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What do I need to do to make a few million $ by 35?
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What do I need to do to make a few million $ by 35?
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I max my IRA each January. I max my 401k and HSA over the year out of my check and I put excess money in my brokerage account whenever I have it. Usually at least some each pay period but not always if I had a big expense. I think it depends on if you have a short term need. If so I would scale back the 401k. If not I would prioritize 401k. It is a balancing act. You need money to live on now too
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I’ve always prioritized maxing to 401k match, which is a lot at my company (not Deloitte), and ira before putting money in my brokerage. If you were saving for a house and couldn’t afford to i think as long as you put enough to get your employer’s match that’s okay for a few years.
Always max 401k because doing so lowers your tax burden.
I max IRA in January with year-end bonus, max HSA over the first few paychecks, and then max 401k within the first six months of the year. Then I put money in my brokerage - usually $1k per paycheck.
Or 7200 if you have family coverage.
I’ve always maxed 401k (but I’ve never not been able to also handle short term goals with the excess)
Most important is to make sure you contribute enough to 401k to get the full match. IRA contribution isn't tax deductible if you are covered by a 401k and I make too much to contribute to a Roth (and if you work for Deloitte you probably do too or will soon) so I haven't ever done either of those. If you are early in your career, you will probably make more in retirement than you will this year. If that's the case, and you aren't over the income level, contributing to a Roth is probably better than contributing excess (above the match) funds to a 401k.
Also, fund a 529 as soon as you have kids - my kids are in and about to start college and 529s will save me ~$60k in taxes.
I set up regular monthly deductions of around $3,000/month to my investment accounts when i was in my 20s and those accounts are worth a lot today. Most of my money is outside tax differed accounts, hopefully capital gains continue to be taxed at a lower rate than ordinary income. If that continues to be true, I think my strategy worked. (but i'm not a tax expert so consult your own tax expert)
That is definitely what I would do.
Chief
I budget in a maxed out 401k and backdoor Roth each year but make monthly brokerage buys along the way. The only real reason is that my employer doesn't do catch up contributions so I would actually miss out on some match if I front loaded 401k contributions. Plus there's a dollar cost averaging benefit from more frequent brokerage buys spread out over the entire year.
Rising Star
Yes, the “order of investing” is usually as follows:
1. 401k up to match
2. High interest debt if applicable
3. Max 401k
4. Max Roth IRA
5. Max HSA
6. Megaback door roth if your employer permits it
7. Brokerage (non tax advantaged)
3-5 can be moved around but all definitely come before 7.
Both
Most people will tell you to max your 401k before a taxable brokerage. That is good advice because it makes mathematical sense, but i don’t follow it. I am hoping to retire early, and I expect that my largest retirement funds will come from my 401k. But there is a time limit on when i can access those funds, so i want to have savings i can draw on when im in my 50s.
Also, my 401k with my employer is very limited in what i can buy. With a taxable, i can invest in virtually anything. And, it’s much more liquid incase i want to pursue a different investment opportunity. The flexibility a taxable brokerage gives me is worth giving up a little tax savings.
Pro
SC1 i think a Roth IRA conversion ladder would make sense for you at some point.
I have been maxing out 401k and HSA for last 5-6 years to save on tax. Company matches on both have been a big bonus.
Roth I just put whatever I can as backdoor. Never been able to save enough for mega backdoor.
I max my IRA early in the year. My 401k is set to max by end of year, and I have a set amount go into my brokerage each pay check.