401K n Roth investment strategy?

New / Sales
Ight

New Sales

Ight
May 6, 2021 16 Comments

Hi Blinders, personal finance newbie here. College didn’t teach us well with this lol

Putting 15% into Roth + 10% into 401K, company does 7% match. Is that the right move?

Using Fidelity. How should I do the 401K play? Currently 100% in Blended Investment (Fidelity Freedom Index 2060 Fund- Investor Class) by default.

TC—$120K (sales, so it fluctuates, recently got to $10K/month)
YoE—6 months

Edit: 15% to Roth to make up for the first couple month of 2021 since I didn’t have any due to low income

Really need help with 401 K funds selection, thanks much guys

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TOP 16 Comments
  • While you figure things out, at least move your money out of that nonsense target date fund and put into an sp500 type index fund
    May 6, 2021 5
  • Rich you shall be, my young padawan.
    May 6, 2021 0
  • Amazon
    tGIO17

    Go to company page Amazon

    tGIO17
    Open a BrokerageLink account with Fidelity to get more fund options.
    May 6, 2021 0
  • Roth has some annual contribution limits to work around. You can do backdoor/mega backdoor to get around this, probably.
    May 6, 2021 0
  • PTC
    itpeople

    Go to company page PTC

    itpeople
    Do Roth 401k (the one you put money after you are taxed instead of regular 401k which is pretax). Your TC is quite low at the early stages of life so make use of lower tax bracket and do only the after tax Roth 401k. Any income made from these are tax free. I personally would suggest doing this till you make double your TC and/or marry. Max out annual contribution limit $19,500?(if that’s too much, do the minimum to get max employer match).

    Back door Roth is too early for you. Enroll in ESPP with max contribution if that’s possible. If you still got funds left over, look at investing on stocks or do index funds. But do your research. Roth back door is only if you have like more than $20k spare to save for retirement.
    May 6, 2021 2
    • New / Sales
      Ight

      New Sales

      Ight
      OP
      Appreciate the detailed explanation PTC

      How do I get access to Roth 401K? Does the employer have to offer it? Or Fidelity?

      In the change contribution section there’s only 401K and Roth :/

      Maybe I’m dumb 😂 is Roth and Roth 401K the same thing?
      May 6, 2021
    • PTC
      itpeople

      Go to company page PTC

      itpeople
      Usually when someone says Roth it means Roth back door. Roth 401k is not the same as Roth back door. Roth 401k is offered as part of your retirement plan(I am sure your employer has this). You need to change your contribution % from traditional 401k to Roth 401k in fidelity and usually takes effect in 1 week for your paycheck to reflect the change. Please look around your fidelity contribution and see if you can manage the contribution.
      Watch some YouTube videos on investing Roth 401k vs traditional 401k, it will help you understand the system better. Keep in mind if you try and take money early there is a huge penalty in all 401k accounts.

      Now for the Roth - this means after tax and after you reach the annual contribution limit. Then you choose to put more funds into retirement account which is called Roth back door and can do a total of $55k? Like mentioned earlier, too soon for you. Get to 250k TC and even then you probably get better returns if you invest in stocks or real estate because this plan offers no tax benefits, just excess funds to sitting in an account untouched for 30+ years.
      May 6, 2021