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[Hysterical]

Recently became eligible for benefits at my work. They automatically contribute 10% of my paycheck to a 457 plan, i dont even have to put any money in there they just pay the 10% out of their own pockets. Plus I can enroll in a 401, they don't do any matching with that. Just really confused about where I should put money because I want to make sure Im not wasting time to be investing.

 

[Unknown Soldier]

I don't have any bonds but I'm also nowhere near retirement.

 

[cheezcake]

If income, I think you'd want to put away at least 10%. If it sounds like a lot start with 5 and then increase it periodically. If you really have a ton sitting in savings let us know

Not 100% sure what you mean on the second question. In general, indexes can track things with lower or higher risk so it's your choice.

If income, I think you'd want to put away at least 10%. If it sounds like a lot start with 5 and then increase it periodically. If you really have a ton sitting in savings let us know

Not 100% sure what you mean on the second question. In general, indexes can track things with lower or higher risk so it's your choice.

I'm looking for less of a minimum and more of a realistic cap. Yeh I phrased that second part awfully, I just generally mean if you're going for a relatively low risk investment what's the most you would put towards investments percentage wise. I can realistically invest almost 50% of my post-tax income comfortably but it's a lot of money to be putting towards something with any amount of risk.

For me it is not so much about percentage of savings. I put away a certain amount of months of income in a savings account, for if stuff goes bad and I'll need it. Then the rest goes into investments a bit every month. The more the better. There is little reason to have a ton of money in a savings account where it gets almost nothing at the moment in interest.

So basically outside of a rainy day fund for potential necessities everything goes into investment?

Best case scenario, try to max out your 401k.

I'm in Australia so we have superannuation instead, we can't withdraw from that til retirement and I know the threads about generally saving for retirement but I'm also looking to buy my first home hopefully in ~5 years so I'm not looking to make extra contributions to my super until after that.

 

[demosthenes]

Recently became eligible for benefits at my work. They automatically contribute 10% of my paycheck to a 457 plan, i dont even have to put any money in there they just pay the 10% out of their own pockets. Plus I can enroll in a 401, they don't do any matching with that. Just really confused about where I should put money because I want to make sure Im not wasting time to be investing.

Link, write or paste what funds you can put your 401k money into. What are your other life details? Can you afford to do the 401k?

 

[demosthenes]

Things are looking good for the end of the year. A naive calculation says I've saved 55% of post-tax income. That's almost certainly incorrect because of the difficulties in figuring out income and expenses related to real estate rental/selling but I figure it's close enough.

I think I'll set a goal for 2017 of getting to 60% as I I'm definitely going to ask for a raise in the next meeting with management.

That's really great. I'm between 15 and 25% for the last few years and at the moment still do too much travel to get much higher.

When you say saved, do you mean to retirement the accounts and retirement money or just not spent?

 

[Y2Kev]

I would definitely dump it into Total Stock. Though to be fair, I am not a fan of bonds and managed funds, so my advice is not totally unbiased.

Personally, I like how Tokkun conceptualizes bonds. If you have a mortgage, loans, or any other debts think of paying those off as investing in bonds and include that in your investment portfolio. The rest of your portfolio can be all or mostly stocks (that's assuming that you are still relatively young).

No debt yet. Maybe next year.

 

[GhaleonEB]

A semi-related bond question.

Our 529 (state college savings plan) allows us to re-balance the portfolio once a year, in January. My daughter is currently in 100% stocks (partly US, part international), but she just started high school. My plan has been to move 20% over to bonds each year she's in high school, so her mix is 80/20 bonds/stocks by the time she graduates; I'll then maintain that mix through college (we'll keep contributing and re-balancing as she goes).

I'd settled on this approximate strategy a few years ago, in part assuming that interest rates would have normalized by now.

Yeah. Nope.

The problem is my understanding of bond fund prices are much less robust than my understanding of stock and stock funds. And in particular, how they'll move assuming the Fed holds to their planned rate increase schedule over the next year. I understand the fundamental inverse relationship between interest rate changes and bond prices (rate hikes driving current bond prices down). But given that, I'm hesitating to go through with shuffling money over to bonds since rates are likely to go up in the mid-term. And if the Fed keeps raising them for a couple years...won't that negatively impact prices for a while? Or are those expectations already factored into the market and prices?

The bond index option (there is only one) is this one, and it's down ~4% over the past three months, which I'm assuming is tied to the recent rate change and guidance. But I'm really not sure.

I have "don't time the market" branded into my skull, but I'm really not sure how to apply that with bonds given their relationship to interest rates. But I'm nervous about keeping her account all in equities, as well.

If this was over a longer retirement horizon, I would not worry about it. But since it's a much shorter one, I'm less certain what to do.

I realize this is not directly tied to the thread, but I hope ya'll will indulge me.

 

[Wheatly]

*Edit - I'm dumb - the answer was in the OP

 

[ClosingADoor]

So basically outside of a rainy day fund for potential necessities everything goes into investment?


I'm in Australia so we have superannuation instead, we can't withdraw from that til retirement and I know the threads about generally saving for retirement but I'm also looking to buy my first home hopefully in ~5 years so I'm not looking to make extra contributions to my super until after that.

If I understand right, you basically want something you can withdraw from at any time, and now have savings in an account with little interest already.

What I do is pretty much the same situation I think. I put an X amount of money into my chosen ETFs (S&P, Total World, Eurostoxx). Of course you run risk that it can go down in value, but by depositing a certain amount every month you even that out, since you buy at high points, but also low ones. If the market goes bad and crashes, you just keep making your contributions and wait for it to go up again, while just taking dividends (and that is why you have an emergency fund next to it, so you don't have to withdraw with possible losses when needed).

Just don't dump it all in at the same moment now, since the market is pretty high. I did that back in 2015 and it took a year to recover. Split the amounts up and deposit some every month to spread the risk of doing your initial investment at a market high.

This is just what I do personally, so your preferences or strategies might vary depending on your situation.

If you know you need the money in 5 years or another period, you might want to look at bonds I guess, since they are lower risk. But some other people here are probably more knowledgeable with that.

 

[Piecake]

A semi-related bond question.

Our 529 (state college savings plan) allows us to re-balance the portfolio once a year, in January. My daughter is currently in 100% stocks (partly US, part international), but she just started high school. My plan has been to move 20% over to bonds each year she's in high school, so her mix is 80/20 bonds/stocks by the time she graduates; I'll then maintain that mix through college (we'll keep contributing and re-balancing as she goes).

I'd settled on this approximate strategy a few years ago, in part assuming that interest rates would have normalized by now.

Yeah. Nope.

The problem is my understanding of bond fund prices are much less robust than my understanding of stock and stock funds. And in particular, how they'll move assuming the Fed holds to their planned rate increase schedule over the next year. I understand the fundamental inverse relationship between interest rate changes and bond prices (rate hikes driving current bond prices down). But given that, I'm hesitating to go through with shuffling money over to bonds since rates are likely to go up in the mid-term. And if the Fed keeps raising them for a couple years...won't that negatively impact prices for a while? Or are those expectations already factored into the market and prices?

The bond index option (there is only one) is this one, and it's down ~4% over the past three months, which I'm assuming is tied to the recent rate change and guidance. But I'm really not sure.

I have "don't time the market" branded into my skull, but I'm really not sure how to apply that with bonds given their relationship to interest rates. But I'm nervous about keeping her account all in equities, as well.

If this was over a longer retirement horizon, I would not worry about it. But since it's a much shorter one, I'm less certain what to do.

I realize this is not directly tied to the thread, but I hope ya'll will indulge me.

Now that the Fed is expected to gradually increase rates, perhaps as early as December, investors should check the average duration in their bond funds to make sure they are comfortable with the level of interest-rate risk they are taking.
"Many investors could be sitting on a ticking time bomb," said Ashish Shah, chief investment officer of global credit and head of fixed income for AllianceBernstein. "They won't likely realize much more price appreciation, but they continue to have very long duration."

This is especially true for investors in bond index funds where the average duration, or sensitivity to interest rate change as measured in years, is higher than for actively managed bond funds.

Globally, bond index funds have an average duration of 7.5 years and an average yield of 1.8 percent whereas actively managed bond funds have an average duration of 5.8 years and an average yield of 3.3 percent, according to Shah's research.

"If rates were to rise by 1 percentage point, these passive funds could lose as much as 7.5 percent," Shah said.

However, credit quality and yield in a bond fund, whether it is active or passive, could cushion the blow from having longer duration bonds in a portfolio.

There is a smaller gap in the average duration and yields for U.S. active and passive bond funds than global funds.

The average U.S. intermediate-term bond fund has a duration of 5.4 years and a yield of 2.2 percent while the average actively managed U.S. intermediate-term bond fund has a duration of 4.9 years and a yield of 2.5 percent, according to investment research firm Morningstar

http://www.cnbc.com/2016/09/25/check-your-bond-funds-before-interest-rates-rise.html

If the Fed does plan on raising interests rates then funds like the total bond fund are going to go down.

As for whether or not you should move your 529 into bonds, is it possible to move that money into some longer-ish term CDs? Sure, the interest rates have a lower ceiling than bonds, but like you said, with the interest rate hike, it looks like bond funds are likely to lose money in the near term.

Leaving it in your money market is always an option as well. It obviously won't make any money, but I bet you would be glad you made that move if the market crashes, bonds are losing money, and you need some money in the 529 to pay a college bill.

As for whether the price is already factored into the bond fund, like you, my understanding of bonds is pretty weak, but from my understanding is that bonds handed out when interest rates were lower are simply going to be worth less compared to bonds handed out with interest rates are higher. Thats bad news for a fund that has an average age of 5-7 years.

 

[AndyD]

Is there a website akin to the old Mint.com where I can register all our investment/retirement accounts into one dashboard?

And would we be better served with a Money Market through by bank (where we have checking/savings) or through Ameritrade (where we have IRAs) to stick some money that is semi-invested semi-rainy day in case something major happens.

Thanks all!

 

[demosthenes]

Is there a website akin to the old Mint.com where I can register all our investment/retirement accounts into one dashboard?

And would we be better served with a Money Market through by bank (where we have checking/savings) or through Ameritrade (where we have IRAs) to stick some money that is semi-invested semi-rainy day in case something major happens.

Thanks all!

I just use excel. I know that sounds boring but it works.

 

[tokkun]

A semi-related bond question.

Our 529 (state college savings plan) allows us to re-balance the portfolio once a year, in January. My daughter is currently in 100% stocks (partly US, part international), but she just started high school. My plan has been to move 20% over to bonds each year she's in high school, so her mix is 80/20 bonds/stocks by the time she graduates; I'll then maintain that mix through college (we'll keep contributing and re-balancing as she goes).

I'd settled on this approximate strategy a few years ago, in part assuming that interest rates would have normalized by now.

Yeah. Nope.

The problem is my understanding of bond fund prices are much less robust than my understanding of stock and stock funds. And in particular, how they'll move assuming the Fed holds to their planned rate increase schedule over the next year. I understand the fundamental inverse relationship between interest rate changes and bond prices (rate hikes driving current bond prices down). But given that, I'm hesitating to go through with shuffling money over to bonds since rates are likely to go up in the mid-term. And if the Fed keeps raising them for a couple years...won't that negatively impact prices for a while? Or are those expectations already factored into the market and prices?

The bond index option (there is only one) is this one, and it's down ~4% over the past three months, which I'm assuming is tied to the recent rate change and guidance. But I'm really not sure.

I have "don't time the market" branded into my skull, but I'm really not sure how to apply that with bonds given their relationship to interest rates. But I'm nervous about keeping her account all in equities, as well.

If this was over a longer retirement horizon, I would not worry about it. But since it's a much shorter one, I'm less certain what to do.

I realize this is not directly tied to the thread, but I hope ya'll will indulge me.

The Fed has talked about its plans to raise rates a few times in the last few years, and those plans keep getting revised back. In general they seem to be pretty conservative about raising rates, and will only do so if economic growth is unambiguously good.

The consequence of that is that they will probably only increase rates if stock prices continue to go up. If there is a recession instead, bond prices will go up. So if you are looking for something that is anti-correlated with stocks to mitigate risk, they are still fine. And since you are talking about gradually shifting from 100% stocks into a mix of stocks and bonds, I don't see the problem. If your plan was to go from 100% stocks directly to 100% bonds, then I could see the quandary.

What you might want to consider doing is shifting to a 50/50 stock/bond split by the time she is halfway through school, then begin shifting money into a stable value fund, like money market.

Is there a website akin to the old Mint.com where I can register all our investment/retirement accounts into one dashboard?

I recommend Personal Capital.

 

[anonymous_abc]

Is there a website akin to the old Mint.com where I can register all our investment/retirement accounts into one dashboard?

And would we be better served with a Money Market through by bank (where we have checking/savings) or through Ameritrade (where we have IRAs) to stick some money that is semi-invested semi-rainy day in case something major happens.

Thanks all!

I use nYNAB with automated import from all my banks and investment accounts.
Well worth the subscription fee for me.
I've been using YNAB for years now.

I hardly use it for budgeting anymore because I have that pretty much under control and am not prone to bad habits, but if you want to budget and save money it gives you an excellent philosophy to work with.

 

[AndyD]

I just use excel. I know that sounds boring but it works.

Oh I have that already. Was thinking something that can track the various investments over time. Just found Google FInance. Looks like I can add the various holdings and track them that way. It's not perfect, but it's a start.

 

[demosthenes]

Oh I have that already. Was thinking something that can track the various investments over time. Just found Google FInance. Looks like I can add the various holdings and track them that way. It's not perfect, but it's a start.

I have my excel setup to do just that. I have enough logins to keep track of lol

 

[PflargBlarg]

That's really great. I'm between 15 and 25% for the last few years and at the moment still do too much travel to get much higher.

When you say saved, do you mean to retirement the accounts and retirement money or just not spent?

Basically 100% of that is retirement stuff. I've had the 'same' $5000 in my bank as emergency fund for over a year so no savings went there and I keep another $2000 for cash flow which I don't count as savings.

My bank keeps giving special interest rates of 1.5-2% so I keep the cash in there until I build up $5000 and invest it all together to cut down on transaction fees.

Is there a website akin to the old Mint.com where I can register all our investment/retirement accounts into one dashboard?

And would we be better served with a Money Market through by bank (where we have checking/savings) or through Ameritrade (where we have IRAs) to stick some money that is semi-invested semi-rainy day in case something major happens.

Thanks all!

Seconding Personal Capital. I keep hoping they'll extend into Canada but no luck so far.

 

[Y2Kev]

And TIRA funded *blows kazoo*

only two days until I can convert lol

 

[Original Famous Ray]

A new year means its time to put some dough into my Roth IRA! As usual I'll put in the full $5500 because why not.

Last year I almost maxed out my 401k (17.7k) for the first time and I'll try to replicate that this year. Still haven't bothered with taxable investments yet which I really should since I will be able to max out my Roth and 401k this year. No sense letting money rot in some checking account doing squat. Have to educate myself more on that stuff though.

Hope you all do well with your retirement savings! Happy new year!

 

[hockeypuck]

And TIRA funded *blows kazoo*

only two days until I can convert lol

Ah, thanks for the reminder. Just did the same.

 

[Chris R]

A new year means its time to put some dough into my Roth IRA! As usual I'll put in the full $5500 because why not.

Last year I almost maxed out my 401k (17.7k) for the first time and I'll try to replicate that this year. Still haven't bothered with taxable investments yet which I really should since I will be able to max out my Roth and 401k this year. No sense letting money rot in some checking account doing squat. Have to educate myself more on that stuff though.

Hope you all do well with your retirement savings! Happy new year!

Wish I could be funding a 401k along with my Roth instead of my taxable account Oh well

 

[vypek]

This year will hopefully go a bit differently for me with less unexpected expenses. Really trying to get serious and buckle down. If I really go for it I might be able to fully fund my 401K.

I wonder what would happen if I do fully fund and my company tries to put part of my paycheck in there or if they try to deposit their matching. Just blocked, right?

 

[tokkun]

I wonder what would happen if I do fully fund and my company tries to put part of my paycheck in there or if they try to deposit their matching. Just blocked, right?

In general the company that manages the 401k for your employer should ensure that you don't accidentally over-contribute.

But the $18K contribution limit is only on your contributions and not on your employer's matching funds. There is a separate combined $53K limit that accounts for that.

 

[ascii42]

But the $18K contribution limit is only on your contributions and not on your employer's matching funds. There is a separate combined $53K limit that accounts for that.

Though depending on how your employer handles matching, it's possible to miss out on matching if you hit the contribution limit early.

 

[vypek]

In general the company that manages the 401k for your employer should ensure that you don't accidentally over-contribute.

But the $18K contribution limit is only on your contributions and not on your employer's matching funds. There is a separate combined $53K limit that accounts for that.

Though depending on how your employer handles matching, it's possible to miss out on matching if you hit the contribution limit early.

Already learning a lot more on the first day of the new year. Haha. Thanks both of you. Doubt I have to worry about over-contribution but it's still good to learn this stuff.

 

[anonymous_abc]

IRA 2017 fully funded.

 

[Chris R]

IRA 2017 fully funded.

Technically, mine wont be until Tuesday or Wednesday

 

[Randolph Freelander]

Part of my early Roth IRA funding put new tires and brakes on my car.

Spoiler

And a new squat rack in my house.

I should be able to top it off before March.

 

[anonymous_abc]

Technically, mine wont be until Tuesday or Wednesday

Meh. I'm ignoring that fact of life.

 

[GhaleonEB]

No IRA contributions for us this year, though we will increase the 401k contributions if I get a raise in April, as hoped.

This past quarter we've gone through a forced budget shift, and as an experiment might try to make it permanent. Last January I was hospitalized with food poisoning, and in my weakened condition agreed to stay overnight for observation. Cue $3,000 hospital bill, plus $600 for the doctor's cameo. We had enough in our HSA for the latter but not the former, so we had to pay $3,000 out of pocket. But we can get reimbursed for medical expenses, and upped our contributions to the HSA so we could get the benefit of using pre-tax dollars. The tax benefit is ~35%, so we had to put ~$2,000 into the HSA in order get the reimbursement.

Then our older daughter needed braces. We've been spending out of the HSA almost as fast as we put in.

In August we set the HSA contributions to max out for the year in a bid to finally pull ahead, which meant an extra $350 withheld from paychecks per month. Once summer vacations were paid for, we managed to adapt to the new budget and only had to shuffle money over from savings to fill in some of the gap once. (Tapping the brakes on home projects once summer was over helped.)

By the end of January, we'll finally have the HSA caught up enough to get the $3,000 hospital bill reimbursed (which is going straight onto the mortgage). We're going to go ahead and max out again this year, in order to build up a buffer and not chase the next big medical expense (daughter #2 might need braces, too). But since those contributions will be spread throughout the year rather than back-loaded as 2016 was, my paychecks will actually go up in January. I might up the 401k contributions to keep them flat-ish until summer, when projects will kick in again.

All of which is to say, we might up our 401k this year, but still no IRA as we're stuffing the HSA and still paying down the mortgage. But otherwise, no bit changes in plans. (That was way longer than I meant it to be.)

 

[Makai]

No contributions for this year - cashed out most of my Roth to move. Ready to start chipping back in now - hopefully max before the deadline.

 

[Wellington]

IRA 2017 fully funded.

And TIRA funded *blows kazoo*

only two days until I can convert lol

Technically, mine wont be until Tuesday or Wednesday

Same, feels good man.

Trying to focus on efficiency this year and increase my savings rate.

 

[chaosblade]

I probably won't fund my Roth this year until I get a house and know where I stand on cash after that. Can chip in with each paycheck until then.

 

[Azar]

Hey Finance-GAF,

A new year means thinking about budgets and investments and I'm looking for some advice! Short version: I have some index fund investments and wonder if I should move that money to a Roth IRA.

I'm almost 29 and just bumped my two-year-old 401k up to 15% from 10% where I've had it for a little while (employer matches 3%). Separate to that, I have a Fidelity Investments account my dad set up when I was a kid. For a long time this money was in mutual funds that didn't see much growth (and took a big hit in 2008), but it's currently sitting at $20k invested in the following funds:

Fidelity Freedom 2050, Fidelity Government Income, Fidelity Low Priced Stock index, Fidelity Extended Market index investor class, Fidelity Total Market investor class. There's also some money in Apple stock and about $500 sitting in money markets (my Fidelity credit card cash-back dumps straight into my investment account).

I think these are all pretty good long-term growth investments, but where my knowledge gets fuzzy is on the tax perks of a Roth IRA. Obviously this money has all been taxed already and should grow with the market over the years. Would there be any advantage to me taking this money out of the index funds and re-investing it in a Roth IRA? Or should I just leave well enough alone?

Few other details:
- Debt free. Paid off my student loans in 2016 and I have several credit cards but never carry a balance. Credit is pretty dang good.
- I live in SF so rent is pretty expensive, and as a journalist I don't expect too many big raises in my future, so I need to invest smart! Currently no plans to buy a home.
- I'm getting some budgeting together in Mint after ignoring it for a few years. Plan to start working on some rough budgets for dining out, etc. to make saving easier.
- I love to travel and don't mind spending money on it when I'm young, even if I could be saving more. So that's an important budget factor.

 

[SyNapSe]

I think these are all pretty good long-term growth investments, but where my knowledge gets fuzzy is on the tax perks of a Roth IRA. Obviously this money has all been taxed already and should grow with the market over the years. Would there be any advantage to me taking this money out of the index funds and re-investing it in a Roth IRA?

IRAs are tax advantaged accounts. Inside of one the govt will ignore your growth. In your current Fidelity, they'll expect you to pay capital gains tax when you realize the growth by selling. If your 20k grows to 60k, you'll pay taxes on that growth.

I'm not sure how you moved from the mutual funds to the indices without tax implications that'd leave you knowing this already. Assuming you're looking to invest long term it's likely worth moving it in chunks to an IRA.

 

[smokeandmirrors]

This should be a good reference. Almost a year at my job and I'm contributing 3% matched with my employer 3% match.

Can't do much more at the moment due to student loans but gonna start lurking this thread more to get things in order.

 

[Y2Kev]

Do y'all fully fund 401ks when trying to save for down payment for house?

 

[sazabirules]

Do y'all fully fund 401ks when trying to save for down payment for house?

If I was saving for a down payment on a house I would only contribute the amount needed to get the full employer match for the 401k.

 

[TylerD]

If I was saving for a down payment on a house I would only contribute the amount needed to get the full employer match for the 401k.

That makes sense to me. I'm going to adjust my 401k contribution and IRA to expedite funding house down payment. I had a specific funding goal in mind for Dec 2017 but want to get a mortgage signed sooner rather than later before interest rates go up.

 

[Randolph Freelander]

Do y'all fully fund 401ks when trying to save for down payment for house?

I did. I like market returns (late edit: and tax advantages!) more than I care about additional interest and PMI.

 

[Pixels]

I'm scared to put my IRA contribution into the stock market at this time...

 

[Piecake]

I'm scared to put my IRA contribution into the stock market at this time...

Comfort yourself with the notion that market timing rarely works, and even if the market takes a dive it really won't matter much in 30-40 years.

The smart money is always investing ASAP

 

[kutthoat5150]

holding off on IRA contributions as well as we're currently saving up for a house with a pretty aggressive savings plan this year. Just debating whether I want to pull 10k from IRA for a house as I won't get hit with the tax penalty. California housing market is a real SOB

 

[demosthenes]

If I was saving for a down payment on a house I would only contribute the amount needed to get the full employer match for the 401k.

This. Increase it after.

I just did this.

 

[demosthenes]

I haven't fully funded my 401k before, for people that have, how much do you make if you don't mind sharing? Are you alone? I just purchased a house and I'm not married so my income is my own. I put a good chunk away but I feel like I'd be missing that extra $6-7k. One of my goals over the next couple of weeks is to get a better budget in place and try to control some more spending.

 

[Link]

Roth is fully funded for the year. I also recently increased my 403b contribution from 10% to 12% of my paycheck. Gotta make up for lost time.

 

[meow]

One of my new year's resolutions is to get my act together with this investing stuff. I'm going to do a steady read through this thread (have read a handful of pages just now).

I was extremely stupid this past year and have just had my money sitting in my savings account and I want to remedy this. So I have a small lump sum (quote to see an estimate here) to invest and was wondering if anyone could give me some starting pointers on what I should look at.

I did max out my 401(k) last year (but my employer doesn't match at all) and guess I should probably put the 5.5k into an IRA (saw I have until April to do so for last year). I'm just under 30 years old if that matters. I don't have any planned big expenses though I am thinking of seeing if I can get a mortgage in...I don't know? 2 years?

Should I throw it all into index funds under vanguard? Is there a benefit to using something like betterment instead? My apologies if this has all been covered and I fully intend on doing my own research and googling and reading through this thread. I just really appreciate some thoughts and I'm pretty peeved I squandered this past year so even this post makes me feel like I'm at least trying to move in the right direction.

 

[SourBear]

Have somewhat of a hypothetical but based on somewhat of a real world situation I'm in.

The standard advice seems to be to do 401k until matched, then IRA, etc. Then contribute back to 401k until you cap it. The last bit is obviously only if you can afford to cap it. Which I can't.. not really.

But lets say your companies 401k is really awesome and provides a lot of Vanguard funds, and other well regarded funds. Since I can't afford to cap the 401k and contribute to an IRA. Would it be okay to skip the IRA and put all the money into the 401k assuming I would get the same fund picks as the IRA?

 

[tokkun]

Have somewhat of a hypothetical but based on somewhat of a real world situation I'm in.

The standard advice seems to be to do 401k until matched, then IRA, etc. Then contribute back to 401k until you cap it. The last bit is obviously only if you can afford to cap it. Which I can't.. not really.

But lets say your companies 401k is really awesome and provides a lot of Vanguard funds, and other well regarded funds. Since I can't afford to cap the 401k and contribute to an IRA. Would it be okay to skip the IRA and put all the money into the 401k assuming I would get the same fund picks as the IRA?

Short answer: Yes.

Long answer: Although fund choice is the main motivation for that choice, there are a couple other factors to consider. 401ks tend to have better legal protections than IRAs do and are usually safer in the event that you are the target of a lawsuit or have to file for bankruptcy. On the other hand, it is easier to do early withdrawals with IRAs, so if you are worried that you will have an emergency that requires withdrawal (while you are still employed), you might prefer an IRA.

 

[Wellington]

Do y'all fully fund 401ks when trying to save for down payment for house?

I didn't make enough money to fully fund my 401k when I bought my house but I think for me at this point it would depend on when I am buying, basically if it's this year I would contribute less this year and focus my savings, if it's next year I would try and cap it. My reason being is that the marginal addition in savings over the course of the year would be offset by my loss associated with the tax shelter provided by the 401k savings as well as the (assumed) growth of the fund.

If I normally hit the cap at $18k and decide this year I want to put $10k in my pocket rather than contribute, that $10k is getting taxed (IIRC you are at a high tax rate) so it's not a real number. Further, you now have to have the discipline to not spend it and as I mentioned there's less growth.If I am buying sometime in 2018 I would rather the growth and tax savings this year and see if I can tighten my belt in another category.

Edit: Nvm, Randolph beat me and much more succinctly.