Comment by emil-lp
2 days ago
Here it is, unabridged
Make a will.
Pay off your credit card balance.
Get term life insurance if you have a family to support.
Fund your company 401K to the maximum.
Fund your IRA to the maximum.
Buy a house if you want to live in a house and can afford it.
Put six months’ expenses in a money market account.
Take whatever is left over and invest it 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement
If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.
Solid advice overall. But I have to disagree with the 401k advice.
> Fund your company 401K to the maximum.
Fund it up to amount your company matches. The maximum you can contribute to 401k is 40% of your salary I believe. I wouldn't contribute 40% of my salary to the 401k. Just the amount your company matches ( 5% or whatever it is for your company ). That 5% match ( or whatever it is ) is free money. It would be foolish to leave it on the table.
There is not percentage limit, it's a flat number that increases annually https://www.irs.gov/newsroom/401k-limit-increases-to-24500-f...
I max my 401k because not taking advantage of tax-advantaged income is leaving money on the table.
Unless you work for Enron, where the retirement fund went down with the company.
401k's are independent of the company. The account is in your name, not the companies.
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So if your company doesn't match your contribution then contribute nothing to 401k?
Not American, but as I understand it, 401k's are tied to your employers 401k implementation and while you are employed you have little choice in how the funds are managed. If you are contributing to a third party managed fund (employer or otherwise) that is not being matched, then you are ceding control of your retirement funds for no practical benefit. You would be better off putting your savings into another tax shelter appropriate to your needs that you can control.
If you aren't getting a matching benefit or other reward for using an employer managed investment, then you shouldn't. If someone doesn't have the time, inclination, or knowledge to understand the difference then investing in an unmatched 401k is still better than not saving at all :S
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No, if you can, max the 401k, as long as you've set up emergency fund and other stuff. After maxing the 401k, then go to taxable brokerage.
The personal finance reddit goes like, fund it up to the match is basic, but if you can, max it.
You reduce your taxable income and the money doesn't pay capital gains when you pull it out.
> You reduce your taxable income and the money doesn't pay capital gains when you pull it out.
You do pay income tax on it when you pull it out though. Whether or not you come out ahead depends at least partially on your marginal tax rates before and after retirement.
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70% in a stock fund is extremely risky if you are close to retirement. You will not have fresh income to dollar-cost-average your way back into the black in the event of another market crash.
This is solid advice assuming the shit doesn't hit the fan. In Adams' lifetime many countries' pension funds went bust and inflation ate any soft assets.