Hi I am a new grad and this is my first job. I am contributing (maxing out) 401K. When I enrolled into 401K I made a choice of investment allocation as 100% domestic stocks and then when I spoke to fidelity advisor they said it’s not the best strategy as I will be risking it all and asked me to move to some blended investment and advised me saying this will be aggressive investment allocation in the beginning and eventually at the time of retirement go to a more conservative allocations. I think it’s a good advise. Also they introduced me to traditional-IRA and ROTH IRA. I did some research after that. I think I have basic understanding of the concepts. I see I can contribute $6000 pre-tax to Traditional-IRA and I am not eligible for ROTH-IRA based on my pay. Now I am confused if I should contribute to Traditional IRA or take post tax and invest in Stock market (robinhood). Also what is recommended way of getting started in this retirement funding. Any other suggestions or directions I should consider? Am I interpreting this in the right way? If there is any thing else I should research on point me in the direction. TC: 230K YOE: 1 + PhD
Those Fidelity guys(I'm assuming it's Financial Engines or similar 3rd party service) are morons. With at least 30 yrs to retirement, it makes no sense to put your money anywhere else but in stocks. I made a mistake of engaging them last year and boy did they screw up the returns. If you want to diversify, do it between large caps, small caps, international equity and 1 more etf of your choice... If you have HSA, max it out, it has triple tax benefits( you can invest in any stock through HSA vs only limited options in 401K). (e.g. I recently invested 5k in AAPL through my HSA account). Read about backdoor Roth IRA and see if you can utilize that.
So you recommend not to contribute to Traditional IRA ? I am maxing out HSA already
The way to backdoor roth is through traditional roth with your income. You cannot directly contribute to roth ira for your income. So you need to use backdoor method. The 6k should first be put into traditional ira and once transfer is complete, there is option to convert it to roth ira (means moving funds from traditional to roth ira, that is called backdoor roth). Once converted you can start investing that 6k. Your financial advisor from fidelity should be able to help with that. You should also look into mega back door roth ira for additional investment.
You are not eligible for Roth IRA, hence backdoor Roth IRS for you. As far as traditional IRAs go, I'm not a fan because of limited options of investment and the fact that you'd most certainly pay more tax while withdrawing the money. That said, I have some colleagues who exhaust all these options and then start their trading accounts. 😀 I'm more of a rental investment person.
I might be wrong but one of my friends was saying he takes ROTH IRA money to purchase rental property, how ever he has to assign a custodian to that and has to put back all his earning from there into ROTH IRA. Not sure how true this is. This way he don’t get taxed on the rental income.
Software Engineering Career
13h
1918
How strict is the google RTO ?
Ask Blinders
Yesterday
1109
Why is our country owned by Israel? I don't want my tax dollars fund genocide. How can we stop this nonsense?
India
10h
797
What do vegetarian Indians eat for protein?
AMA
4h
699
I have worked at TikTok US core tech for 3 years. AMA.
Tech Industry
Yesterday
598
Bitcoin is the only possible future
100% 401k allocation into SP500 is completely fine at this stage. I recommend you look into backdoor Roth IRA, it basically just means you can convert the 6k you contribute to Traditional (post tax) into the Roth. This way you don’t pay any taxes on those gains in retirement.