Hello,I just finished reading the 13 steps, in a few months we will have all our debt paid off including our house. I have a 457 plan and my wife has a 401K, neither one have matching benefits. We also have ROTH IRA's; my question is do we max out everything before buying stocks to take advantage of the tax deferred where applicable, or only put a percentage into each of those accounts? Any advice would be great.
I would always be sure to max out the tax-deffered space, but that's just my opinion. I don't know about the Roth issue, since I never qualified for a Roth until very recently, and I decided against converting to a Roth since I think the government will find a way to stick it to me even with a Roth. Again, that's just me. Good luck.
Sit down with a calculator or spreadsheet and do a bit of calculating for the various scenarios. The bottom line is its all about after tax total return.No matter what, you want to be mostly into equities to take advantage of the better returns especially if you think economic recovery is coming.From there pretax 401K or IRA is taxable in retirement vs after tax tax free in retirement Roth IRA or 401k. They are mathematically identical if tax rates now and in retirement are the same. So choice depends on how your tax rate will change between now and retirement.Long term buy and hold in a taxable account is after tax and taxable at capital gains rates. That is usually your best choice once you have maxed your tax preferenced programs, but capital gains tax rates might change and picking investments you can really hold long term is not so easy.So most do some of all in hopes that most you own will be winners and if you get a loser or two it won't be devastating.
I would max out the retirement options including the Roth but why not open a Roth with a broker where you can invest in stocks of your choosing.
Since your 457 and 401k plans don't have a match, I'd max out the Roth IRA first. If you don't qualify for a Roth in future years, max out a Traditional IRA, even if you can't take the tax deduction.Then I'd max out the 457 and 401k for the tax deferred status.If anything extra after that, a taxable account.JLC
Just wanted to thank everybody for their input.
I've been using the "Coffeehouse" investor portfolio using all Vangard funds for 5 years now. It's easy, non-volitable and very diversified.Take a look at it.Jim
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