[USER]

40 years old. Just started. I’m in a position to invest pretty heavily (3-4K/month). I have a brokerage account, new job 401k (5% match), Roth IRA, and HSA.

I’m having trouble deciding how to divide the money up. I’m thinking this:

5% match on 401k (I think the contribution max is like 23K which would put me at a 40% investment rate from my checks.

I do see the triple tax advantage of maxing HSA (family 8400). So I think I’ll do that.

Max out my wife’s and I individual Roth IRA’s (7k each).
Then the rest in the brokerage account for FXAIX. All of this is with fidelity excluding the HSA.

I’m new so be gentle. I’m really just having a rough time trying to decide how much to contribute with my 401k.

I have a year of emergency fund in a money market account

[Andrew]

I wish we could talk in person because this is about where I was at 40 and basically did exactly what you are proposing.

Doing what you are saying is a great plan and will ultimately create an earlier retirement option for you. You could stick to this and be in great shape. Start with that knowledge.

Here’s the small tweaks I think I would have made if I could go back (I’m 48 now and started my FI process at 40).

Work backwards.
How much do you want when you are 65? Or 59? Or maybe at 51? (That’s when I can fully FI).

The earlier you can FIRE the better so having the superhero brokerage account is helpful to bridge the gap until 59.5 when you can collect 401k (there are exceptions to this and if that interests you then look into SEPP or rule of 55)

I might have front loaded my 401k by adding much more early on and then stop adding and let it grow to the amount I wanted by the age I wanted without adding more (although I’d always fully fund the match).

Meaning you could add substantially more than the 5% match knowing that you have more years to let this grow. It is tax advantaged which is beneficial.

Do you have kids? If so, financial aid looks at your brokerage accounts differently than traditional retirement accounts.

That may be a consideration for you but I’m still of the mind that my retirement comes before my kids education.

HSA is king. Always fully fund that. Non taxed money is amazing. Pay for your medical expenses out of pocket and save all the recipes in a folder.

Later in life when you want to take the money pick receipts that add up to the amount you need and withdraw that amount. Magic.
ROTH Ira’s are also king.

Love these because the money your invest is still yours and you can access it whenever you need. The interest you make is held hostage until “retirement age” (59.5). But the money you put in is available before that.

These all give you flexibility before 59.5.
This is what has worked for me and I know there are MANY ideas and opinions out there. Listen to the people here. Lots of good knowledge (that could differ from me too).

But also know that your plan is a solid plan and will help you find financial independence early.

Hope this helps.

[Jule]

Max your 401k before putting money in your brokerage. Leverage all tax advantage accounts first.

[Marco]

Check out Welthfront savings account for your cash. Good fixed interest rate and your cash is available in minutes after you transfer it.

Everything else I would do the same your are planning.

If you and wife exceed max income for ROTH IRA contribution consider backdoor ROTH.

Good luck.

[Author]

Posts