401(k) vs IRA vs boosting emergency fund........decisions decisions...

[man4857]

Originally Posted by Thinking-man

I'm in the process of switching jobs this early January....
I max out my IRA (wife and I) as well as only my 401k annually, and i've set my withholding to be around 90% of my first paycheck (so, about $5k), going towards 401k. That's because i'm thinking that i may not have an employer for a few months (in case of potentially being laid off soon...) and want to make sure i contribute as much as possible before that happens. Similarly, what i could do is reduce that % to 0, take the cash and max out my IRA instead.

Emergency fund is at about a year conservatively, before touching any of the brokerage accounts, so i think adding to the EF may not be the best use for the money....

I'm stuck between the choices, but maybe that's because they're so close?
Any thoughts?

I personally would keep the 401(k) at the level you had if everything was going fine, keep maxing out the IRA, and max out a HSA if you have it available. Otherwise, I'd pile up cash and do my own investing on the side. The downside of stuffing all your money into the 401(k) is there is a limited amount of investment options open to you versus having your own brokerage. I'd go with more freedom for investment opportunities than the 401(k). Since your EF is already built, there's nothing really to worry about, just the flexibility.

[HLS14]

Originally Posted by Florida2014

Sounds like OP may be a high earner who couldn't qualify for the Roth.

You can always qualify for a Roth if you use the backdoor. I'm a high earner and we maxed out our Roth last year.

[galaxyhi]

Thinking man,
You asked me on page 1 what i meant by "losing a company 401k", but I think that has been thoroughly answered on page two of your thread here.

The last retail company I worked for went bankrupt, and all 401k participants had to file as creditors to the company to even think of getting any money back. It seems the company, who had a 401k program invested in its own stock, then failed to pay the administrator, and somehow had raided the plan for "operating capital" to keep the doors open. It failed still. People who had money tied up in the 401k, even at 100% vested only received about 1% of their funds, and fees to transfer funds directly was taken out of that. I read all this rather than experienced it as to my way of thinking, a 401k mostly or all invested solely in its own stock is a bad idea to me. But I got all the paperwork involved in the 401k debacle as a former employee and potential 401k holder. .

I think the few examples given plus my "warning" if you will, should give you pause.

You may have a successful 401k left at another company, but not all 401ks are equal.

Faced with a company in jeopardy, even if they only appear to be doing "seasonal layoffs/rehires" I'd not want to keep my money with them, I'd rather keep it under my control and in my hands.

But your ideas may be different, I just would not be surprised if it fell through. Let's say you don't work for then for the next 25 years and they appear to be doing well. But since you aren't involved you may not see their journey towards insolvency. And then wham! You find out your stash with them is going going gone.