[Mosaud1998]

I had a retirement account set up with my previous employer that I worked with for 4 years. I left the company almost a year ago. I don't plan to stay with my current employer for too long. I am trying to get out of the automotive sales field and get into more of an automotive corporate level(District sales manager etc). Hence, why I have decided not to enroll in the retirement plan my current employer has.

I have not taken the money out of my old retirement account. I am going to leave it there. My 4-year rate of return is 12%. In the meantime, while I am still with my current employee, I was thinking about putting 15% of my check every week into the stock market. I am not sure what stocks to put the money in for the long term.

Right now I have some money invested in Tesla, NVDA, Costco, AMZN, MSFT, AAPL, GOOGL, AAL (stupid decision), AMC (another stupid decision), etc.

My employer matches 1%. For reference, I will be 26 years old in 13 days. Maybe I should just enroll with my employer's retirement plan and have them take out 1% of my check every week? Not sure, what do you guys suggest?

[vreihen16]

My $0.02 (and that of many financial advisors) is to find a low fee index fund stock that tracks the S&P 500 and put your money there. The 5-year gain is over 82%, and there is nothing to do but let it sit there. Past performance does not guarantee future profits, blah, blah, blah, but I park all of my play investing money in SPYG and it is up 100% plus over five years.

Here's the S&P graph:




.

[chassis]

Originally Posted by Mosaud1998

I had a retirement account set up with my previous employer that I worked with for 4 years. I left the company almost a year ago. I don't plan to stay with my current employer for too long. I am trying to get out of the automotive sales field and get into more of an automotive corporate level(District sales manager etc). Hence, why I have decided not to enroll in the retirement plan my current employer has.

I have not taken the money out of my old retirement account. I am going to leave it there. My 4-year rate of return is 12%. In the meantime, while I am still with my current employee, I was thinking about putting 15% of my check every week into the stock market. I am not sure what stocks to put the money in for the long term.

Right now I have some money invested in Tesla, NVDA, Costco, AMZN, MSFT, AAPL, GOOGL, AAL (stupid decision), AMC (another stupid decision), etc.

My employer matches 1%. For reference, I will be 26 years old in 13 days. Maybe I should just enroll with my employer's retirement plan and have them take out 1% of my check every week? Not sure, what do you guys suggest?

Employer match is free money. Free money is good. More detail is needed - is it a 401k plan, or something else? Is there immediate vesting of employer match? If yes, enroll in the plan. If no, do not enroll in the plan because you state you will move on soon.

Save 10%-20% of your pay (before- or after-tax, to me it doesn’t matter but rather it establishes a habit). After you sort out the employer program questions above, invest the remaining funds in a Fidelity Roth account in which you will invest half of the contributions in SPY and the other half in QQQ. Don’t touch the money until your full retirement age, 67 years old.

[Mosaud1998]

Originally Posted by chassis

Employer match is free money. Free money is good. More detail is needed - is it a 401k plan, or something else? Is there immediate vesting of employer match? If yes, enroll in the plan. If no, do not enroll in the plan because you state you will move on soon.

Save 10%-20% of your pay (before- or after-tax, to me it doesn’t matter but rather it establishes a habit). After you sort out the employer program questions above, invest the remaining funds in a Fidelity Roth account in which you will invest half of the contributions in SPY and the other half in QQQ. Don’t touch the money until your full retirement age, 67 years old.

It's a 401k plan from Fidelity. I am not sure if it is immediate vesting or not. I'll talk to my H.R. on Thursday when I get to work. If it is immediate vesting, should I just put 15% of my check every week into the 401k or match the 1%?

[Vindicator3]

Agree that your plan to change jobs soon-ish isn't a reason not to enroll in your employer plan. Employer plan money is portable and can be rolled over to your next employer's plan and/or to an IRA when you leave your current employer. Maybe an hour's PITA paperwork balanced against tax deferral, employer match, etc. If it's a really crappy plan with high participant fees that might dictate otherwise, but for most folks in your boat the best bet for retirement investing is to enroll and use (and probably max out) your current employer plan rather than investing in a taxable account outside of the tax-deferred 401k environment, even if you don't plan to stay with this employer very long. Just make sure you actually do the rollover when the time comes rather than taking a withdrawal and paying the penalty.

[Mosaud1998]

Originally Posted by Vindicator3

Agree that your plan to change jobs soon-ish isn't a reason not to enroll in your employer plan. Employer plan money is portable and can be rolled over to your next employer's plan and/or to an IRA when you leave your current employer. Maybe an hour's PITA paperwork balanced against tax deferral, employer match, etc. If it's a really crappy plan with high participant fees that might dictate otherwise, but for most folks in your boat the best bet for retirement investing is to enroll and use (and probably max out) your current employer plan rather than investing in a taxable account outside of the tax-deferred 401k environment, even if you don't plan to stay with this employer very long. Just make sure you actually do the rollover when the time comes rather than taking a withdrawal and paying the penalty.

Stupid question, what do you mean by maxing out employer plan?

[E90convert]

I would enroll in the 401k. You get a current year tax deduction on the invested income, and 1% for free.

If I was in your shoes, I would enroll and at least get that free 1%, assuming you would only have to contribute 1% to get that match. Then I would put 19-24% of your gross into a Roth IRA (assuming you are within the income limits). At your age, I'd try to pile it on. I'm in my 30s and invested heavily in my 20s, and wow has that paid off. I now have a growing family and more responsibility, and feel like I can ease off the investing from at 25% I was doing, to a more reasonable 15% (including match). I now have more disposable income for family activities, paying cash for cars, 529 contributions, ect because I set myself up in my 20s.

If you plan on changing employers soon, look into if the 401k has a vesting period. For example, if you leave within two years, you forfeit any match you have received.

[Vindicator3]

Originally Posted by Mosaud1998

Stupid question, what do you mean by maxing out employer plan?

Maxing out means contributing the maximum amount allowed by law and/or the plan terms. As opposed to investing some amount in the plan and then some additional amount outside the plan.

[Mosaud1998]

Originally Posted by E90convert

I would enroll in the 401k. You get a current year tax deduction on the invested income, and 1% for free.

If I was in your shoes, I would enroll and at least get that free 1%, assuming you would only have to contribute 1% to get that match. Then I would put 19-24% of your gross into a Roth IRA (assuming you are within the income limits). At your age, I'd try to pile it on. I'm in my 30s and invested heavily in my 20s, and wow has that paid off. I now have a growing family and more responsibility, and feel like I can ease off the investing from at 25% I was doing, to a more reasonable 15% (including match). I now have more disposable income for family activities, paying cash for cars, 529 contributions, ect because I set myself up in my 20s.

Jesus 19-24% is alot. Basically no take home money

[E90convert]

Originally Posted by Mosaud1998

Jesus 19-24% is alot. Basically no take home money

25% total contributions is aspirational in your 20s. I'd start at 15% gross and work your way up to 25% by mid-30s or sooner. Or work on your spending and debt situations.. Not sure how much you have going out the door due to lifestyle (eating out, consumer debt, vacation, ect.).

[Vindicator3]

Originally Posted by E90convert

You get a current year tax deduction on the invested income

In a traditional 401k, as mentioned in the quoted post, you can deduct your current-year contributions from your income taxes. Many employers also offer a Roth 401k option in their plans, but not all do. If your employer offers that option, you may be better off putting your contributions in the Roth option and paying taxes on them now to avoid paying tax on them and the accumulated earnings at ordinary income rates when you retire. Which is better for you depends on your current marginal tax rate/income bracket and what your crystal ball says about what tax rates will be, and what your annual withdrawals will be, when you retire.

[2000cs]

Taxable account, look at SCHG and SCHD for long term holdings with very low management fees. Reinvest dividends (I prefer to accumulate and reinvest myself instead of using the DRIP, but either works). Note that often SCHG will dip when SCHD is doing well, and vice versa. Those are the buying opportunities for each.

Non-taxable account (IRA, 401(k), etc), look at JEPI and JEPQ. These are high dividend paying funds that also have some modest growth. Again reinvest the dividends.

Once you look at those four funds, you should find other similar funds and then choose which to invest in based on your preferences, risk tolerance, etc.

Lots of YT videos on these as well.

And I agree with others, max contributions to the company plan because the match is an instant return and the whole thing is tax deferred.

[Vindicator3]

Originally Posted by E90convert

Then I would put 19-24% of your gross into a Roth IRA (assuming you are within the income limits).

For Roth IRA (as opposed to Roth 401k), you not only need to be within the income limits, there is also a contribution limit of $7,000 for 2025. So 24% into a Roth IRA doesn't work if you make more than 30k or so.

But I do agree that a Roth IRA outside the 401k is a great move, if you are below the income limit, up to the $7,000 limit, once you at least max out your employer match. How to slice and dice these options depends on whether your employer offers a Roth 401k, your current tax bracket, how much total you can afford to invest (the more the better of course!), etc.

[Mosaud1998]

I'll talk to my H.R. gal on Thursday morning. I think I'll go with 15%. I'm young and don't spend money like an idiot. I hardly eat out etc. Not in debt so I think 15% should be fine. Gotta pay myself first .

I believe with my previous employer, I went with a 7% ROTH IRA. I don't remember.

[E90convert]

Check out Dave Ramsey and The Money Guy Show content. You don't have to follow it exactly (although it does work if you do!). Their is a lot of good principals in there and you can apply them to your personal situation. Personal finance, is exactly that, personal.

[zx10guy]

Lots of good advice here. Just a point of clarification on something that was said. Contributing to a 401k does not provide a tax deduction per say. It lowers your AGI (adjusted gross income) when you file your taxes. So you're paying less income taxes now as a result. And depending on where you are income wise, the adjusted AGI could put you in a lower tax bracket which increases the tax savings. But as indicated, that 401k money will be taxed in the future when you reach the age requirements at the prevailing tax rate as ordinary income. Also, 401k accounts are subject to RMD (required minimum distributions). This means at I think it's currently age 70, you have to pull out a minimum amount of money per year from IRA accounts or face a penalty. Roth accounts are exempt from RMDs. It's the governments way of forcing you to cash out so they can get their hands on additional forced tax revenue.

You're doing the smart thing which I wish I had done at your age. Plan better for the future. I'm ok in a sense but wish I had planned better as the bulk of my retirement savings are in a 401k/IRA. I'm playing catch up now by shoving money into my employers Roth 401k. I put in the catch up amount afforded me for being over 50 which will be forced into a Roth 401k anyways with the implementation of the SAVES Act. I just got a head start on it since my employer already has a Roth 401k in place and I needed to diversify money buckets. I'm also putting money into a non qualified investment account to provide another layer of money diversification. It'll allow me to pull from different buckets come retirement time to be able to position myself into specific tax brackets.

[Bc2005]

I put about 10-15% into my 401k during most of my working life, and my employer match varied between jobs. At age 60 I had an appointment to review our total assets and expenses with my Fidelity advisor and she said “ you have enough so you don’t need to keep working, so you can retire anytime.” I finally retired at 61. I sold a rental house and had other income, so I have not had to take out very much from IRA funds so far. However, hitting 73 years old (the current RMD age) is going to be painful.

Everything I take out to meet RMD requirements will be taxed at state and federal levels, and I don’t even really need the money to live. If I don’t take it out, and the IRA goes to my wife or kids, they will only have a few years after my death before they have to draw the funds out of the IRA into a taxable account, and pay the taxes. Just doesn’t seem fair that I was so consistent in saving, and now the IRS will force me to take it out.

[E90convert]

Originally Posted by Bc2005

I put about 10-15% into my 401k during most of my working life, and my employer match varied between jobs. At age 60 I had an appointment to review our total assets and expenses with my Fidelity advisor and she said “ you have enough so you don’t need to keep working, so you can retire anytime.” I finally retired at 61. I sold a rental house and had other income, so I have not had to take out very much from IRA funds so far. However, hitting 73 years old (the current RMD age) is going to be painful.

Everything I take out to meet RMD requirements will be taxed at state and federal levels, and I don’t even really need the money to live. If I don’t take it out, and the IRA goes to my wife or kids, they will only have a few years after my death before they have to draw the funds out of the IRA into a taxable account, and pay the taxes. Just doesn’t seem fair that I was so consistent in saving, and now they the IRS is making me take it out.

Can you roll it all to a Roth IRA and pay the big tax hit now, so their is no RMD and inherited IRA timeline for your heirs?

[chassis]

Originally Posted by Mosaud1998

Jesus 19-24% is alot. Basically no take home money

Do not max out the Federally allowed contribution.

Rather, contribute to the 401k to the point that the maximum employer match is secured by you. What are the rules to receive the 1% match? Another question for HR on Thursday.

401k contributions are harmful to liquidity, speaking from a lifetime of experience. Life happens, unexpected waves come over the bow, and funds are needed from time to time. Roth contributions are a good balance of tax-advantaged saving and liquidity.

Do not blindly "max out the 401k".

Suggested account structure:
- 401k --> contribute to capture the employer match, but no further
- Roth IRA --> contribute until you have put away 10%-20% of your pay
- Taxable investing (stocks, etfs) --> contribute after the first two are satisfied
- Cash management: Fidelity has an excellent account for this, which has "high interest" instruments available for you to park cash for monthly living expenses. Think of the Fidelity cash management account as a "checking account", which it is and much more.

[Mosaud1998]

Originally Posted by chassis

Do not max out the Federally allowed contribution.

Rather, contribute to the 401k to the point that the maximum employer match is secured by you. What are the rules to receive the 1% match? Another question for HR on Thursday.

401k contributions are harmful to liquidity, speaking from a lifetime of experience. Life happens, unexpected waves come over the bow, and funds are needed from time to time. Roth contributions are a good balance of tax-advantaged saving and liquidity.

Do not blindly "max out the 401k".

Suggested account structure:
- 401k --> contribute to capture the employer match, but no further
- Roth IRA --> contribute until you have put away 10%-20% of your pay
- Taxable investing (stocks, etfs) --> contribute after the first two are satisfied
- Cash management: Fidelity has an excellent account for this, which has "high interest" instruments available for you to park cash for monthly living expenses. Think of the Fidelity cash management account as a "checking account", which it is and much more.

Employee match for 401k is 3%. For how long, I will have to ask HR>

ROTH IRA? I thought that was part of 401k as an option. If not, I bank with Chase so I can open a ROTH IRA account with Chase I believe. Or I can go through Fidelity or SOFI

I have some money in stock and crypto. I can't consume interest. So, that's out. Religious reasons.

[Vindicator3]

Roth IRA and Roth 401k are two separate things. Whether you can contribute to a Roth 401k depends on the options offered by your employer's plan. Whether you can contribute to a Roth IRA instead of or in addition to your contributions to your employer's plan depends on whether you make less than the income limit, and is subject to the $7,000 contribution limit for 2025.

On the comment above about liquidity, I agree with the poster not to do any of this blindly. I disagree that "do not max out your federally allowed contribution to your employer plan" is good advice across the board but I agree with "do not blindly" max out your allowed contribution.

You should not contribute so much to any 401k that it will deprive you of liquidity needed to ride out life's ups and downs, including need to take unpaid medical leave, loss of job for a year, things like that. Likewise if you are paying off student loans, saving for a down payment on a house, you don't want to starve those efforts just to max the 401k contribution.

But once you have that liquidity, then maxing out your contributions to an employer plan can be a great move.

The hierarchy I would suggest is -

1) Employer plan enough to capture the employer match (Roth option if available, and depending on your tax bracket)
2) Roth IRA if eligible to contribute, up to the $7,000 max
3) Address liquidity and debt (other than home mortgage)
4) Employer plan beyond that needed to capture the match up to the max contribution
5) Taxable investing

If you make enough money to get to 5, you're doing very well and are probably no longer in your 20s and may be in upper tax brackets where you may also want to blend in other tax-advantaged options like life insurance. At that point you can also afford professional advice on these topics and shouldn't listen to random folks on a car chat board.

Also, don't borrow money to buy that new BMW!

[Mosaud1998]

Originally Posted by Vindicator3

Roth IRA and Roth 401k are two separate things. Whether you can contribute to a Roth 401k depends on the options offered by your employer's plan. Whether you can contribute to a Roth IRA instead of or in addition to your contributions to your employer's plan depends on whether you make less than the income limit, and is subject to the $7,000 contribution limit for 2025.

On the comment above about liquidity, I agree with the poster not to do any of this blindly. I disagree that "do not max out your federally allowed contribution to your employer plan" is good advice across the board but I agree with "do not blindly" max out your allowed contribution.

You should not contribute so much to any 401k that it will deprive you of liquidity needed to ride out life's ups and downs, including need to take unpaid medical leave, loss of job for a year, things like that. Likewise if you are paying off student loans, saving for a down payment on a house, you don't want to starve those efforts just to max the 401k contribution.

But once you have that liquidity, then maxing out your contributions to an employer plan can be a great move.

The hierarchy I would suggest is -

1) Employer plan enough to capture the employer match (Roth option if available, and depending on your tax bracket)
2) Roth IRA if eligible to contribute, up to the $7,000 max
3) Address liquidity and debt (other than home mortgage)
4) Employer plan beyond that needed to capture the match up to the max contribution
5) Taxable investing

If you make enough money to get to 5, you're doing very well and are probably no longer in your 20s and may be in upper tax brackets where you may also want to blend in other tax-advantaged options like life insurance. At that point you can also afford professional advice on these topics and shouldn't listen to random folks on a car chat board.

Also, don't borrow money to buy that new BMW!

I am not taking a loan out on any car. I am done with that crap. Hate owing people money.

Okay, so I have to ask HR Thursday if I can contribute to a Roth 401k. If so, I'll do the match at 3%. I also have to figure out what the requirement is for the 3%. If not Roth 401k, I'll still do the minimum match at 3% and open a ROTH IRA with SOFI and put 12% of my check there every week.