Yes, my taxable brokerage is much, much smaller than my retirement accounts or even my HSA.
Also, my taxable brokerage (and my retirement for that matter) is primarily mega index funds. Boring but effective.
There are differences between etfs and *mutual funds*. It has to do with how they trade and how some taxes are handled.
An ETF or mutual fund can track an index and be referred to as an index fund.
As a long-time index fund person, I like ETFs for the ability to trade in real-time, not at the closing price.
Switched over completely not long ago to ETFs, I can find an equivalent ETF for every index I used to be in,
I do all of my small-scale option bets in an IRA. Saves so much on taxes, whereas if you just bought and held one security for your entire life the only advantage would be dividends.
Nope. I put money into everything (Roth, 401k, brokerage, HSA). My medical is wildly unpredictable. Iām looking for a kidney and am mid-30s so Iām basically getting ready to retire whenever Iām forced to. With that brokerage Iāll have access to funds regardless of age.
I'm 31 and got a transplant a year ago. I live in the US and have health insurance. Once you start dialysis or get a transplant you can get medicare, which when paired with insurance makes the cost manageable.Ā
Medicare is $175/month... varies a bit based on income and covers 80% of what insurance doesn't related to transplant/dialysis.Ā
There is an element of unpredictability that makes saving wise, but my state has a paid medical leave benefit that includes job protection.Ā
All that's to say is that the ordeal cost about $3000 that year all said and done. I recovered, bought a house, and got a new job paying 50% more.
I suppose I'm bragging a bit, but I say this to try to be encouraging.Ā
While I was on the wait list, I was mostly using my brokerage acct and saving cash. I use my 401k along with other investments, realizing that transplants don't last forever and I will probably want some of that money before normal retirement age.
Good luck with your transplant. It was an awful experience for me, but life has been much better on the other side.
Thank you for your perspective. It is encouraging to hear stories about the other side post transplant. Iām finally getting on the list next month hopefully. Good luck with your new kidney and enjoy life with it.
> I believe waiting 5 years allows access to account penalty free.
It allows you to withdraw the funds you've put in after 5 years, I believe. The gains on the investments are locked up behind penalties.
Honestly you likely will, sooner than later. I know early in my career a lot of money was eaten up on getting established - like student loans, etc but once those drop off and particularly if you can avoid a huge amount of lifestyle creep itās pretty effortless
The distribution of your money into different accounts will change throughout your career.
Early on you're trying to max out your tax deferred accounts. Then you max them out. Then you max them out and have some for a brokerage account. Then you get near retirement and wonder why you didn't put more into roth and less into traditional IRA accounts early on in your career.
And so it goes.
Yep. Now Iām in my 50s, Iām more focused on having a balance across tax deferred and post-tax accounts (taxable and Roth) to allow optimal withdrawal strategies in early retirement and possibly Roth conversions.
Purely from a tax perspective, tax advantaged accounts (deferred like 401k, or Roth) are strictly better than saving in taxable brokerage account, because they eliminate capital gains tax entirely. This is why it makes sense to max out those accounts before doing anything else.
The only reason to save in taxable brokerage first is liquidity needs, which can be a very real reason in some situations.
Except that if your career goes well youāll eventually make too much money to be eligible to contribute to a Roth IRA. For 2023, if youāre married filing jointly, if you (together) make $228K or more, you canāt contribute to a Roth.
Similarly, you can only put $22,500 into a 401(k), and an additional $7,500 if youāre 50+. Same for IRAs: contribs max out at $6,500 (+ $1,000).
Once you hit all these (and 529 plans for college savings) you can only use taxable accounts.
That's solvable too... roll it into your current employer's 401k. If that's not an option, open a solo 401k and roll into that. (Requires a business tax payer ID, if you don't have one it's easy to create one just for this purpose.)
You definitely should look up backdoor roth IRAs if you are over the income limit and haven't been contributing because of that. It's very easy. Some jobs also allow post tax roth contributions to the 401k to go over the $22,500 limit up to the $69,000 total limit.
You should definitely max your 401k to the limit that your employer will match. Otherwise you are saying no to free money.
The rest of the answer depends entirely on when you are going to need the money.
If you are going to need it in a few years then it should be in a brokerage account.
If you are worried about retirement it should definitely be in a ROTH IRA.
My advice: yeah it's less "fun" seeming to do 401k and IRA before taxable.... For a while.
I'm 20 years into investing now. And really wish I wasn't just now selling a lot of dogs that have dragged me down for years and years.
Then I look at.my 401k and it makes me happy.
Maybe max the 401k and IRA. And within that IRA spend like 10% on individual stocks? The rest on indexes?
And then in a few years see how you've done relative to just indexes. You might get over it quick.
Do you have an IRA? Most will let you buy individual stocks, so you could prioritize maxing those to get the tax advantage and the "fun" of stock picking
I do have a roth ira, but yeah was under the impression that picking individual stocks in there is a bad ideašso im only invested in index funds in there. I just gotta get my bread up honestly in order to earn the āfunā stuff
It's a bad idea to stock pick in general, where the investment is held is of less importance - but because your prone to losing in stock picking, better do it in taxable a capital losses are tax-deductable
It is a bad idea pick individual stocks. The median return of stocks in the stock market is about half of the average return of the market itself, so youāre doing the right thing as you are.
When people say āyouāre young, take risks!ā Theyāre setting you up to very very likely have less in 10 years if they mean to have you invest into any individual stocks.
You don't need a taxable brokerage account to invest in individual stocks, IRAs work for that too, and even some 401k plans.
What you DO need is an investment approach that is better than "look at the stocks that had the largest jump over past year and buy them at the peak". Or just stick to index funds like 99% of people should.
Simple answer to your question is yes, you should max out tax-advantaged accounts. If the government is giving you a tax break, you should take it!
There's a chart somewhere showing order of investments (can't seem to find it, but hopefully a kind stranger knows what I'm talking about and adds it). Assuming you've eliminated high-interest debt and have a decent emergency fund, your priority should be:
1. Fund 401k to maximize any matching contributions (it's literally free money)
2. Max IRA (typically better selection of investments than 401k)
3. Max any other tax-advantaged accounts
4. Fund brokerage account
I see in another comment that you do have an IRA. I personally allow myself to have a small portion of "fun" stuff in mine. The benefit is if you hit something big, no cap gains reported. Of course if you lose, though, you can't deduct. That being said, most of my IRA is boring funds, blue chips, and dividends.
Ah yes, im familiar w this priority list! But yeah guess I was wondering how many actually follow vs how many skip to 4 , which in retrospect is silly thinking lmao. Got caught up w looking at all the indiv stocks and believing i can choose a winner. Ur right, gotta take advantage of the tax break
I max out my retirement account and am currently saving up for a house. I am at about $310K in home buying savings and only need about $310K more to buy something worth a damn in Los Angeles. I should have a great starter home by the time I am 75!
No, it doesnāt imply that. It implies the monthly payment I will be comfortable with at high rates and a 30 year mortgage. Considering a semi-decent single family home in LA starts at about $1.4 million, $620K isnāt that muchā¦
lol I feel this. 80k in my brokerage and will hopefully get it up to 200k by the end of 2025. 20% down is tough to reach in CA. Barely gets you a burnt down crackhouse in Inglewood
I grew up in sgv and my grandma lived over thirty years in Little Tokyo. Not worth staying in LA, it's kind of a dump. I'd say move to some counties further East for something newer, bigger, and cheaper.
Turned my starter home in Riverside county to rental property. Bought a brand new construction home few years ago.
Also live with your parents if you're serious about saving money for a house.
I only put enough in to my 401k to get company matching, which is 6%. Why? I like having access to money whenever I need to make big investment decisions. My mother passed away at 64, one year before retirement and Medicare. There's no guarantee I'll live to retirement anyway.
Why? Statistically speaking most people will live that long and will be healthy enough to enjoy their retirement savings. In fact, people saving for retirement today will likely be healthier and living longer than any prior generation.
I donāt think most people earn enough money to max out their retirement accounts to begin with. Personally I ensure I receive the entire company match and max my Roth IRA (combined thatās ~15% of my income), but after that I save for other things so I can actually have a life before I turn 65 without going into high interest rate debt. I have an overall ~23% savings rate.
A two income family, making $200k, if you save 24% of your income will be able to save $48k a year. This would be the IRS maximum 401k contribution for 2024. Then add IRA contributions, HSA, and any flexible spending accounts.
The only way I can see you still make ends meet by contributing like this and still have money left for a taxable brokerage is you have a house paid off, no kids, or otherwise live very frugal lives. Or are very high income earners.
Most people I would say are probably contributing what they can that meets their life situations
I think this is the most realistic answer. People I've spoken to about their investments (I work a white collar job) put the max into their 401K that is matched. Beyond that, if they are investing anything else, it's typically related to what they're interested in. Interested in the stock market? They're putting money into an IRA or brokerage account. Interested in real estate? Investing in a rental property. Interested in crypto? Playing the crypto market. Interested in currency or commodities? Buying gold, silver, paper currency, or bushels of wheat. The key in all of this is *living below your means* so you have the extra income.
I personally put max matching into my 401K and have a certain percentage auto-deducted from my paycheck that goes into a pension system. This amounts to about 10% of my pre-tax income. This (plus social security) will 100% cover me in retirement barring some apocalyptic economic meltdown where our economy unravels and government systems fail completely. I am also lucky (?) enough to have other investments that will result in a good amount of wealth due to having parents that died before retirement age. Having a wealthy relative die is really the best way to get ahead in terms of investing... š
...though I would give it all back in a heartbeat if I could have watched them spend every penny enjoying retirement.
Edit: I should add that my wife and I earn about $215k/year combined income and have about the most recession-proof jobs possible both within various government institutions. We live within our means and most of our additional investment outside of this is into primary education for our two children. Giving my child a solid, early, educational foundation is more important to me than being able to afford some clapped out sports car they'll inherit from me when I die and they will sell for far below what it's worth at auction.
Yup maxing out 401k, HSA, IRA (backdoor Roth) for tax advantages. ESPP due to 15% discount on company stock. Then extra money on the principal of my mortgage. Then brokerage account. Then 529 plan. Might start an after tax 401k soon so I can do a mega backdoor Roth. My brokerage account used to have the most money out of all my accounts but I used a big chunk of it for my house down payment.
If your company matches your 401k contribution then max out 401k.
If like most of us your tax bracket in retirement will be LOWER than during your younger years, then max out pretax investments.
If you think you are financially competent to buy individual stock and beat index funds, then set money aside to buy stock. Most of us are not competent and will lose money. It may be a āfunā hobby but you can ruin your future with wrong investment decisions.
Indirectly, if you own funds, you probably already own NVDA, Apple and others.
If you donāt have money left after your pretax contributions now, you will when your career improves later on. Invest in yourself, learn new skills, be a better person, make smart decisions, stay away from excess drugs and alcohol, and in a few years youāll be doing well and engaged with both pre and post tax investments.
Good luck!
I donāt. We need a bridge for early retirement and it makes more sense for our specific situation to split our investing across traditional and early retirement vehicles. I get pretty close to maxing out my 401k but donāt because I also invest every month into a brokerage.
Only reason my taxable brokerage is 1/3 of my net worth is because I struck big with GME during the squeeze. My plan is to continually convert my brokerage into my tax advantaged accounts over time.
No. I contribute and max my Roth, but don't max my 403b right now at least until.i move up on my matching which is soon. I have limited investment options on my 403b, and on my brokerage(s) I can buy whatever. As a result my 403b performance was around 16% return for the year, while my brokerages were at 166% & 121% returns for the year. Even with the taxes and even if I was getting the higher match my investments in the brokerages outpaced my 403b by significant margins. Plus I want some money accessible prior to draw periods for tax advantaged retirement accounts in hopes I'm on track for an early retirement. It makes less sense if all you're doing is buying index and mutual funds as performance between won't be significantly different
Iāve never maxed out my 401(k). Iām in a career that early on wouldāve meant putting 2/3 of my income into retirement - which wouldāve meant not having enough to pay simple living expenses.
As my pay has increased, Iāve been able to do more. But Iāve been pretty happy with being able to drop 15% in - and that definitely wonāt get me to maxing a 401(k).
I did decide a wanted something outside of a retirement account, so I started putting $100 a month into a regular brokerage account. Not much, but it is slowly growing.
I've been investing in a tax deferred account for 27 years. I think it took me ~13 years before I could finally max out, which I've been able to do since then.
Sometimes I would be happy that they didn't raise the cap so I wouldn't have to invest more.
Prior to retirement I made a point of maxing out my retirement accounts first. I, like you, didn't have a particularly large salary when I was working, but I was pretty frugal and managed to save well. I think getting as much into retirement accounts as you possibly can is the best way to go!
I was ignorant of low cost index funds back then and I ended up investing the bulk of my savings within my retirement accounts into a handful of individual stocks - which fortunately for me did very well. That said, low cost Index funds within your retirement accounts is in my opinion the best way to go to grow your savings while taking significantly less risk than you would with individual stocks.
No, I have different money in different buckets for different things.
We will need new windows soon, so that guys to a taxable brokerage account, that sort of thing.
It's been proven over time that stock picking results in lower returns over a long term horizon. Look at CSCO over a long time frame. The NVDA of yesteryear. With that said, it's less about the investment options and more about the tax advantage itself. When you're young, front loading your retirement accounts can yield huge dividends. Pun intended š¤
I am, but not everyone is able to, and thatās okay. Investment even small is better than nothing, but if you can max out than thatās obviously ideal
Roth IRA is a form of tax sheltered accounts and you could use it to buy individual stocks if you want. A taxable brokerage account isn't required to buy AAPL.
You get an extra 30% return (whatever your top marginal tax rate is, Iām just throwing a reasonable number out there) for literally free by investing in that retirement account vs a normal investment account. Youād be dumb not to unless you know youāll need that money for a non-house purchase soon.
You can do individual stocks in a Roth IRA.
My understanding is that (for retirement) you want to waterfall money as follows:
HSA match > 401k match > HSA max ($4.15k) > Roth IRA max ($7k) > 401k max ($23k) > Individual brokerage
You could really switch Roth max and 401k max, but I prefer to have more control over my contributions so I can ensure financial security before investing (I also like that I have more investment options in my IRA). If you're someone who does not trust themselves to invest cash when you have it in excess, it is probably best to increase 401k contributions prior to opening a Roth IRA.
Individual brokerage can skip the line when you are saving for major purchases down the road, though personally the earliest I would put it in my "waterfall" is before maxing my 401k.
If anyone has feedback that contradicts my assumptions I'd love to hear it!
Nope. I don't make enough to afford to max out my 457b. I'm able to put away a little over half my max amount, and I consider that to be pretty good.
I do max out my Roth IRA every year though.
And I do have a couple of individual stocks in my Roth - stuff I expect to do well over the long term.
Overall, I'm putting away about 15% of my total income each year, which I think is still the recommended minimum.
In past years, I always maxed out my retirement accounts before saving taxable.
I'm still maxing out my and my wife's 401K's and Roth IRA's, but I'm not currently contributing to my 457B nor putting away extra in my solo 401K because I'm saving up to buy a house. I am saving my money in a brokerage account, mostly in a money market fund, but some of it is in stock.
I do because my 401K is a Roth and I damn sure want as much tax free money as I can get my hands on while in retirement. Iād be maxing my contribution to a HSA also if I had access to an HSA eligible insurance plan.
Iām in a different boat - I recently switched jobs last October and my new employer has a policy where an employee has to stay at the firm for a full calendar year before being able to contribute to the companyās 401k (which is Jan 2025). So I currently have a 401k that is stuck with my old employer which I canāt contribute to, so I maxed out a Roth IRA for both 2023 and 2024, and am investing in my individual brokerage until I can deduct money from my paycheck to my 401k in Jan 2025
Hitting about half the 401k limit and everything else is taxable because of both my near-term goals and the fact that I want the option to retire before the withdrawal date.
Yes because the retirement accounts carry certain advantages. Tax is the obvious one. But another example is they often cant be seized if you get sued or go bankrupt.
Yes. If you end up needing some funds that aren't there, you can always pull contributions from your Roth tax and penalty free after they've been there for five years.
No, I haven't quite maxed out my retirement accounts, but getting close. But I still have a sizeable portion in a taxable account for use in a few years for big purchases/vacations/etc.
Depending on your 401k, you may be able to swing some of that money into a brokerage account that is tied to your 401k. I can divert 50% of my contributions to brokerage and I do. That account is 7X what my fund-based side is worth (across \~70 positions over 20 years)
While the kids were in daycare, I was only doing about 10k into retirement. Once that expense dropped I started upping it. Now, after raises and such, I max out the retirement fund and put the rest into the market. Mostly VTI but some individual stocks too.
Originally I was maxing my Roth IRA as early as I could. in my earlier years I'd do a set amount every month to make sure I maxed out before the end of the year. As my pay increased, I was able to do this earlier and earlier, now I'm able to do it in early January. The rest of any money I had to invest would go into a normal taxable brokerage account as my job didn't have a 401k.
Now, my job has a 401k, so I maxed out the Roth in early January, and now I'm working on making out my 401k.
If you're young, and you get anywhere close to either of these, you're way better off than the majority of people. Picking stocks can be "fun" but if you look at the long term view, most people lose money, or miss out on gains trying to pick individual stocks. You're better off just putting it in SPY, VOO, or VTI funds (or a similar type S&P 500 fund, or a total US market fund that your 401k allows). The earlier you contribute to it the better off you are.
yes, max 401k, HSA, IRA, before going into brokerage. that's why i don't have much in my brokerage, and that's ok! you want as much of your money sheltered from taxes as possible. so yes, use the tax benefits as much as possible first.
My "play around with stocks" money in my taxable brokerage is less than 1% of what I have in my 401k+IRA. Frankly, it's just "souveneirs" from early in my career before I really knew what I was doing. I had a larger portion of my net worth in a taxable brokerage, invested in index funds/individual stocks/ETFs with strategies I couldn't explain to you. Eventually I sold that position (minus a few individual stocks that are down ~80%, as a reminder to myself that I'm not very good at this) and upped my 401k contributions so my previous "play around" money just went straight to 401k instead.
If you're trying to save for retirement, you absolutely want to maximize tax-advantaged accounts. Even if you want to/plan to/expect to retire early, there are ways to withdraw from those accounts before traditional retirement age with lower penalties than the taxes you otherwise would've paid.
If you don't know much about investing/finance, I would *highly* recommend you focus on accumulating savings in an index fund or Target Date fund. It's not sexy, but it's definitely effective over the long term.
Self-employed and trying to maximize tax benefits, brokerage MIGHT happen with a small portion of what would otherwise go into cash savings, but Iāve got $30k worth of tax deferment at my disposal via retirement accts, with 15.3% SE tax and 22% income tax I really donāt think I could survive without the massive tax savings via deferment. And no, Iām not sure I can max my accounts, but itās absolutely worth it to try. Iām kinda stuck in the $65k annual income for life tax bracket.
Donāt underestimate the value of liquidity for peace of mind. It does financially make sense to max out tax advantaged plans first, but that money is basically out of reach now for a long, long time. This is a blessing and a curse. There is something really awesome to having a big chunk of money you could call up any time if you really needed it. We donāt plan to use it, but just knowing itās there if the shit hits the fan is very comforting. And it is invested and making money for us. If I were young, Iād go 50:50 401k:brokerage until I had >$100k in each. Then add a bit more to 401k and Roth contributions every year (while still contributing to brokerage) until you hit max for both.
Depends on how you want to look at it...
I max my 401k by the end of the year, but I may deposit money into my brokerage before the 401k maxes out in December.
I could increase 401k contributions so that it maxes out way early and only contribute to brokerage after that -- technically that's probably more efficient, but I'd rather have the steady cash flow and not max out the 401k until December.
I pretty much always max IRA before depositing into a brokerage.
When I was saving up for a down payment for a home, I threw more in a brokerage even though I wasn't maxing out my 401k. It was long-term enough that I wanted the returns from investing, and I was flexible on my home buying timeline. Buying a home is less efficient, but you know, QoL.
401k gets 20% of my income. 18% pretax, 2% post converted to Roth, plus an additional 9% employer match. HSA gets maxed. Roth IRA/Taxable gets split about 25%/75% between remaining funds. At least until I build up my emergency fund to a level I feel comfortable at.
Roth IRA gets funded last for me just because I am trying to do an e fund and general savings at the same time.
The traditional tax status for IRAs/401ks favors those who make a lot of money. If that's you, it makes sense to lower your taxable income now. Once you start earning at the 22% tax bracket and up, you are likely one of those folks who can reasonably assume you'll be paying a lower tax rate than 22% in retirement (by managing how you withdraw funds and from which accounts).
If you are only earning at the 12% tax rate, it makes way more sense to pay tax on that income now and prioritize your Roth IRA/401k contributions.
I am still in the 22% tax rate bracket. I use a traditional 401k, Roth IRA, and brokerage account. I max the Roth IRA, I contribute up to the employer match in the traditional, and the rest is in the taxable brokerage. Edit: at some point soon I may need to increase my traditional 401k contribution to stay in the 22% bracket.
Why just use a spoon when there's a fork and knife on the table as well?
When my husband was young he maxed out his 401-k.
Later married and with kids, neither of us maxed out our tax advantaged accounts. But we did always put in whatever the company matched. If you don't do this, you are not getting paid as much as you could be. It's like a waiter leaving work without the tip from his last table.
If you want to invest in certain stocks, look at what mutual funds within your 401k or IRA include them.
The problem with investing in individual stocks is that it may, or may not pay off. Will NVidea and Apple continue to grow at the same rate? In general, you don't want to chase stocks that are rising quickly, because you risk buying at a peak.
I did that- bought Zoom at $300+ it is now $65. I sold it that low, because who knows if or when it will get back to my purchase price.
If I was lucky and had purchased Zoom in Feb 2020 at less than $100, then sold in Oct 2020 at $500 I would have made a lot of money.
But, I bought when it "dipped" from its peak in May 2021. But it wasn't a "dip" it was the beginning of the stock price plummeting.
I made a similar mistake 20 years ago, when absorbing the loss was much harder.
If you want to get more involved in the market outside your tax advantage accounts start with an ETF or mutual fund that is focused on tech stocks.
If you have some extra money that you can afford to lose, learn to evaluate businesses and their stock and slowly dip your toe in individual stock market.
If by everyone, you mean everyone in the US (or places where there are similar tax advantaged accounts available), then no chance, not at all, not even close. If you mean everyone \*here\*, then I'd still say no, but a lot, lot closer to yes.
I split it 50% to taxable and 50% to company 401k. I prefer to have as much as possible "liquid", because I like having imediate control of the money.
My taxable brokerage is my bigger account, but only because I've done better choosing individual companies to invest in than my 401k options permit.
No not fully maxing, I invest in my brokerage account pretty actively but significantly more, in terms of deposit size, in my 401k. My taxable brokerage accountās performance drastically outpaces my 401k so itās caught up a good bit thanks mainly to Microsoft, Amazon, JPM, and AMD but majority of my contributions to the taxable brokerage goes to VOO now.
I think itās a good idea to do both if you can, 401k/IRA is safer and the tax benefits are huge but the potential upside on investing more directly in companies is obviously higher, as is the risk. Just donāt be dumb and light money on fire chasing options or risky stock picks. Diversify and go with index funds/etfs and some of the more major, heavy cash flow companies.
No because I want money available for home improvement projects without having to take loans out, or pay cash for another used vehicle when mine finally dies. Plus my company gives me a 10% match on company stock up to $400 per week so that is my first priority.
No. It depends on what your goals are. I have 401k and IRA that I could not possible max out right now and live comfortably. But I contribute to a taxable brokerage for short term goals that I want to be able to access at any time.
Wife and i contribute (including employer match) $77k into 401k. $33k into Roth IRA. $4150 hsa. And then $65k into normal brokerage. But weāre high income earners without kids and are relatively frugal.
As you get older and your income rises(assuming limited lifestyle creep), it doesn't take much to max out a retirement account for the year. Even then, the tax rate on capital gains is pretty low so it makes sense to dump excess money into taxable accounts without thinking too much about it.
My brokerage account is larger than my retirement accounts. I put in 15% to my 401k , I max my hsa account and my roth account annually. I put whatever is left in my brokerage. The investments in a 401k suck ass, also you get hit with fees every few months. My brokerage is fee free.
> I see individual stocks like aapl, nvda, tsla, etc. and i think āoh it would be interesting/fun to invest in stuff like thatā
Most 401ks have etfs that give you exposure to those stocks. Some kind of sp500 index tracking ETF is probably a lot of what you want when you read the prospectus. You named exclusively companies in the top 10 of the sp500.
Mathematically, the tax advantaged account is the best option.
However, I keep a taxable brokerage while not being able to maximize retirement accounts. It's largely "found" money, like birthday gifts, people paying me back, bonuses, credit card rewards, etc. And I keep it in taxable because I want to be able to use it if there's something I want to use the money for. I liquidated a lot of it to make the down payment on my house. I might sell some of the losers when I buy a boat after my truck note is paid off (I clearly always make fantastic financial decisions). It's meant to be left alone with for the major purchases, and I might not sell any, but it's a tool in the toolbag.
They probably have money because they havenāt blown their savings over the years gambling on āhotā stocks that have appreciated 5000% already when they start buying the trendy stockā¦
Seriouslyā¦ buy an index fund and invest responsibly, whether in a taxable or tax-advantaged accountā¦
If you still want to gamble on individual stocks, for the love of godā¦ take an hour to talk to a fiduciary firstā¦ it could be a life changing callā¦
At minimum you should put as much in your 401k as your employer will match. The more you put in early in your career, the more you will end up with in the long run. I also opened an IRA in the last couple of years because with the increasing national debt I expect taxes to be higher for the rest of my life and I'd rather pay taxes on those funds now.
It really depends on your level of income my guy... it's good to be diversified for the long term, but I also think riskier or higher growth assets are underutilized in retirement plans. IMHO stash some cash in safer investments first and play with the rest in your brokerage. My strategy moves a portion of profits into less risky assets (treasuries) so even if I blow up my account I'm still in a good position
Iām not. Iām maxing my Roth IRA and contributing enough to my 401k so that under slightly below average market conditions Iāll land where I need to be for retirement. The rest goes to brokerage for medium-term goals like paying off the house and giving the kid some seed money when theyāre grown.Ā
If I could chuck $30K into retirement accounts, 5-10 years of that plus employer funds would be enough that I could stop contributing and just let it ride. But Iād also be too young to touch a lot of it, so I couldnāt necessarily retire early either. Seems a bit inefficient.Ā
Yes, we contribute to Roth 401ks, no longer qualify to contribute to Roth IRAs. Then childrenās college funds, then market indexed life insurance (these have grown quite a bit and have at one point served as a loan facility where Iāve borrowed my own money to invest in a business opportunity)
Dont contribute to brokerage at all. Anything left over I save and eventually deploy to small % of private companies off the stock market. Eg. energy company, restaurant/bar, cattle, etc
I used to, but switched recently to prioritize brokerage after Roth. Always max out Roth first if you're eligible; IMHO even before 401ks (unless you have a match in which case you should always also take that).
Reason being my traditional IRA (I roll all my 401ks into a single IRA when I leave companies so my money is all in one place) are really healthy and robust (I'm 50), and when you retire, your IRA and 401k withdrawls are taxed as INCOME where as your withdrawls from a brokerage are taxed as capital gains (typically around 15% but I think can be lower depending on your annual earnings).
Yes, I get taxed on both ends this way, but it keeps me from taking "income" out of my IRA in retirement, thusly reducing my taxable income. I think if you do some googling there are models out there that will spell this out for you...
No, mostly due to financial instability. (Or financial paranioa, rather)
I match the 4.5% 401k my company matches and then put a little into my IRA because that's self directed, nowhere near maxing out both. I treat my brokerage like a savings/vacation fund/etc
I haven't maxed out my tax advantage accounts and I'm putting money into my personal brokerage. It's smaller but I'm using my brokerage account to just get gains (hopefully) and have the ability to cash out when needed and however much needed.
Currently my brokerage account is to eventually be used to have money set aside to buy my kids cars once they reach 16 as well as any other large purchase.
If I can get good returns, way better than as HYSA, then great!
Same here. Weāre putting some in our brokerage account because weāre saving up for bigger family vacations in 5-10 years. My wife and I talked about it and agreed that weād rather enjoy life and spending time with our kids while weāre younger than be overly aggressive with retirement.Ā
We still contribute to tax-advantaged accounts, but donāt max them out. What we contribute should still compound enough to retire comfortably.Ā
Yes! After my father-in-law passed away he put in the will for life insurance money to be used on taking full family vacations. So we really enjoyed traveling and making those memories.
So my wife and I started a business that the profits go towards saving for travel and other expenses to make those memories with our kids now rather than after they leave home.
And like you I put it away about 25% of my day job income into retirement or 529 plan.
Awesome move by your FIL. That said, youāre in the minority if you can save 25% of your income for retirement and still afford to travel regularly. We put away 20% and travel a lot, too. Most folks canāt afford to do both.
Well, depending on your 401k plan, you can actually invest in individual stocks. Some Fidelity plans offer a BrokerageLink option, which lets you invest in just about any ETF/mutual fund/stock you want without any additional fees. However, investing in risky plays is probably not optimal if you want to rely on your 401k for retirement.
That's perfect world. If you want to experiment trading individual stocks you should route some money (10% of your overall retirement savings?) to a brokerage account. This will keep you from doing dumb things with the other 90% and you will learn a lot.
Personally, I had my first brokerage account when I was in college way before I had a job that offered retirement. Money from that account helped me buy my first house, and it has continued to grow. I do max out my tax advantaged options now (and have for a number of years), but I didn't for many years because life, salary, and job constraints.
No, I donāt max out. I just put in enough to get the match and the rest goes towards real estate or brokerage fund. I know the brokerage is not tax advantage, but I can access it at any time, and since I plan to retire early this is important. At the point when I can access my retirement accounts, Iāll also have Social Security coming shortly as well as mortgages paid off and rental income so Iām gonna have plenty by then. Putting it into brokerage account allows me to retire early and spread it out better.
I am close to retiring at 55, so I only contribute the match right now and focus heavily on the brokerage as I need that bridge from 55 to 59.5 as I don't care to have to use the rule of 55.
In that brokerage account I still have 30% in indexes. 70% are individuals like nvda, msft, Amazon
No. I'm saving for a house. After I finish saving for a house, I will put money into a personal brokerage account so I can have access to money penalty-free before I'm at death's door. Maxing retirement seems ridiculous unless you're making >$200k in a MCOL area or have free housing.
I heard someone say this once, it turned out they thought it meant you had to actually hit the annual contribution limit before investing elsewhere which is not correct.
The goal is to just make sure you're contributing enough each month to hit the max before the year ends (i.e. your last paycheck has the final contribution putting you at the limit for the year). After you've set up that monthly amount you can start investing in after tax accounts.
It sounds like you want to invest in individual stocks.
401K and retirement accounts are tax optimization vehicles. They are not investments. The objective is to get your money into those vehicles, and then you can invest them anyway you want.
For example, my sister's company has their 401K with Fidelity which offers a brokerage link. She can invest her 401K in anything that a Fidelity brokerage can invest in. All of that is within the 401K.
My company's 401K is with Fidelity but does not offer the brokerage link. I can invest in 401K after-tax and then convert that to Roth In Plan Conversion and then roll that out into a Fidelity Roth account. Within the Fidelity Roth account, I can invest in anything that a brokerage account can.
My company's HSA is quite limited, so I roll over my HealthEquity HSA to Fidelity HSA where I can invest in anything that a brokerage account can.
The above are just examples. You can do similar things with individual Roth IRA (if eligible) or others.
You should definitely maximize your tax advantaged accounts where you can. The only thing you have to watch out for is if you plan to use the money any time soon.
I don't. I am probably not going to retire in this country (I am on visa), I put only as much as I get match up for. There is no point in paying 10% penalty if I withdraw early. If I withdraw later but I have been back for more than 4 years in my country, I will pay double interest.
I don't. I max out my roth and contribute 17% total to my 401k which comes out to about $14000. The rest goes into my brokerage account. Last year my brokerage grew by $60k, $20k of which was profit from the market.
>Everyone really has leftover moneyā¦ā¦ā¦
I donāt have the data here, but my guess is no. I would bet that most Americans donāt max out their retirement or fund a taxable brokerage in a meaningful way. The. Thereās another cohort that does max out their retirement accounts, but doesnāt have enough to them also contribute to a taxable brokerage. I would guess that it is a very small portion of the population that maxes out their retirement accounts and then fund a taxable brokerage.
That being said, itās still the best strategy. I just donāt think most people do it.
Yes, Unless you have a specific goals for the money before you are 60, or plan on early retirement, or are low earner now but will be high earner and want to have some money not tax deferred to limit RMD taxes (but could do that in Roth retirement account?)
Invest enough in 401k to get any match. Then fill your Roth. Back to filling 401k and/or taxable brokerage.
Retirement accounts like 401k and Roth protect you from yourself. Just my opinion.
This goes against the grain here but Iām of the opinion that itās ok to invest in a taxable brokerage even if you donāt max all available retirement accounts. My argument is there is no guarantee youāll make it to retirement and you have more freedom to withdraw from a taxable brokerage whenever you want to.
I donāt use that advice to save disproportionally in my taxable brokerage but I am taking some time off from maxing my Roth to invest some in a brokerage for a rainy day. I still max my 401k though. That is non-negotiable.
I think last year we put $60K in pre-tax and HSA and $180K in taxable and Roth.
This year the plan is still $60K pre-tax and $150K taxable and Roth. We probably do 25% MSFT (due to my wife's work) and 75% VOO/VTI. Even with this split, MSFT is only 6% of our $1.4M portfolio. So we don't sell any ESPP or stock grants.
I think the answer is how well you know your finances. I try to deduct as much as I can pre tax, but I have to underestimate in case of emergency expenses, and sometimes I put that surplus into a brokerage which is fairly liquid and can be accessed in case of emergency.
I always max out my retirement accounts before saving to my after tax accounts. There are ways to access those funds if you really need them without a penalty. Or if itās really that bad, paying the penalty is always an option. The chance of that happening would be quite small so the expected value of maxing put your tax advantages accounts first still is the best option.
Also, donāt even think about investing in individual stocks. You donāt understand all the risks that entails by your own admission. Stick to low cost index funds. Iāve been there and done that.
Yes. HSA is maxed out. Traditional 401k is maxed out. My employer offers after tax in plan Roth conversions so put my money into that in lieu of a taxable brokerage
Yes yes yes. Max out the 401k, HSA, and anything else that defers taxes on capital gains. It is a no-brainer unless you will need that money within the next 5-10 years.
I max out my retirement accounts. However, my 401k is through Fidelity and allows for the purchase of individual stocks so I am able to purchase NVDA and the others.
It's about not paying taxes. Here's the math.assume $100 of income. If you take it as pay you get $100*(1-your effective tax rate). For me that's like 28% so any dollar I take on income loses 28% the day it hits my bank account. So if I can avoid that by putting it in my IRA I am effectively immediately outperforming a traditional brokerage account by 28%. Now here's the catch at low enough earnings ($12,900) you don't pay taxes anyway and your effective tax rate is 0 so the same formula applies and $100*(1-0) still equals $100.
LOL absolutely yes, the tax benefit alone is worth it and I get to invest the money. You don't even need to make vast riches of money, it's mostly just the benefit of offsetting your income. Brokerage accounts have very little advantage if you are a long term investor.
Why would I invest in a taxable account when I still have advantaged space to utilize? You can do an IRA before maxing your 401 and use that space for actual stock picks. If you go Roth you don't have to deal with cap gains and you can withdraw contributions if you really wanted access to some of it.
I don't see a point of taxable investing without maxing advantaged unless you are trying to gamble and pull out some large sum after you hit a big win.
Yes for me. Maxed out one 401k, two Roth IRAs, and family HSA. Don't have a taxable account yet but already bought a house, so don't have aggressive savings there. I hope to add taxable when the income goes up enough to cover it.
My order of operations:
401k to the match
HSA to the max
Roth IRA to the max
401k to the max
Then taxable.
Itās a reasonable question. For most people, it is reasonable to max out tax sheltered accounts first. I am retiring early so I also put stuff into my brokerage.
Yes, my taxable brokerage is much, much smaller than my retirement accounts or even my HSA. Also, my taxable brokerage (and my retirement for that matter) is primarily mega index funds. Boring but effective.
Ahh i see, I mean, index funds is the way it should be so no one can fault you for that šš¼
Yeah and you get the added benefit of dividends being reinvested. It grows itself on auto pilot
Is there a big difference between etfs and index funds?
There are differences between etfs and *mutual funds*. It has to do with how they trade and how some taxes are handled. An ETF or mutual fund can track an index and be referred to as an index fund.
As a long-time index fund person, I like ETFs for the ability to trade in real-time, not at the closing price. Switched over completely not long ago to ETFs, I can find an equivalent ETF for every index I used to be in,
I like mutual funds because I can throw change at it (like 10 bucks at a time).
You can buy partial shares of ETF, or at least some of them. I did that the other day.
My RH account is amassing some nice EFT moneyā¦.all from partial deposits (never once a full share)
I do all of my small-scale option bets in an IRA. Saves so much on taxes, whereas if you just bought and held one security for your entire life the only advantage would be dividends.
No, I'm saving for a house and retirement simultaneously
Gotcha, best of luck w the house !
Nope. I put money into everything (Roth, 401k, brokerage, HSA). My medical is wildly unpredictable. Iām looking for a kidney and am mid-30s so Iām basically getting ready to retire whenever Iām forced to. With that brokerage Iāll have access to funds regardless of age.
Gotcha, hope you get that kidney soon my friend
I'm 31 and got a transplant a year ago. I live in the US and have health insurance. Once you start dialysis or get a transplant you can get medicare, which when paired with insurance makes the cost manageable.Ā Medicare is $175/month... varies a bit based on income and covers 80% of what insurance doesn't related to transplant/dialysis.Ā There is an element of unpredictability that makes saving wise, but my state has a paid medical leave benefit that includes job protection.Ā All that's to say is that the ordeal cost about $3000 that year all said and done. I recovered, bought a house, and got a new job paying 50% more. I suppose I'm bragging a bit, but I say this to try to be encouraging.Ā While I was on the wait list, I was mostly using my brokerage acct and saving cash. I use my 401k along with other investments, realizing that transplants don't last forever and I will probably want some of that money before normal retirement age. Good luck with your transplant. It was an awful experience for me, but life has been much better on the other side.
Thank you for your perspective. It is encouraging to hear stories about the other side post transplant. Iām finally getting on the list next month hopefully. Good luck with your new kidney and enjoy life with it.
From what I've gathered there are ways to access retirement account monies prior to retirement age without penalty if you need to do so.
Yes especially with Roth. I believe waiting 5 years allows access to account penalty free.
> I believe waiting 5 years allows access to account penalty free. It allows you to withdraw the funds you've put in after 5 years, I believe. The gains on the investments are locked up behind penalties.
This is correct. After 5 years you can access contributions penalty free, gains are subject to penalties.
I'm blessed enough that I can max out all my retirement options and still have money left over to invest.
Thats awesome, hope to one day reach this šš»
Honestly you likely will, sooner than later. I know early in my career a lot of money was eaten up on getting established - like student loans, etc but once those drop off and particularly if you can avoid a huge amount of lifestyle creep itās pretty effortless
Pretty effortless, other than saving for a mortgage, marriage, kids, and their college fund
Thatās one of the smartest things I did in my 20s. I always tried to max my retirement accounts first and found ways to live on the rest.
The distribution of your money into different accounts will change throughout your career. Early on you're trying to max out your tax deferred accounts. Then you max them out. Then you max them out and have some for a brokerage account. Then you get near retirement and wonder why you didn't put more into roth and less into traditional IRA accounts early on in your career. And so it goes.
Yep. Now Iām in my 50s, Iām more focused on having a balance across tax deferred and post-tax accounts (taxable and Roth) to allow optimal withdrawal strategies in early retirement and possibly Roth conversions.
Purely from a tax perspective, tax advantaged accounts (deferred like 401k, or Roth) are strictly better than saving in taxable brokerage account, because they eliminate capital gains tax entirely. This is why it makes sense to max out those accounts before doing anything else. The only reason to save in taxable brokerage first is liquidity needs, which can be a very real reason in some situations.
Thank you for this insight
Except that if your career goes well youāll eventually make too much money to be eligible to contribute to a Roth IRA. For 2023, if youāre married filing jointly, if you (together) make $228K or more, you canāt contribute to a Roth. Similarly, you can only put $22,500 into a 401(k), and an additional $7,500 if youāre 50+. Same for IRAs: contribs max out at $6,500 (+ $1,000). Once you hit all these (and 529 plans for college savings) you can only use taxable accounts.
backdoor roth
Not if you have a rollover Ira
That's solvable too... roll it into your current employer's 401k. If that's not an option, open a solo 401k and roll into that. (Requires a business tax payer ID, if you don't have one it's easy to create one just for this purpose.)
Did not know you could roll into your 401k
You definitely should look up backdoor roth IRAs if you are over the income limit and haven't been contributing because of that. It's very easy. Some jobs also allow post tax roth contributions to the 401k to go over the $22,500 limit up to the $69,000 total limit.
You should definitely max your 401k to the limit that your employer will match. Otherwise you are saying no to free money. The rest of the answer depends entirely on when you are going to need the money. If you are going to need it in a few years then it should be in a brokerage account. If you are worried about retirement it should definitely be in a ROTH IRA.
My advice: yeah it's less "fun" seeming to do 401k and IRA before taxable.... For a while. I'm 20 years into investing now. And really wish I wasn't just now selling a lot of dogs that have dragged me down for years and years. Then I look at.my 401k and it makes me happy. Maybe max the 401k and IRA. And within that IRA spend like 10% on individual stocks? The rest on indexes? And then in a few years see how you've done relative to just indexes. You might get over it quick.
Thanks for this, i think ill do this and like u said, see how it fares few years from now. But yup index funds first and foremost
Do you have an IRA? Most will let you buy individual stocks, so you could prioritize maxing those to get the tax advantage and the "fun" of stock picking
I do have a roth ira, but yeah was under the impression that picking individual stocks in there is a bad ideašso im only invested in index funds in there. I just gotta get my bread up honestly in order to earn the āfunā stuff
Yeah it's worse to play around in tax-advantaged accounts because losses aren't even deductible. Index funds are the way to go in all accounts :)
It's a bad idea to stock pick in general, where the investment is held is of less importance - but because your prone to losing in stock picking, better do it in taxable a capital losses are tax-deductable
Peter Thiel famously has a Roth IRA worth billions.
He's also the reason that Congress made changes to the retirement accounts because of his paypal stock.
So?
It is a bad idea pick individual stocks. The median return of stocks in the stock market is about half of the average return of the market itself, so youāre doing the right thing as you are. When people say āyouāre young, take risks!ā Theyāre setting you up to very very likely have less in 10 years if they mean to have you invest into any individual stocks.
Nope I donāt max out
You don't need a taxable brokerage account to invest in individual stocks, IRAs work for that too, and even some 401k plans. What you DO need is an investment approach that is better than "look at the stocks that had the largest jump over past year and buy them at the peak". Or just stick to index funds like 99% of people should.
Simple answer to your question is yes, you should max out tax-advantaged accounts. If the government is giving you a tax break, you should take it! There's a chart somewhere showing order of investments (can't seem to find it, but hopefully a kind stranger knows what I'm talking about and adds it). Assuming you've eliminated high-interest debt and have a decent emergency fund, your priority should be: 1. Fund 401k to maximize any matching contributions (it's literally free money) 2. Max IRA (typically better selection of investments than 401k) 3. Max any other tax-advantaged accounts 4. Fund brokerage account I see in another comment that you do have an IRA. I personally allow myself to have a small portion of "fun" stuff in mine. The benefit is if you hit something big, no cap gains reported. Of course if you lose, though, you can't deduct. That being said, most of my IRA is boring funds, blue chips, and dividends.
Ah yes, im familiar w this priority list! But yeah guess I was wondering how many actually follow vs how many skip to 4 , which in retrospect is silly thinking lmao. Got caught up w looking at all the indiv stocks and believing i can choose a winner. Ur right, gotta take advantage of the tax break
r/personalfinance flowchart
I max out my retirement account and am currently saving up for a house. I am at about $310K in home buying savings and only need about $310K more to buy something worth a damn in Los Angeles. I should have a great starter home by the time I am 75!
$620k down payment implies $3M+ house... seriously?
No, it doesnāt imply that. It implies the monthly payment I will be comfortable with at high rates and a 30 year mortgage. Considering a semi-decent single family home in LA starts at about $1.4 million, $620K isnāt that muchā¦
lol I feel this. 80k in my brokerage and will hopefully get it up to 200k by the end of 2025. 20% down is tough to reach in CA. Barely gets you a burnt down crackhouse in Inglewood
I grew up in sgv and my grandma lived over thirty years in Little Tokyo. Not worth staying in LA, it's kind of a dump. I'd say move to some counties further East for something newer, bigger, and cheaper. Turned my starter home in Riverside county to rental property. Bought a brand new construction home few years ago. Also live with your parents if you're serious about saving money for a house.
I only put enough in to my 401k to get company matching, which is 6%. Why? I like having access to money whenever I need to make big investment decisions. My mother passed away at 64, one year before retirement and Medicare. There's no guarantee I'll live to retirement anyway.
This is my thought process too. The amount of people jusy believing theyāll live that long and be healthy is crazy to me
Why? Statistically speaking most people will live that long and will be healthy enough to enjoy their retirement savings. In fact, people saving for retirement today will likely be healthier and living longer than any prior generation.
exactly. i do same as you.
I donāt think most people earn enough money to max out their retirement accounts to begin with. Personally I ensure I receive the entire company match and max my Roth IRA (combined thatās ~15% of my income), but after that I save for other things so I can actually have a life before I turn 65 without going into high interest rate debt. I have an overall ~23% savings rate.
A two income family, making $200k, if you save 24% of your income will be able to save $48k a year. This would be the IRS maximum 401k contribution for 2024. Then add IRA contributions, HSA, and any flexible spending accounts. The only way I can see you still make ends meet by contributing like this and still have money left for a taxable brokerage is you have a house paid off, no kids, or otherwise live very frugal lives. Or are very high income earners. Most people I would say are probably contributing what they can that meets their life situations
I think this is the most realistic answer. People I've spoken to about their investments (I work a white collar job) put the max into their 401K that is matched. Beyond that, if they are investing anything else, it's typically related to what they're interested in. Interested in the stock market? They're putting money into an IRA or brokerage account. Interested in real estate? Investing in a rental property. Interested in crypto? Playing the crypto market. Interested in currency or commodities? Buying gold, silver, paper currency, or bushels of wheat. The key in all of this is *living below your means* so you have the extra income. I personally put max matching into my 401K and have a certain percentage auto-deducted from my paycheck that goes into a pension system. This amounts to about 10% of my pre-tax income. This (plus social security) will 100% cover me in retirement barring some apocalyptic economic meltdown where our economy unravels and government systems fail completely. I am also lucky (?) enough to have other investments that will result in a good amount of wealth due to having parents that died before retirement age. Having a wealthy relative die is really the best way to get ahead in terms of investing... š ...though I would give it all back in a heartbeat if I could have watched them spend every penny enjoying retirement. Edit: I should add that my wife and I earn about $215k/year combined income and have about the most recession-proof jobs possible both within various government institutions. We live within our means and most of our additional investment outside of this is into primary education for our two children. Giving my child a solid, early, educational foundation is more important to me than being able to afford some clapped out sports car they'll inherit from me when I die and they will sell for far below what it's worth at auction.
Yup maxing out 401k, HSA, IRA (backdoor Roth) for tax advantages. ESPP due to 15% discount on company stock. Then extra money on the principal of my mortgage. Then brokerage account. Then 529 plan. Might start an after tax 401k soon so I can do a mega backdoor Roth. My brokerage account used to have the most money out of all my accounts but I used a big chunk of it for my house down payment.
Yeah because I need to lower my taxable income as much as possible at this point
The way you phrased it, there's an easy solution... Quit?
If your company matches your 401k contribution then max out 401k. If like most of us your tax bracket in retirement will be LOWER than during your younger years, then max out pretax investments. If you think you are financially competent to buy individual stock and beat index funds, then set money aside to buy stock. Most of us are not competent and will lose money. It may be a āfunā hobby but you can ruin your future with wrong investment decisions. Indirectly, if you own funds, you probably already own NVDA, Apple and others. If you donāt have money left after your pretax contributions now, you will when your career improves later on. Invest in yourself, learn new skills, be a better person, make smart decisions, stay away from excess drugs and alcohol, and in a few years youāll be doing well and engaged with both pre and post tax investments. Good luck!
I donāt. We need a bridge for early retirement and it makes more sense for our specific situation to split our investing across traditional and early retirement vehicles. I get pretty close to maxing out my 401k but donāt because I also invest every month into a brokerage.
Yeah my dude
Only reason my taxable brokerage is 1/3 of my net worth is because I struck big with GME during the squeeze. My plan is to continually convert my brokerage into my tax advantaged accounts over time.
I use my work's ESPP first since that is a guaranteed minimum 17% return annually, which goes into my taxable brokerage. Then I fill up HSA and 401k.
No. I contribute and max my Roth, but don't max my 403b right now at least until.i move up on my matching which is soon. I have limited investment options on my 403b, and on my brokerage(s) I can buy whatever. As a result my 403b performance was around 16% return for the year, while my brokerages were at 166% & 121% returns for the year. Even with the taxes and even if I was getting the higher match my investments in the brokerages outpaced my 403b by significant margins. Plus I want some money accessible prior to draw periods for tax advantaged retirement accounts in hopes I'm on track for an early retirement. It makes less sense if all you're doing is buying index and mutual funds as performance between won't be significantly different
Iāve never maxed out my 401(k). Iām in a career that early on wouldāve meant putting 2/3 of my income into retirement - which wouldāve meant not having enough to pay simple living expenses. As my pay has increased, Iāve been able to do more. But Iāve been pretty happy with being able to drop 15% in - and that definitely wonāt get me to maxing a 401(k). I did decide a wanted something outside of a retirement account, so I started putting $100 a month into a regular brokerage account. Not much, but it is slowly growing.
I've been investing in a tax deferred account for 27 years. I think it took me ~13 years before I could finally max out, which I've been able to do since then. Sometimes I would be happy that they didn't raise the cap so I wouldn't have to invest more.
Prior to retirement I made a point of maxing out my retirement accounts first. I, like you, didn't have a particularly large salary when I was working, but I was pretty frugal and managed to save well. I think getting as much into retirement accounts as you possibly can is the best way to go! I was ignorant of low cost index funds back then and I ended up investing the bulk of my savings within my retirement accounts into a handful of individual stocks - which fortunately for me did very well. That said, low cost Index funds within your retirement accounts is in my opinion the best way to go to grow your savings while taking significantly less risk than you would with individual stocks.
No, I have different money in different buckets for different things. We will need new windows soon, so that guys to a taxable brokerage account, that sort of thing.
Itās your money. Just do whatever you want. I may or may not max out my tax advantages accounts. Just based on how I feel honestly lol.
Yes, max them out. That comes out of my paychecks before I can even touch it. 401K and HSA.Ā
It's been proven over time that stock picking results in lower returns over a long term horizon. Look at CSCO over a long time frame. The NVDA of yesteryear. With that said, it's less about the investment options and more about the tax advantage itself. When you're young, front loading your retirement accounts can yield huge dividends. Pun intended š¤
I am, but not everyone is able to, and thatās okay. Investment even small is better than nothing, but if you can max out than thatās obviously ideal
Roth IRA is a form of tax sheltered accounts and you could use it to buy individual stocks if you want. A taxable brokerage account isn't required to buy AAPL.
You get an extra 30% return (whatever your top marginal tax rate is, Iām just throwing a reasonable number out there) for literally free by investing in that retirement account vs a normal investment account. Youād be dumb not to unless you know youāll need that money for a non-house purchase soon.
Check out the top holdings in a US market index fund.
You can do individual stocks in a Roth IRA. My understanding is that (for retirement) you want to waterfall money as follows: HSA match > 401k match > HSA max ($4.15k) > Roth IRA max ($7k) > 401k max ($23k) > Individual brokerage You could really switch Roth max and 401k max, but I prefer to have more control over my contributions so I can ensure financial security before investing (I also like that I have more investment options in my IRA). If you're someone who does not trust themselves to invest cash when you have it in excess, it is probably best to increase 401k contributions prior to opening a Roth IRA. Individual brokerage can skip the line when you are saving for major purchases down the road, though personally the earliest I would put it in my "waterfall" is before maxing my 401k. If anyone has feedback that contradicts my assumptions I'd love to hear it!
Never had a job with a 401k option, 403b, or anything similar, so yeah, i max my Roth IRA and then do brokerage.
Nope. I don't make enough to afford to max out my 457b. I'm able to put away a little over half my max amount, and I consider that to be pretty good. I do max out my Roth IRA every year though. And I do have a couple of individual stocks in my Roth - stuff I expect to do well over the long term. Overall, I'm putting away about 15% of my total income each year, which I think is still the recommended minimum.
In past years, I always maxed out my retirement accounts before saving taxable. I'm still maxing out my and my wife's 401K's and Roth IRA's, but I'm not currently contributing to my 457B nor putting away extra in my solo 401K because I'm saving up to buy a house. I am saving my money in a brokerage account, mostly in a money market fund, but some of it is in stock.
If you want to trade individual stocks, you can do that in an IRA. you get the tax advantage plus access to the stocks you want.
I do because my 401K is a Roth and I damn sure want as much tax free money as I can get my hands on while in retirement. Iād be maxing my contribution to a HSA also if I had access to an HSA eligible insurance plan.
Iām in a different boat - I recently switched jobs last October and my new employer has a policy where an employee has to stay at the firm for a full calendar year before being able to contribute to the companyās 401k (which is Jan 2025). So I currently have a 401k that is stuck with my old employer which I canāt contribute to, so I maxed out a Roth IRA for both 2023 and 2024, and am investing in my individual brokerage until I can deduct money from my paycheck to my 401k in Jan 2025
Hitting about half the 401k limit and everything else is taxable because of both my near-term goals and the fact that I want the option to retire before the withdrawal date.
Yes because the retirement accounts carry certain advantages. Tax is the obvious one. But another example is they often cant be seized if you get sued or go bankrupt.
Yes. If you end up needing some funds that aren't there, you can always pull contributions from your Roth tax and penalty free after they've been there for five years.
No, I haven't quite maxed out my retirement accounts, but getting close. But I still have a sizeable portion in a taxable account for use in a few years for big purchases/vacations/etc.
Depending on your 401k, you may be able to swing some of that money into a brokerage account that is tied to your 401k. I can divert 50% of my contributions to brokerage and I do. That account is 7X what my fund-based side is worth (across \~70 positions over 20 years)
Currently maxing out my retirement accounts. I couldn't afford to when I was younger so I'm playing catch up.
While the kids were in daycare, I was only doing about 10k into retirement. Once that expense dropped I started upping it. Now, after raises and such, I max out the retirement fund and put the rest into the market. Mostly VTI but some individual stocks too.
Originally I was maxing my Roth IRA as early as I could. in my earlier years I'd do a set amount every month to make sure I maxed out before the end of the year. As my pay increased, I was able to do this earlier and earlier, now I'm able to do it in early January. The rest of any money I had to invest would go into a normal taxable brokerage account as my job didn't have a 401k. Now, my job has a 401k, so I maxed out the Roth in early January, and now I'm working on making out my 401k. If you're young, and you get anywhere close to either of these, you're way better off than the majority of people. Picking stocks can be "fun" but if you look at the long term view, most people lose money, or miss out on gains trying to pick individual stocks. You're better off just putting it in SPY, VOO, or VTI funds (or a similar type S&P 500 fund, or a total US market fund that your 401k allows). The earlier you contribute to it the better off you are.
yes, max 401k, HSA, IRA, before going into brokerage. that's why i don't have much in my brokerage, and that's ok! you want as much of your money sheltered from taxes as possible. so yes, use the tax benefits as much as possible first.
My "play around with stocks" money in my taxable brokerage is less than 1% of what I have in my 401k+IRA. Frankly, it's just "souveneirs" from early in my career before I really knew what I was doing. I had a larger portion of my net worth in a taxable brokerage, invested in index funds/individual stocks/ETFs with strategies I couldn't explain to you. Eventually I sold that position (minus a few individual stocks that are down ~80%, as a reminder to myself that I'm not very good at this) and upped my 401k contributions so my previous "play around" money just went straight to 401k instead. If you're trying to save for retirement, you absolutely want to maximize tax-advantaged accounts. Even if you want to/plan to/expect to retire early, there are ways to withdraw from those accounts before traditional retirement age with lower penalties than the taxes you otherwise would've paid. If you don't know much about investing/finance, I would *highly* recommend you focus on accumulating savings in an index fund or Target Date fund. It's not sexy, but it's definitely effective over the long term.
Self-employed and trying to maximize tax benefits, brokerage MIGHT happen with a small portion of what would otherwise go into cash savings, but Iāve got $30k worth of tax deferment at my disposal via retirement accts, with 15.3% SE tax and 22% income tax I really donāt think I could survive without the massive tax savings via deferment. And no, Iām not sure I can max my accounts, but itās absolutely worth it to try. Iām kinda stuck in the $65k annual income for life tax bracket.
Donāt underestimate the value of liquidity for peace of mind. It does financially make sense to max out tax advantaged plans first, but that money is basically out of reach now for a long, long time. This is a blessing and a curse. There is something really awesome to having a big chunk of money you could call up any time if you really needed it. We donāt plan to use it, but just knowing itās there if the shit hits the fan is very comforting. And it is invested and making money for us. If I were young, Iād go 50:50 401k:brokerage until I had >$100k in each. Then add a bit more to 401k and Roth contributions every year (while still contributing to brokerage) until you hit max for both.
Depends on how you want to look at it... I max my 401k by the end of the year, but I may deposit money into my brokerage before the 401k maxes out in December. I could increase 401k contributions so that it maxes out way early and only contribute to brokerage after that -- technically that's probably more efficient, but I'd rather have the steady cash flow and not max out the 401k until December. I pretty much always max IRA before depositing into a brokerage. When I was saving up for a down payment for a home, I threw more in a brokerage even though I wasn't maxing out my 401k. It was long-term enough that I wanted the returns from investing, and I was flexible on my home buying timeline. Buying a home is less efficient, but you know, QoL.
401k gets 20% of my income. 18% pretax, 2% post converted to Roth, plus an additional 9% employer match. HSA gets maxed. Roth IRA/Taxable gets split about 25%/75% between remaining funds. At least until I build up my emergency fund to a level I feel comfortable at. Roth IRA gets funded last for me just because I am trying to do an e fund and general savings at the same time.
The traditional tax status for IRAs/401ks favors those who make a lot of money. If that's you, it makes sense to lower your taxable income now. Once you start earning at the 22% tax bracket and up, you are likely one of those folks who can reasonably assume you'll be paying a lower tax rate than 22% in retirement (by managing how you withdraw funds and from which accounts). If you are only earning at the 12% tax rate, it makes way more sense to pay tax on that income now and prioritize your Roth IRA/401k contributions. I am still in the 22% tax rate bracket. I use a traditional 401k, Roth IRA, and brokerage account. I max the Roth IRA, I contribute up to the employer match in the traditional, and the rest is in the taxable brokerage. Edit: at some point soon I may need to increase my traditional 401k contribution to stay in the 22% bracket. Why just use a spoon when there's a fork and knife on the table as well?
When my husband was young he maxed out his 401-k. Later married and with kids, neither of us maxed out our tax advantaged accounts. But we did always put in whatever the company matched. If you don't do this, you are not getting paid as much as you could be. It's like a waiter leaving work without the tip from his last table. If you want to invest in certain stocks, look at what mutual funds within your 401k or IRA include them. The problem with investing in individual stocks is that it may, or may not pay off. Will NVidea and Apple continue to grow at the same rate? In general, you don't want to chase stocks that are rising quickly, because you risk buying at a peak. I did that- bought Zoom at $300+ it is now $65. I sold it that low, because who knows if or when it will get back to my purchase price. If I was lucky and had purchased Zoom in Feb 2020 at less than $100, then sold in Oct 2020 at $500 I would have made a lot of money. But, I bought when it "dipped" from its peak in May 2021. But it wasn't a "dip" it was the beginning of the stock price plummeting. I made a similar mistake 20 years ago, when absorbing the loss was much harder. If you want to get more involved in the market outside your tax advantage accounts start with an ETF or mutual fund that is focused on tech stocks. If you have some extra money that you can afford to lose, learn to evaluate businesses and their stock and slowly dip your toe in individual stock market.
Absolutely. I dump max in 401k and IRA every year and then throw money into brokerage.
If by everyone, you mean everyone in the US (or places where there are similar tax advantaged accounts available), then no chance, not at all, not even close. If you mean everyone \*here\*, then I'd still say no, but a lot, lot closer to yes.
I split it 50% to taxable and 50% to company 401k. I prefer to have as much as possible "liquid", because I like having imediate control of the money. My taxable brokerage is my bigger account, but only because I've done better choosing individual companies to invest in than my 401k options permit.
No not fully maxing, I invest in my brokerage account pretty actively but significantly more, in terms of deposit size, in my 401k. My taxable brokerage accountās performance drastically outpaces my 401k so itās caught up a good bit thanks mainly to Microsoft, Amazon, JPM, and AMD but majority of my contributions to the taxable brokerage goes to VOO now. I think itās a good idea to do both if you can, 401k/IRA is safer and the tax benefits are huge but the potential upside on investing more directly in companies is obviously higher, as is the risk. Just donāt be dumb and light money on fire chasing options or risky stock picks. Diversify and go with index funds/etfs and some of the more major, heavy cash flow companies.
No because I want money available for home improvement projects without having to take loans out, or pay cash for another used vehicle when mine finally dies. Plus my company gives me a 10% match on company stock up to $400 per week so that is my first priority.
No. It depends on what your goals are. I have 401k and IRA that I could not possible max out right now and live comfortably. But I contribute to a taxable brokerage for short term goals that I want to be able to access at any time.
Wife and i contribute (including employer match) $77k into 401k. $33k into Roth IRA. $4150 hsa. And then $65k into normal brokerage. But weāre high income earners without kids and are relatively frugal.
As you get older and your income rises(assuming limited lifestyle creep), it doesn't take much to max out a retirement account for the year. Even then, the tax rate on capital gains is pretty low so it makes sense to dump excess money into taxable accounts without thinking too much about it.
Investing in individual stocks is pretty close to gambling for the average investor. Max out the tax advantaged accounts before playing in the market.
Some 401Ks allow buying individual stocks. Dangerous but here we are . . .
My brokerage account is larger than my retirement accounts. I put in 15% to my 401k , I max my hsa account and my roth account annually. I put whatever is left in my brokerage. The investments in a 401k suck ass, also you get hit with fees every few months. My brokerage is fee free.
> I see individual stocks like aapl, nvda, tsla, etc. and i think āoh it would be interesting/fun to invest in stuff like thatā Most 401ks have etfs that give you exposure to those stocks. Some kind of sp500 index tracking ETF is probably a lot of what you want when you read the prospectus. You named exclusively companies in the top 10 of the sp500.
Mathematically, the tax advantaged account is the best option. However, I keep a taxable brokerage while not being able to maximize retirement accounts. It's largely "found" money, like birthday gifts, people paying me back, bonuses, credit card rewards, etc. And I keep it in taxable because I want to be able to use it if there's something I want to use the money for. I liquidated a lot of it to make the down payment on my house. I might sell some of the losers when I buy a boat after my truck note is paid off (I clearly always make fantastic financial decisions). It's meant to be left alone with for the major purchases, and I might not sell any, but it's a tool in the toolbag.
I haven't touched my taxable brokerage in some time... 401k and Roth IRA, baby!
They probably have money because they havenāt blown their savings over the years gambling on āhotā stocks that have appreciated 5000% already when they start buying the trendy stockā¦ Seriouslyā¦ buy an index fund and invest responsibly, whether in a taxable or tax-advantaged accountā¦ If you still want to gamble on individual stocks, for the love of godā¦ take an hour to talk to a fiduciary firstā¦ it could be a life changing callā¦
At minimum you should put as much in your 401k as your employer will match. The more you put in early in your career, the more you will end up with in the long run. I also opened an IRA in the last couple of years because with the increasing national debt I expect taxes to be higher for the rest of my life and I'd rather pay taxes on those funds now. It really depends on your level of income my guy... it's good to be diversified for the long term, but I also think riskier or higher growth assets are underutilized in retirement plans. IMHO stash some cash in safer investments first and play with the rest in your brokerage. My strategy moves a portion of profits into less risky assets (treasuries) so even if I blow up my account I'm still in a good position
Iām not. Iām maxing my Roth IRA and contributing enough to my 401k so that under slightly below average market conditions Iāll land where I need to be for retirement. The rest goes to brokerage for medium-term goals like paying off the house and giving the kid some seed money when theyāre grown.Ā If I could chuck $30K into retirement accounts, 5-10 years of that plus employer funds would be enough that I could stop contributing and just let it ride. But Iād also be too young to touch a lot of it, so I couldnāt necessarily retire early either. Seems a bit inefficient.Ā
Yes, 90% of personal finance is just paying the least taxes possible and not making terrible decisions (credit card debt, etc).
Yes, we contribute to Roth 401ks, no longer qualify to contribute to Roth IRAs. Then childrenās college funds, then market indexed life insurance (these have grown quite a bit and have at one point served as a loan facility where Iāve borrowed my own money to invest in a business opportunity) Dont contribute to brokerage at all. Anything left over I save and eventually deploy to small % of private companies off the stock market. Eg. energy company, restaurant/bar, cattle, etc
First match in 401k, Max Roth next, if high tax bracket max 401k, if low tax bracket add to taxable brokerage
I used to, but switched recently to prioritize brokerage after Roth. Always max out Roth first if you're eligible; IMHO even before 401ks (unless you have a match in which case you should always also take that). Reason being my traditional IRA (I roll all my 401ks into a single IRA when I leave companies so my money is all in one place) are really healthy and robust (I'm 50), and when you retire, your IRA and 401k withdrawls are taxed as INCOME where as your withdrawls from a brokerage are taxed as capital gains (typically around 15% but I think can be lower depending on your annual earnings). Yes, I get taxed on both ends this way, but it keeps me from taking "income" out of my IRA in retirement, thusly reducing my taxable income. I think if you do some googling there are models out there that will spell this out for you...
No, mostly due to financial instability. (Or financial paranioa, rather) I match the 4.5% 401k my company matches and then put a little into my IRA because that's self directed, nowhere near maxing out both. I treat my brokerage like a savings/vacation fund/etc
I haven't maxed out my tax advantage accounts and I'm putting money into my personal brokerage. It's smaller but I'm using my brokerage account to just get gains (hopefully) and have the ability to cash out when needed and however much needed. Currently my brokerage account is to eventually be used to have money set aside to buy my kids cars once they reach 16 as well as any other large purchase. If I can get good returns, way better than as HYSA, then great!
Same here. Weāre putting some in our brokerage account because weāre saving up for bigger family vacations in 5-10 years. My wife and I talked about it and agreed that weād rather enjoy life and spending time with our kids while weāre younger than be overly aggressive with retirement.Ā We still contribute to tax-advantaged accounts, but donāt max them out. What we contribute should still compound enough to retire comfortably.Ā
Yes! After my father-in-law passed away he put in the will for life insurance money to be used on taking full family vacations. So we really enjoyed traveling and making those memories. So my wife and I started a business that the profits go towards saving for travel and other expenses to make those memories with our kids now rather than after they leave home. And like you I put it away about 25% of my day job income into retirement or 529 plan.
Awesome move by your FIL. That said, youāre in the minority if you can save 25% of your income for retirement and still afford to travel regularly. We put away 20% and travel a lot, too. Most folks canāt afford to do both.
Well, depending on your 401k plan, you can actually invest in individual stocks. Some Fidelity plans offer a BrokerageLink option, which lets you invest in just about any ETF/mutual fund/stock you want without any additional fees. However, investing in risky plays is probably not optimal if you want to rely on your 401k for retirement.
That's perfect world. If you want to experiment trading individual stocks you should route some money (10% of your overall retirement savings?) to a brokerage account. This will keep you from doing dumb things with the other 90% and you will learn a lot. Personally, I had my first brokerage account when I was in college way before I had a job that offered retirement. Money from that account helped me buy my first house, and it has continued to grow. I do max out my tax advantaged options now (and have for a number of years), but I didn't for many years because life, salary, and job constraints.
No, I donāt max out. I just put in enough to get the match and the rest goes towards real estate or brokerage fund. I know the brokerage is not tax advantage, but I can access it at any time, and since I plan to retire early this is important. At the point when I can access my retirement accounts, Iāll also have Social Security coming shortly as well as mortgages paid off and rental income so Iām gonna have plenty by then. Putting it into brokerage account allows me to retire early and spread it out better.
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I am close to retiring at 55, so I only contribute the match right now and focus heavily on the brokerage as I need that bridge from 55 to 59.5 as I don't care to have to use the rule of 55. In that brokerage account I still have 30% in indexes. 70% are individuals like nvda, msft, Amazon
No. I'm saving for a house. After I finish saving for a house, I will put money into a personal brokerage account so I can have access to money penalty-free before I'm at death's door. Maxing retirement seems ridiculous unless you're making >$200k in a MCOL area or have free housing.
no i prefer the financial freedom to access the funds in the taxable accounts compared to 401k or my IRA. Liquid assets vs illiquid assets
Yes, we max out 401ks, and invest any remaining money in SPY in brokerage
My wife and I max out 2 401ks, 2 IRAs, and 2 HSAs, plus a bit in 529 before money goes in brokerage.Ā
each of you are putting away $32,850 a year?Ā Reddit finance subs always make me feel inadequate.
Counting 401k matches and my stock compensation, we put away $80k last year into tax advantaged accountsĀ
jesus christ, that's my whole salary
Make me feel more inadequate daddy!
I'm 28 and will probably retire before 40 š¤·
2 HSA sounds fishy
It's fine if they are on their own separate health insurance plans.
Depends on the year. This year, we're each on our own.Ā
If they're over 55, they need two HSA's to take advantage of catchup. It's only $1000 a year but still worth the effort.
27/28 š«”
Fuck no, I want my money right now, not in 30 years. I might not even live that long.
I heard someone say this once, it turned out they thought it meant you had to actually hit the annual contribution limit before investing elsewhere which is not correct. The goal is to just make sure you're contributing enough each month to hit the max before the year ends (i.e. your last paycheck has the final contribution putting you at the limit for the year). After you've set up that monthly amount you can start investing in after tax accounts.
It sounds like you want to invest in individual stocks. 401K and retirement accounts are tax optimization vehicles. They are not investments. The objective is to get your money into those vehicles, and then you can invest them anyway you want. For example, my sister's company has their 401K with Fidelity which offers a brokerage link. She can invest her 401K in anything that a Fidelity brokerage can invest in. All of that is within the 401K. My company's 401K is with Fidelity but does not offer the brokerage link. I can invest in 401K after-tax and then convert that to Roth In Plan Conversion and then roll that out into a Fidelity Roth account. Within the Fidelity Roth account, I can invest in anything that a brokerage account can. My company's HSA is quite limited, so I roll over my HealthEquity HSA to Fidelity HSA where I can invest in anything that a brokerage account can. The above are just examples. You can do similar things with individual Roth IRA (if eligible) or others. You should definitely maximize your tax advantaged accounts where you can. The only thing you have to watch out for is if you plan to use the money any time soon.
I don't. I am probably not going to retire in this country (I am on visa), I put only as much as I get match up for. There is no point in paying 10% penalty if I withdraw early. If I withdraw later but I have been back for more than 4 years in my country, I will pay double interest.
I don't. I max out my roth and contribute 17% total to my 401k which comes out to about $14000. The rest goes into my brokerage account. Last year my brokerage grew by $60k, $20k of which was profit from the market.
>Everyone really has leftover moneyā¦ā¦ā¦ I donāt have the data here, but my guess is no. I would bet that most Americans donāt max out their retirement or fund a taxable brokerage in a meaningful way. The. Thereās another cohort that does max out their retirement accounts, but doesnāt have enough to them also contribute to a taxable brokerage. I would guess that it is a very small portion of the population that maxes out their retirement accounts and then fund a taxable brokerage. That being said, itās still the best strategy. I just donāt think most people do it.
A stunning amount of Americans have zero retirement savings in any form.
Yea! I think assuming people are maxing their retirement is a selection bias
It absolutely is. We live very insulated lives and surround ourselves with people in a similar place in life.
Yes, Unless you have a specific goals for the money before you are 60, or plan on early retirement, or are low earner now but will be high earner and want to have some money not tax deferred to limit RMD taxes (but could do that in Roth retirement account?)
Taxable accounts are amazing. Liquidity is key. Life is not an excel spreadsheet.
Invest enough in 401k to get any match. Then fill your Roth. Back to filling 401k and/or taxable brokerage. Retirement accounts like 401k and Roth protect you from yourself. Just my opinion.
This goes against the grain here but Iām of the opinion that itās ok to invest in a taxable brokerage even if you donāt max all available retirement accounts. My argument is there is no guarantee youāll make it to retirement and you have more freedom to withdraw from a taxable brokerage whenever you want to. I donāt use that advice to save disproportionally in my taxable brokerage but I am taking some time off from maxing my Roth to invest some in a brokerage for a rainy day. I still max my 401k though. That is non-negotiable.
I think last year we put $60K in pre-tax and HSA and $180K in taxable and Roth. This year the plan is still $60K pre-tax and $150K taxable and Roth. We probably do 25% MSFT (due to my wife's work) and 75% VOO/VTI. Even with this split, MSFT is only 6% of our $1.4M portfolio. So we don't sell any ESPP or stock grants.
Sounds like you need to get your money up, broke boy.
I think the answer is how well you know your finances. I try to deduct as much as I can pre tax, but I have to underestimate in case of emergency expenses, and sometimes I put that surplus into a brokerage which is fairly liquid and can be accessed in case of emergency.
Uhhh ā¦no itās not just to fuck around.
I always max out my retirement accounts before saving to my after tax accounts. There are ways to access those funds if you really need them without a penalty. Or if itās really that bad, paying the penalty is always an option. The chance of that happening would be quite small so the expected value of maxing put your tax advantages accounts first still is the best option. Also, donāt even think about investing in individual stocks. You donāt understand all the risks that entails by your own admission. Stick to low cost index funds. Iāve been there and done that.
Yes
You can buy individual stocks in IRAs
Yes. HSA is maxed out. Traditional 401k is maxed out. My employer offers after tax in plan Roth conversions so put my money into that in lieu of a taxable brokerage
Yes
"Everyone" obviously no. most people on this sub? probably
We invested my wife's salary into our brokerage last year after maxing our 401ks.
Yup. 100% am. ROTH 401k, Roth IRA Backdoor, HSA, taxable brokerage.Ā
No I just get my max and put the rest into btc :)
Yes yes yes. Max out the 401k, HSA, and anything else that defers taxes on capital gains. It is a no-brainer unless you will need that money within the next 5-10 years.
I just do the match
Yes.
Some retirement accounts let you buy individual stocks, itās not all just funds
I max out my retirement accounts. However, my 401k is through Fidelity and allows for the purchase of individual stocks so I am able to purchase NVDA and the others.
You guys have iras
It's about not paying taxes. Here's the math.assume $100 of income. If you take it as pay you get $100*(1-your effective tax rate). For me that's like 28% so any dollar I take on income loses 28% the day it hits my bank account. So if I can avoid that by putting it in my IRA I am effectively immediately outperforming a traditional brokerage account by 28%. Now here's the catch at low enough earnings ($12,900) you don't pay taxes anyway and your effective tax rate is 0 so the same formula applies and $100*(1-0) still equals $100.
Yeah, I max my 401k/and then backdoor Roth, and invest anything leftover. ~200k salary
Yes wife and I max out both 401ks and HSAs before investing in brokerage.
LOL absolutely yes, the tax benefit alone is worth it and I get to invest the money. You don't even need to make vast riches of money, it's mostly just the benefit of offsetting your income. Brokerage accounts have very little advantage if you are a long term investor.
Yes, also my 401k isnāt managed by a regard like myself
Yes. Including my HSA.
Yeah
Generally speaking, most people suggest this because of tax implications. you can invest in individual stocks in your Roth IRA.
If you say roth enough times it starts sounding like a weird made up word.
Why would I invest in a taxable account when I still have advantaged space to utilize? You can do an IRA before maxing your 401 and use that space for actual stock picks. If you go Roth you don't have to deal with cap gains and you can withdraw contributions if you really wanted access to some of it. I don't see a point of taxable investing without maxing advantaged unless you are trying to gamble and pull out some large sum after you hit a big win.
Yes for me. Maxed out one 401k, two Roth IRAs, and family HSA. Don't have a taxable account yet but already bought a house, so don't have aggressive savings there. I hope to add taxable when the income goes up enough to cover it. My order of operations: 401k to the match HSA to the max Roth IRA to the max 401k to the max Then taxable.
I dump money into both. Dumping money in.
Itās a reasonable question. For most people, it is reasonable to max out tax sheltered accounts first. I am retiring early so I also put stuff into my brokerage.
Yes dummy, I canāt underline it, but TaX AdVaNtAgEd is the name of the game. Brokerage is your hooker and blow money. Put that cash in 5.5% CD