How to invest? - 401k vs Roth /Both

Sounds like you have a Roth 401k option at work, which is different from a Roth IRA.

The benefits of a Roth IRA vs a 401k is that you are not limited to the funds offered by your company. Both are post-tax dollars going in. I believe the match portion of the Roth 401k is going to be going to a traditional 401k.

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Both are post-tax dollars going in. I believe the match portion of the Roth 401k is going to be going to a traditional 401k.

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As far as the OP, and your order of operations-

I recommend getting 3 months liquid savings, then Roth 401k up to the match. Which means you'll have 6% Roth and 6% traditional 401k split. That's a sweet match BTW.

Then move to max out Roth IRA for you (and spouse if you're married).

Then max out your HSA (if you qualify for one)

Then go back to getting a full 6 months liquid.

Then get back to the 401k and split between Roth and traditional.


I use the word "then" meaning when it is feasible to be added to your budget. Whether that's through getting a raise or cutting back on other expenses.

I'm definitely hoping to be in a higher bracket by retirement as I'm only 26 now. I guess my question was the difference between my company's Roth through Fidelity and a Roth IRA through Vanguard. If vanguard was the much better option, would it be better to put my 6% company match towards traditional 401k and open up a new Roth account outside of work.

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I'm definitely hoping to be in a higher bracket by retirement as I'm only 26 now. I guess my question was the difference between my company's Roth through Fidelity and a Roth IRA through Vanguard. If vanguard was the much better option, would it be better to put my 6% company match towards traditional 401k and open up a new Roth account outside of work.

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Of course your tax bracker will be higher "by" the time you hit retirement but how are you wanting to live "in" retirement? If you plan on not having a mortgage and other big expenses, you can live nice in retirement while being in a lower tax bracket.

You need to research the fees and costs of your 401k vs the IRA. You need to look at account holding fees for the IRA AND the fund fees you can choose from. You'll have to look at the fund fees in your 401k as you have to have the 401k no matter what. In that case, account holding fees for the 401k are irrelevant.

I don't know of any differences between a 401k Roth vs an IRA roth other than I think you can get penalty free access to a 401k before an IRA, not sure about that, though.

That's how I did have it for the past year or so. What are the benefits of throwing money into a traditional 401k? I understand it's untaxed going in and taxes going out, but not much more than that...

If you think you will be in a lower tax bracket in retirement than you are now, its advantageous to put more into traditional 401k. If you expect your tax rate to be higher, then it benefits you to take the tax hit now in a Roth 401k. Predicting my tax bracket 25-30 years from now is not something I feel super confident in, so I am hedging my bets and splitting up between pre and post tax contributions.

Thanks for all the helps guys. Seems like I don't need to settle into just one area.

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I dont think this is always correct. You need to check with your plan administrator to know for sure, but I currently have a Roth 401k with my employer and the employer match is contributed to the same Roth 401k that I make contributions to. Maybe some companies force the matching funds to go into a traditional 401k, but it certainly isn't the case for all.

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It definitely varies. The companies I have worked for only put matching funds into traditional 401k accounts, not Roth. In addition to that, they would not match any funds you/me put into a Roth. So if my employer matched up to 6%, in order to get the 6% i had to put 6% into the traditional account.

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If you are unsure, i'd go 50/50 so you can leverage both sides as you need to when the time comes.

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If you are single and your adjusted gross income is over 60k you can't contribute to both a IRA and a 401(k). If you're MFJ the limit is around double that but you'd have to look up the exact amount.

Just fyi. Don't contribute to both without taking that into consideration.

The matching would make me more inclined to contribute to the 401(k). Plus you are capped at contributing 5,500 /year with a IRA.

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This is incorrect. There is nothing that ties 401k usage to IRA eligibility.

If you are single, you can contribute to an IRA if you make less than $118k/yr.

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*Roth IRA