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qlikview226
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 ROTH or 401K
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Posted on 09-08-21 9:51 AM     Reply [Subscribe]
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Need some advise. Me and my wife works fulltime with stable job. we make roughly 210K annually before tax. we do have traditional 401K. our company matches 3 at full rate so we both have 3% contribution on 401K. now we would like to open Roth IRA with max contribution which is 6000 yearly,

My question is should we contribute more in 401K and max out and put rest on ROTH or maxed out on ROTH. We want to have both account but confused how much to distribute in both account.

- There will be 2 account with same amount of contribution
-We don't own home but planning to buy end of this year.
-We do have some passive income on side which is 1000-1500 monthly


Last edited: 08-Sep-21 09:51 AM
Last edited: 08-Sep-21 09:52 AM

 
Posted on 09-08-21 11:19 AM     [Snapshot: 73]     Reply [Subscribe]
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Its a typical answer, its based on your personal situation.

Let me add more, if you think you will have more income when you retire its best to choose roth but if you think retirement money will be your sole income then 401k is good.

In general Roth is better coz we are currently at historically low tax rate. Considering aging population and need for social spending increasing, tax rates will only go higher from here. So its better to pay tax at current rate ie roth account.
 
Posted on 09-08-21 12:58 PM     [Snapshot: 132]     Reply [Subscribe]
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qlikview226

First thing that caught my eye is that you have 210K annual income but no house.

What made you stay in apartment with that income? Strange situation.

You have wide door with many options to utilize your income. Good luck.

Thanks
Last edited: 08-Sep-21 01:20 PM

 
Posted on 09-08-21 1:16 PM     [Snapshot: 152]     Reply [Subscribe]
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I am surprised you are only doing 3% contribution each. That in itself is a red flag. My suggestion is maximize, don’t just contribute to get only the company match. You will be grateful later.

And beyond maximizing contribute to IRA if you can afford. I don’t know the limit the income level has to be below a certain amount to be eligible to open IRA accounts.
 
Posted on 09-08-21 2:13 PM     [Snapshot: 195]     Reply [Subscribe]
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Thanks for the reply.
I have been making around 100K for past 3-4 years and was living by myself. My wife started working from feb that brings around 110K from her side. 210 K will be our income for this year onwards. so as above comment i will take advantage on both.

@dhoti_prasad ---- was single till last year and never came to my mind to own a house lol.


 
Posted on 09-08-21 2:16 PM     [Snapshot: 203]     Reply [Subscribe]
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sorry we both contribute 5 percent but company matches only 3 percent. as above suggestion i will also open Roth IRA .

Thank You again
 
Posted on 09-08-21 2:30 PM     [Snapshot: 216]     Reply [Subscribe]
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any recommendation for best ROTH IRA company
 
Posted on 09-08-21 3:00 PM     [Snapshot: 238]     Reply [Subscribe]
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Max out 410K for both..I think it is $19500..

Check Vanguard and talk to rep..

Brokerage account have some advantages over IRA if you have max out 401K..

You can invest money using brokerage account( dollar cost average ) every month .There are few good low expense ratio vanguard ETFs like VOO,VUG,VTI etc.. QQQ is good as well..

Take some risk on 401k diversification(stock % > Bond %) if you are below 35.. The avg return of S&P 500 over 90 years is around 10%..
 
Posted on 09-09-21 12:52 AM     [Snapshot: 347]     Reply [Subscribe]
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qlikview226,
You are an inspiration! Keep it up!

Unlike some people here who made tall claims that they made 100K per year but then received stimulus checks on their behalf.

Good luck with your plans ahead!
 
Posted on 09-09-21 11:23 AM     [Snapshot: 448]     Reply [Subscribe]
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Back in those days, when I was studying, I used to tune into this channel in a certain radio station every day, Now I could not locate him. Most people would not listen to radio stations this much these days, but for me, I always liked listening to to the radio ever since I was a kid back in Nepal. This guy really gave some good ideas and suggestions to handle the financial portfolios for people with any kind of background, sometimes even some horrible status to talk about over the radio!

Since I am not a professional advisor, but I would recommend you to listen to him how he advises the people who call him on his show. I believe you do not have any school debt to worry about and now are planning to buy a house, and then contribute to investments as well, his ideas would be something you should listen to. If you want, you can call him as well while keeping your name private.



 
Posted on 09-10-21 10:03 PM     [Snapshot: 590]     Reply [Subscribe]
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Sounds like you are still young and also good with money management cause you have passive income .

1. If you plan to expand that passive income and turn that into business model, just save money outside of any retirement account . Cash is always king in business world.
2. If first doesn’t apply or still have access money, max out Roth. In long run since you are young , return on it will most likely be high then other tax savings due to compounding over long time . Also there is very chance that you won’t be qualifying any more for Roth ( without back door ) , because both of salary will grow in next few years. Also Roth can be used as emergency funds because , your contribution can be easily pulled out any time.
3. After 1 and 2 , max out 401 k. But personally now a days I feel like 401k is a trap created by corporates and government to keep you trapped on workforce till you are 60. Even though you have 5 mil in 401 you can’t take disbursement and stop working until you reach the age. These days it’s fairly easy to invent , day trace and live out of it if you have 1 mil to play with. But if it’s stuck in 401k , you can’t do much . So think carefully about 401k , depending on your future plan.

Apologies for typos and missing words etc , iPhone sucks.
Last edited: 11-Sep-21 06:23 AM

 
Posted on 09-11-21 1:58 PM     [Snapshot: 678]     Reply [Subscribe]
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Step 1 - 3% to company 401k to get the match
Step 2 - Max out Roth IRA = $6,000 per year in 2021 per person
Step 3 - Pay off any debt other than mortgage

Step 4 -
Put any additional $ you can afford to company 401k or max it out at $19,500 for 2021 per person
Or if you are planning on buying a house soon - save up to make a 20% down payment. This will help you avoid paying the PMI, less interest, allows you to consider a 15 year mortgage.
 
Posted on 09-13-21 3:16 PM     [Snapshot: 914]     Reply [Subscribe]
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Thanks everyone for the suggestion.
 
Posted on 09-16-21 1:24 PM     [Snapshot: 1109]     Reply [Subscribe]
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Good discussion guys. I have my roth with betterment. It is a robo advisor with minimal fee. You just contribute dollar amount and forget. It auto allocates funds for your investment. I like the park and forget kind of investment when it comes to roth. There are also M1 , Fidelity, Schwab, Wealth front and lot more to choose from, but if you want automated investment that the sophisticated algorithms pick, then I would recommend Betterment.
 
Posted on 09-22-21 10:11 AM     [Snapshot: 1366]     Reply [Subscribe]
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@quickView226, there is a income limit for being able to contribute on ROTH IRA, look into that too.
 


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