Investing alongside 401k

I’m 25 and work in tech. I have a 401k through work that I’ve maxed out company contributions every year; I feel pretty good about my progress with that (I am ahead of what I “should” be at for my age). I also recently opened a Roth IRA and have $3k invested in it. I’m curious about how to balance the 401k and the Roth IRA. Should I focus more on the 401k, or start to really build the Roth IRA? How much should I be contributing to the Roth IRA? I want to begin investing in Index Funds through the IRA but am overwhelmed with how to start / balance the two accounts!

Hi Claire!

First off, great job for maxing out your 401k every year! That is an accomplishment worth celebrating in itself!

Ideally, you would want to max out both your 401k and your Roth IRA each year.

The max you can contribute to your employee 401k for 2021 is $19,500.

If your Modified Adjust Gross Income (MAGI) for the 2021 tax year is less than $125,000, then the max you can contribute to your Roth IRA for 2021 is $6,000.

If your MAGI for the 2021 tax year is more than $140,000, then you are not eligible to contribute to your Roth IRA for 2021 because you make too much money :wink: If this is the case, then you may want to look into doing a backdoor Roth IRA.

You can start by adding money to your existing Roth IRA and investing the money in index funds.

Given your age, you may consider starting with an aggressive three-fund portfolio:

I hope this helps!

Let me know if you have any questions.


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Honestly, at your age you should only be investing in one thing, the total stock market. Schwab ticker symbol is SWTSX and the Vanguard ticker symbol is VTSAX… If you put money into bonds or international funds all you’re doing is limiting your upside growth potential.

First thing to do is to invest the same amount into your 401k as your company matches, that’s a 100% gain, you can’t beat that. Sounds like you’re doing that, good deal.

Second thing is to max out your roth every year, stick it in a total market index fund or ETF.

At this point, if you can, max out your 401k every year.

Does your company offer a HDHP? If they do, you can sign up for it and then you’re eligible to open an HSA.

The idea is to use every retirement option you have available, max them out for as many years as possible and you’ll have a great retirement.

If you managed to put the max in those 3 investments ( $29,100 total each year ) for only 5 years and then stopped investing, invested it and got 9% return, in 30 years you’d have about $2.9 million. If you did that for 10 years and then stopped investing, in 30 years you’d have around $6 million.

This is all very helpful, thank you! I’ve maxed out my 401k contributions and have after-tax contributions now being converted to Roth, which according to someone at Vanguard, is a good idea. For my Roth IRA, I’m investing in VTTSX which is also where my 401k is being invested. I am thinking that I am going to max out my Roth IRA and invest the next $3k in something else though, and it sounds like VTSAX might be a good idea.

I have an HSA through work. It had $1.8k and I invested $1.3k. I am planning on contributing more and investing it if I can max out my Roth IRA. Really I just don’t know what to do with my Roth IRA, and that’s what’s stressing me out.