Fund 401k up to match or max Roth first?

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achomper
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Fund 401k up to match or max Roth first?

Post by achomper »

Hello,

***EDIT***

401k account will be accessible after 90 days of employment. (Middle of August)

Just need some basic guidance too short on time to make a lengthy/ detailed post about my situation (can edit later if more info needed).

Long story short.
Already have a well funded Roth IRA. Moving to a company that does a 3% match on a 401k in a Schwab account.

This year, should I work on maxing the roth first or fund the 401k up to the match first --> max Roth IRA?

Basic info: age 30. Own house. 100k+annual income. Mainly buy and hold 80% FSKAX and 20% FSPSX in my fidelity roth IRA.
Last edited by achomper on Fri May 13, 2022 8:56 am, edited 2 times in total.
Katietsu
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Re: Fund tIRA up to match or max Roth first?

Post by Katietsu »

Short answer: your first priority should be to get the full match.
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White Coat Investor
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Re: Fund tIRA up to match or max Roth first?

Post by White Coat Investor »

Companies don't match traditional IRAs.

Traditional IRAs and Roth IRAs share the same contribution limit.

Do you want to rephrase your question with proper terminology so you can get the right answer? I feel like something should be a SEP IRA or a SIMPLE IRA or a 401(k) or something in the question.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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celia
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Re: Fund tIRA up to match or max Roth first?

Post by celia »

White Coat Investor wrote: Fri May 13, 2022 12:32 am Companies don't match traditional IRAs.
Yep, this is what happens when you make a post too brief. I’ll bet the OP has both IRAs plus access to an employer plan.

In that case, your Roth IRAs should be maxed when you are early in your working years, since once you have several years of work experience, your wages will tend to increase. When your wages push you into a higher tax bracket, you can start to use pre-tax instead (and save even more because your income is higher and the tax-deferred contributions won’t be taxed until withdrawal time).

OP, does the employer match contributions to both pre-tax and post-tax 401k’s? How much are you able to save each year and how soon will you need to spend the money? Let’s start with that.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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retiredjg
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Re: Fund tIRA up to match or max Roth first?

Post by retiredjg »

achomper wrote: Fri May 13, 2022 12:12 am Hello,

Just need some basic guidance too short on time to make a lengthy/ detailed post about my situation (can edit later if more info needed).

Long story short.
Already have a well funded Roth IRA. Moving to a company that does a 3% match on a tIRA in a Schwab account.

This year, should I work on maxing the roth first or fund tIRA up to the match first, then max Roth IRA?

Basic info: age 30. Own house. 100k+annual income. Mainly buy and hold 80% FSKAX and 20% FSPSX in my fidelity roth.
It sounds like this work account will have to be a SIMPLE IRA (or a SARSEP but few of those exist any more).

Unless the plan is terrible (an many are pretty bad) you should get the match because it is free money. There is no reason you cannot fill both a SIMPLE IRA and a Roth IRA if you can save that much.
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achomper
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Re: Fund tIRA up to match or max Roth first?

Post by achomper »

celia wrote: Fri May 13, 2022 2:35 am
White Coat Investor wrote: Fri May 13, 2022 12:32 am Companies don't match traditional IRAs.
OP, does the employer match contributions to both pre-tax and post-tax 401k’s? How much are you able to save each year and how soon will you need to spend the money? Let’s start with that.
Apologies every one for my late night sleep deprived post. Company matches pre tax 401k.

I always try to max our roth IRAs for myself first then my wife. Considering funding up to the match first (before maxing roth) as most have suggested since its pre tax. No touching any of this until we're retirement age. *fingers crossed*

We're on track to contribute 12k for our roths this year.

Fidelity Total stock MF 80%
Fidelity total international MF 20%
Roth

Unsure about full structure of 401k account atm. Meeting today to get more info.

Thanks again!
Last edited by achomper on Fri May 13, 2022 8:54 am, edited 1 time in total.
Topic Author
achomper
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Re: Fund tIRA up to match or max Roth first?

Post by achomper »

retiredjg wrote: Fri May 13, 2022 8:07 am
Unless the plan is terrible (an many are pretty bad) you should get the match because it is free money. There is no reason you cannot fill both a SIMPLE IRA and a Roth IRA if you can save that much.
Thank you for your response. I messed up the original post. It'll be a 401k that's offered.
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achomper
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Re: Fund tIRA up to match or max Roth first?

Post by achomper »

White Coat Investor wrote: Fri May 13, 2022 12:32 am Companies don't match traditional IRAs.

Do you want to rephrase your question with proper terminology so you can get the right answer? I feel like something should be a SEP IRA or a SIMPLE IRA or a 401(k) or something in the question.
Thank you kindly for your insight. Indeed I messed up the original post. It'll be a 401k that's offered.
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retiredjg
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Re: Fund tIRA up to match or max Roth first?

Post by retiredjg »

achomper wrote: Fri May 13, 2022 8:42 am
retiredjg wrote: Fri May 13, 2022 8:07 am
Unless the plan is terrible (an many are pretty bad) you should get the match because it is free money. There is no reason you cannot fill both a SIMPLE IRA and a Roth IRA if you can save that much.
Thank you for your response. I messed up the original post. It'll be a 401k that's offered.
The answer will likely be the same - get the match in the 401k and put the rest into Roth IRA. If the 401k is a good one, some people prefer to fill the 401k and put the rest (including the taxes saved by using the 401k) into Roth IRA.

Don't bypass a match unless the plan is absolutely terrible and even then, it is often a good idea to get the match.
dboeger1
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Re: Fund 401k up to match or max Roth first?

Post by dboeger1 »

Keep in mind that contributions to traditional 401k and IRA accounts aren't binding in perpetuity. There are options. You can roll the 401k over to an IRA and/or do Roth conversions later at a more advantageous time. So it's not like contributing to a 401k is somehow anti-Roth. If you ever expect to be in a lower tax bracket, perhaps due to early retirement or job loss, or there's ever a huge drop in asset values, you can take advantage of those situations by doing strategic Roth conversions. As someone who aspires to retire as early as reasonably possible, I am prioritizing traditional pre-tax 401k contributions because I fully expect to be paying lower taxes when I start withdrawing.
rkhusky
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Re: Fund 401k up to match or max Roth first?

Post by rkhusky »

For some 401k's you have to contribute each paycheck to get the match.
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White Coat Investor
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Re: Fund 401k up to match or max Roth first?

Post by White Coat Investor »

Yup, get the match as your highest priority.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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