If it is truly an either/or scenario, then yea focus on the free money. Do a Roth 401k if you can.

No, $200/month doesn't sound like much, but if you do it for 30 years, you could end up with $300k, tax free. Definitely worth the effort if you can manage it.

2/22/2015 6:48:37 PM

Okay so here's the deal. My wife has been working for a shitty employer who offered no benefits, so we set her up a Roth IRA with Vanguard and have been putting in around $300 a month. She just got a new job with full benefits including a 401k(non-matching.)

Should we continue to contribute to the Roth(until we can max it out,) or should we start contributing to the 401k?

9/12/2016 5:54:30 PM

Max the Roth. If there's no match there's really no need to prioritize the 401k.

[Edited on September 12, 2016 at 5:59 PM. Reason : Sorry, misread. ]

9/12/2016 5:57:48 PM

It's a non-matching 401k

9/12/2016 5:58:55 PM

What Kurtis said. You should max the Roth either way unless the 401k match is significant.

9/12/2016 8:10:42 PM

^ [NO]

401k up to any amount that it's matched ("significant" or not), then Roth IRA, then 401k without match.

9/13/2016 12:00:12 AM

Yup. Always get that free matching money. That's the starting point.

9/13/2016 12:34:29 AM

Yeah, it's not a matching 401k. That's why I edited.

9/13/2016 6:30:35 PM

Absent matching funds you should definitely contribute to the IRA before the 401k. About the only exception would be if investment options in the 401k were better/cheaper than the IRA. But, seeing as you're already set up with Vanguard (and the ease with which you can set up an IRA at Vanguard or anywhere else), it's hard to imagine that's the case in your situation.

I will say that having access to the 401k gives you a great opportunity to shovel a lot of money into a tax advantaged account.

9/13/2016 11:02:40 PM

Yeah, I mean by all means invest as much as you can without being miserable and sacrificing quality of life. At minimum you should max out a Roth, contribute to your 401k, and have a regular savings account which can include your "emergency fund" or even better set up a separate account just for your emergency fund.

I mean, I'm no investing wiz, but by following some basic budgeting and self discipline I've been able to put myself in line to retire at age 50-55 pretty easily, and that's as a single dude. If you're married you guys should be blessed to put away even more.

9/14/2016 11:51:11 PM

Yeah so I have my own retirement account. We're doing about 500-600 a month into a savings account(down payment on our next house) and around 300 into her Roth every month.

9/15/2016 8:06:18 AM

Quote :

"If you're married you guys should be blessed to put away even more."

Yeah but you also are gonna have to fund two old people in retirement so this cancels out haha.

9/15/2016 8:20:56 AM

Another thing to look into is opening an HSA (health savings account). Some places offer that as part of your health insurance, or if not you can open one on your own. Great place to tuck away cash that you can use later on in retirement and has investment options. Given how much of your post retirement spending will be on health care it's very appealing.

9/16/2016 12:43:13 PM

HSA premiums as well as the contribution you put into your HSA (for single like $3350/married probably twice that for 2016) are not only fed/state deductible as your typical PPO premiums are, but are also PAYROLL deductible. That comes out to be 7.45 % of $3,350 plus 7.45% off the premiums. Keeps the governments hands off $275 if single granted you're not above the SS cap for income. Can put into any investment vehicle you like and withdraw at age 65 at your tax bracket. Essentially making it a traditional IRA.

9/16/2016 2:57:58 PM

Yeah, it's a nice little option, especially if your employer contributes as well.

9/16/2016 4:01:16 PM

yep. i've had an HSA account for about 3 years. this is really the first year i've contributed much and taken it seriously. i originally had it through my insurance at work previously and was contributing some out of every pay check. changed jobs about 2 years ago and kinda forgot about it (no more auto-contributions to it) and quit paying much attention to it until this year. i moved it over to SECU (they offer 1.5% interest on HSA) and have started actually contributing and paying attention to it...i will likely max it out this year, or come very close to it.

[Edited on September 16, 2016 at 5:10 PM. Reason : c]

9/16/2016 5:09:40 PM

Didn't realize the HSA rolls over. Works throws in $500 so figure I'll just max it out going forward.

9/17/2016 12:17:08 PM

Yeah, just make sure it's and HSA not an FSA. Your health savings account is yours, it's transferable and you can actually invest the balance once you have a certain balance amount.

An FSA is a flexible spending account and generally has to be spent within the year.

[Edited on September 17, 2016 at 1:12 PM. Reason : Ndndmdm]

9/17/2016 1:11:55 PM