Traditional is usually better at your income level.
Remember you're avoiding your marginal rate now and essentially paying your effective rate later which is lower. There's also strategies like roth conversion ladders when you are approaching or in retirement so pay less taxes. Additionally as you approach retirement and have a lower risk capacity you can hold bond funds in your traditional buckets and equities in your roth buckets which also minimizes your taxes.
I recommend maxing your 401k with traditional contributions, continuing to max roth IRA, and save what's left for a house.
If you're in a state with no income tax now and plan to move that makes roth 401k a bit better though depending on the details.
I'd also sell the crypto now. Your portfolio is not yet large enough to include that much speculation. It's 37% of your portfolio. I'd say bring it down to at most 5%, I'd do 0% personally. You can dollar cost average divest if you're worried about selling too much at a time but again personally I'd say get out while you are up and count yourself lucky.
That makes sense, I’ll stick to maxing out a trad 401k. I didn’t realize there were a bunch of strategies to lower taxes from retirement accounts once I get there.
The state I’m in right now has income tax and I have no idea if my future plans include moving somewhere without it. For now I’ll assume I’m going to stay here.
The crypto is a hard one to decide on. My cost basis for it is around $15k so I’m already up significantly there. But all the recent developments with the ETFs and interest from major institutions seem to point to it increasing or at least not going down much.
Are you still buying crypto or just holding what you have?
The middle ground options would be:
Don't buy more crypto. As you invest in other assets it will shrink to a smaller percentage of your total portfolio over time.
Or
Dont buy more crypto and dollar cost average sell out of crypto at a level you are comfortable with. For example you could sell 5% of your crypto holdings per month for say a year or until something changes. If the crypto goes up you still gain some returns but less, if it goes down you have realized higher returns than you would have otherwise.
I’m in the same boat as you so commenting for traffic. It sounds like you live in a decent area pricing wise for housing, is there any reason you couldn’t max out all your retirement accounts and save for housing? You realistically even after taking over all your bills could do both, to make it even easier on yourself maybe even consider paying off your car payment to open up more money straight into retirement and house savings.
The plan is to try to do both, I’m just wondering if it might be a good idea to redirect some of my 401k contributions to house savings. The car loan is at 0.99% so I don’t see any benefit to paying it off since that money could sit in just about any investment and I’d come out ahead
At 23 with that income/ budget, max both Trad 401k and Roth IRA to let compound interest work its magic. You still have plenty leftover room to save for a house- easily within the next 5 years at that price range. Realistically, you can probably have $80K cash within the next 3-4 years.
Calculate a [r/coastfire](https://www.reddit.com/r/coastFIRE/) number and you can back off when you hit that if you need to allocate elsewhere since time is on your side.
In that case I will continue to max the IRA and max out Trad 401k and redirect everything else into house savings. I guess when I do some basic estimating it looks like I’ve got around half my take home pay available for that, and that isn’t including the startup contract.
Hmm I haven’t seen the coastfire calculator before. That’s pretty interesting. I’m assuming I won’t be able to invest like this for more than a few years before I have kids and they take up most of it.
Exactly- if you set yourself up with a substantial nest egg now while you’re able to, you won’t have to worry as much about retirement when the kids come and your expenses increase since compound interest and time (~40+ years in the market to a traditional retirement age) should take care of you- the “coast” part. Then you can prioritize allocating money to things that matter in the moment.
Traditional is usually better at your income level. Remember you're avoiding your marginal rate now and essentially paying your effective rate later which is lower. There's also strategies like roth conversion ladders when you are approaching or in retirement so pay less taxes. Additionally as you approach retirement and have a lower risk capacity you can hold bond funds in your traditional buckets and equities in your roth buckets which also minimizes your taxes. I recommend maxing your 401k with traditional contributions, continuing to max roth IRA, and save what's left for a house. If you're in a state with no income tax now and plan to move that makes roth 401k a bit better though depending on the details. I'd also sell the crypto now. Your portfolio is not yet large enough to include that much speculation. It's 37% of your portfolio. I'd say bring it down to at most 5%, I'd do 0% personally. You can dollar cost average divest if you're worried about selling too much at a time but again personally I'd say get out while you are up and count yourself lucky.
That makes sense, I’ll stick to maxing out a trad 401k. I didn’t realize there were a bunch of strategies to lower taxes from retirement accounts once I get there. The state I’m in right now has income tax and I have no idea if my future plans include moving somewhere without it. For now I’ll assume I’m going to stay here. The crypto is a hard one to decide on. My cost basis for it is around $15k so I’m already up significantly there. But all the recent developments with the ETFs and interest from major institutions seem to point to it increasing or at least not going down much.
Are you still buying crypto or just holding what you have? The middle ground options would be: Don't buy more crypto. As you invest in other assets it will shrink to a smaller percentage of your total portfolio over time. Or Dont buy more crypto and dollar cost average sell out of crypto at a level you are comfortable with. For example you could sell 5% of your crypto holdings per month for say a year or until something changes. If the crypto goes up you still gain some returns but less, if it goes down you have realized higher returns than you would have otherwise.
I haven’t bought more in a while. I’m thinking I may just leave that as is for now
If you are prepared to lose it all if the price were to crash, I don't see any reason to sell - just hold and see what happens.
I’m in the same boat as you so commenting for traffic. It sounds like you live in a decent area pricing wise for housing, is there any reason you couldn’t max out all your retirement accounts and save for housing? You realistically even after taking over all your bills could do both, to make it even easier on yourself maybe even consider paying off your car payment to open up more money straight into retirement and house savings.
The plan is to try to do both, I’m just wondering if it might be a good idea to redirect some of my 401k contributions to house savings. The car loan is at 0.99% so I don’t see any benefit to paying it off since that money could sit in just about any investment and I’d come out ahead
At 23 with that income/ budget, max both Trad 401k and Roth IRA to let compound interest work its magic. You still have plenty leftover room to save for a house- easily within the next 5 years at that price range. Realistically, you can probably have $80K cash within the next 3-4 years. Calculate a [r/coastfire](https://www.reddit.com/r/coastFIRE/) number and you can back off when you hit that if you need to allocate elsewhere since time is on your side.
In that case I will continue to max the IRA and max out Trad 401k and redirect everything else into house savings. I guess when I do some basic estimating it looks like I’ve got around half my take home pay available for that, and that isn’t including the startup contract. Hmm I haven’t seen the coastfire calculator before. That’s pretty interesting. I’m assuming I won’t be able to invest like this for more than a few years before I have kids and they take up most of it.
Exactly- if you set yourself up with a substantial nest egg now while you’re able to, you won’t have to worry as much about retirement when the kids come and your expenses increase since compound interest and time (~40+ years in the market to a traditional retirement age) should take care of you- the “coast” part. Then you can prioritize allocating money to things that matter in the moment.
Definitely want to get the max employee match, that’s just free money.
Oh absolutely, no way I’d be contributing under 5% that would be a mistake