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Old 01-23-2020, 12:32 PM
 
Location: Brooklyn, New York
4,005 posts, read 4,068,228 times
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Here is the order of how one *should* be saving for retirement, with each step assuming a scenario if you can save more money after completing the step:
1. Contribute up to employee match into 401K.
2. Max out IRA ($6,000 per year, $7,000 if over 50).
3. Contribute up to 15% of your gross to 401K.
4. Contribute up to 20% of your gross to 401K if Step 3 didn't hit the $19,500 limit.
5. Contribute up to the limit if Step 4 didn't max it out.
6. Contribute into a regular taxable account.

So the absolute *ideal* scenario is maxing out both your IRA and 401K accounts up to the limits. So if you have a debate whether or not you should contribute more or less, if you can save the money, contributing more is the right answer.
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Old 01-26-2020, 04:48 AM
 
2,124 posts, read 789,833 times
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Quote:
Originally Posted by Gantz View Post
Here is the order of how one *should* be saving for retirement, with each step assuming a scenario if you can save more money after completing the step:
1. Contribute up to employee match into 401K.
2. Max out IRA ($6,000 per year, $7,000 if over 50).
3. Contribute up to 15% of your gross to 401K.
4. Contribute up to 20% of your gross to 401K if Step 3 didn't hit the $19,500 limit.
5. Contribute up to the limit if Step 4 didn't max it out.
6. Contribute into a regular taxable account.

So the absolute *ideal* scenario is maxing out both your IRA and 401K accounts up to the limits. So if you have a debate whether or not you should contribute more or less, if you can save the money, contributing more is the right answer.
I'd suggest going all the way to the 401k limit (if you can) before you contribute to to a taxable account. Don't stop at $19,500 if you are able to keep contributing.
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Old 01-26-2020, 08:05 AM
 
19,873 posts, read 14,482,788 times
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Quote:
Originally Posted by TexasLawyer2000 View Post
I'd suggest going all the way to the 401k limit (if you can) before you contribute to to a taxable account. Don't stop at $19,500 if you are able to keep contributing.
The post you quoted suggest maxing out the 491k before going taxable account


The pretax 401k and Roth 401k combined limit is 19.5k you would have 26k if you are over 50. The only other way to get more money in is if your plan has an after tax non Roth option
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Old 01-26-2020, 11:44 AM
 
Location: Tampa, FL
376 posts, read 422,768 times
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Quote:
Originally Posted by Gantz View Post
Here is the order of how one *should* be saving for retirement, with each step assuming a scenario if you can save more money after completing the step:
1. Contribute up to employee match into 401K.
2. Max out IRA ($6,000 per year, $7,000 if over 50).
3. Contribute up to 15% of your gross to 401K.
4. Contribute up to 20% of your gross to 401K if Step 3 didn't hit the $19,500 limit.
5. Contribute up to the limit if Step 4 didn't max it out.
6. Contribute into a regular taxable account.

So the absolute *ideal* scenario is maxing out both your IRA and 401K accounts up to the limits. So if you have a debate whether or not you should contribute more or less, if you can save the money, contributing more is the right answer.

There are concrete steps of saving as different factors can alter what steps should be taken

The "benefit" of contributing to a IRA before maxing out the 401k is dependent on what options your 401k has as well as if the plan has fees.
If the 401k plan has the same or better options and no fees, just increasing the 401k contribution rate is a simpler option.

To some keeping their savings in 1 location makes it easier on them as well as the benefit having it taken out in their paycheck before they have a chance to spend it helps them save (again dependent on the 401k's options/fees).

Also, before contributing to a taxable account, if you are eligible for an HSA contribute to that first.
Another option, if you have kids and want to save for higher learning, you can start a 529 plan.

Also there is no reason to make a jump of employee match to 15% then to 20% then to max.
Just contribute as much as you can. Yes to some giving benchmarks helps, but others may think "well I cant hit 20% so I'll stop at 15%", even if they are able to contribute, say 18.5%
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Old 01-26-2020, 12:43 PM
 
2,124 posts, read 789,833 times
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Quote:
Originally Posted by Lowexpectations View Post
The post you quoted suggest maxing out the 491k before going taxable account


The pretax 401k and Roth 401k combined limit is 19.5k you would have 26k if you are over 50. The only other way to get more money in is if your plan has an after tax non Roth option
That's one option. Another is increased employer contribution for a self employed individual. Both are better than a standard taxable account.
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Old 01-26-2020, 02:19 PM
 
5,075 posts, read 3,086,045 times
Reputation: 4675
Reading much of this thread, I haven't seen some key points. To encapsulate a couple of them:

What are you doing with your non-retirement income? Does a good amount of that go to other savings? Does some go toward paying down a mortgage or other debt...the principal, not the interest?

I consider principal paid on my mortgage to be a 1:1 increase in my net worth, even if it doesn't affect the value of the home itself. My mortgage is short and has a low rate, so 2/3 of each payment is principal. It also means the remaining debt costs me less in remaining interest after every payment. Of course there are tradeoffs...the same money on the investment market might pay off a lot more, but buying also means I'm avoiding an ever-increasing cost later...
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