Financial Priorities

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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Topic Author
Paisley
Posts: 47
Joined: Sun Apr 14, 2019 12:32 pm

Financial Priorities

Post by Paisley » Sun Apr 14, 2019 12:43 pm

Hi I'm new to this site. Wow - amazing information! Question: Is there a priority of where people should invest their money - like a 401k vs IRA? Or whether a house should be paid off instead of contributing to an IRA?

Thanks!

JoeRetire
Posts: 2150
Joined: Tue Jan 16, 2018 2:44 pm

Re: Financial Priorities

Post by JoeRetire » Sun Apr 14, 2019 1:04 pm

Paisley wrote:
Sun Apr 14, 2019 12:43 pm
Hi I'm new to this site. Wow - amazing information! Question: Is there a priority of where people should invest their money - like a 401k vs IRA? Or whether a house should be paid off instead of contributing to an IRA?
Read some more and you'll see lots of answers to these questions already.

In general, if your employer provides any match in your 401k, you want to make sure to take advantage of that free money match. And of course, you can put a lot more tax-deferred money each year into your 401k than you can your IRA.

Don't pay off cheap mortgages.

Ybsybs
Posts: 486
Joined: Thu Aug 28, 2014 4:28 pm

Re: Financial Priorities

Post by Ybsybs » Sun Apr 14, 2019 1:25 pm

Paisley wrote:
Sun Apr 14, 2019 12:43 pm
Hi I'm new to this site. Wow - amazing information! Question: Is there a priority of where people should invest their money - like a 401k vs IRA? Or whether a house should be paid off instead of contributing to an IRA?

Thanks!
People vary in what would be an optimal financial choice just as their situations vary.

In general, it's good to actually accept your full compensation, so if you are among those fortunates who have a company match for some portion of a 401k contribution, make sure to put in at least that much.

If you have no corporate match and the funds options available inside your 401k are not so great high fee choices, it's good to max our your IRA contributions for the year before adding to the 401k.

If you are in a place in your life where moving around is necessary for growing your career, you should probably be renting and not trying to build up your home equity. If you are nearing retirement, it would sure be nice to enter your golden years with the mortgage gone. Many folks will be somewhere in between.

I'm having trouble thinking of a situation where paying off a house is preferable to making *any* retirement contributions. But perhaps if you are a foreign national intending to retire back to your home country and US tax law based retirement savings aren't helpful for you?

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Shackleton
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Re: Financial Priorities

Post by Shackleton » Sun Apr 14, 2019 1:29 pm

The wiki has a page on investing priorities: https://www.bogleheads.org/wiki/Priorit ... nvestments
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton

Ferdinand2014
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Location: New England

Re: Financial Priorities

Post by Ferdinand2014 » Sun Apr 14, 2019 9:27 pm

For me I lined up my priorities as follows:

Make a budget and take on as little debt as possible then,

1.) Emergency Fund of at least 2-3 months of basic expenses
2.) Pay off any credit cards
3.) Contribute the minimum to get the maximum matching in company 401k/403b
4.) Pay off any loans > 4-5 % interest
5.) Maximize 401k/403b if possible
6.) Fill out emergency budget to 6-12 months of basic budget expenses
6.) Put extra to pay off house and any loans < 4% interest



Everyone has unique financial situations. In general, I would at least make sure you have an emergency savings and no credit card debt before anything else in my opinion.

Topic Author
Paisley
Posts: 47
Joined: Sun Apr 14, 2019 12:32 pm

Re: Financial Priorities

Post by Paisley » Tue Apr 23, 2019 7:00 am

Thank you for your input!

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