ignore 90% of all investment options, you'll have people try to convince you to do small caps, real estate funds, gold metal index blah blah blah.

Just keep it simple. You don't have to know really anything about the market or any specific companies to just buy an all in one fund.

Just set up a monthly contribution or whatever you can afford and let it ride.

I started a Roth IRA with Wealthfront years ago and theyve been doing a great job managing it. I actually opened it with TD Amertrade, and felt like I needed to know how to fly a spaceship to manage it, so I just transferred it and let Wealthfront manage it for me.

My 401K is through my employer with T Rowe Price.

Check income limits with Roth IRAs. If you over-contribute because your income is too high it turns into a headache that for tax reasons follows you for over a year.

Like it isn't inherently that hard to resolve but the implications to it are things you likely have limited exposure too so it just involves more research and forms that you've never done before.

Roth is great early on when you're not making much money. You're taxed up front but you're not paying much in taxes, and it'll have decades to grow tax-free.
Once you're solidly into the 22% and/or 24% tax brackets (like, most of your income is above the threshold for them), I think Roth is a trap and you're better off putting your money in traditional 401K or IRA. Getting the taxes deferred will help a ton to save up for a house and family, and then when you retire if you managed your money properly, you can drip feed it back out a little bit each year to ensure you aren't paying high taxes on the bulk of it. Plus being retired, you have the freedom to move to a state w/ low/no taxes (or one that doesn't tax retirement income) w/o having to care about the job prospects there.

Just my opinion. My state income taxes are pretty high too, so when I switched from Roth to traditional, it had a pretty big decrease in my taxes.

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I have something like 3-5k in VTSAX just through my E*Trade brokerage account. Am I missing out on anything by not having that money invested into VTSAX through a Roth IRA instead?

Also, I'm contributing around 10% to my 401k with my company matching like 4.5% of it. Am I missing out on anything by not investing the 5.5% my company doesn't match into a Roth IRA? Is that percentage better through the 401k or a Roth?

I have a TSP and have just been increasing the percent I put in over time. Any reason to open an IRA as well? I don't nearly approach the over 20k annual limit on TSP contributions

AlCalavicci posted...

I have something like 3-5k in VTSAX just through my E*Trade brokerage account. Am I missing out on anything by not having that money invested into VTSAX through a Roth IRA instead?

Also, I'm contributing around 10% to my 401k with my company matching like 4.5% of it. Am I missing out on anything by not investing the 5.5% my company doesn't match into a Roth IRA? Is that percentage better through the 401k or a Roth?

Roth contributions are post tax, so if you think taxes will be higher when you retire than they are now, Roth is arguably a better option unless you just plan to move to a state that doesnt tax retirement withdrawals, etc.

401Ks have a lot of protections apparently, as the government has decided I owe them a lot of money due to a mistake they made a decade ago, and a lawyer told me they couldnt touch my 401K but my Roth IRA didnt have the same protections.

As for 401K vs IRA, aside from the protections, the 401K is tied to a company and I dont know how that works if you get a new job etc. Maybe you can transfer it to the new company 401K, I dont know. But an IRA (traditional or Roth) is not tied to a particular employer.

I do about the same as you. I contribute about 10% to my 401K, and on top of that I try to hit the annual maximum in contributions to my Roth IRA by depositing $500 every month then adding the extra required as a one off the first chance I get.

If anything should be stickied here, it should be this.

AceAttorneyist posted...

I have a TSP and have just been increasing the percent I put in over time. Any reason to open an IRA as well? I don't nearly approach the over 20k annual limit on TSP contributions

I do my company match then try to max an IRA before going back to 401k. I like the IRA option better because it can have better funds with lower expenses than the funds you find in a 401k.

Dat_Cracka_Jax posted...

I do my company match then try to max an IRA before going back to 401k. I like the IRA option better because it can have better funds with lower expenses than the funds you find in a 401k.

TSP has much lower expenses than a normal 401K and even an IRA if I'm not mistaken. It's something like 0.06%. The better funds thing I'm not as worried about unless I were to start doing extensive research into which funds I invest in.

Arcanine2009 posted...

If anything should be stickied here, it should be this.

Thank you good sir

I'm keeping my index funds for personal investments. If your company offers a managed retirement account, take it. Let Fidelity or whomever pick your funds and redistribute everything.

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