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Rising Star
Any thoughts on Analog Folk?
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401K is always better. You don't get a company match with an IRA. If you aren't investing in your 401K you are giving YOUR money back to the company. Let's face it they make enough already.
ROI is better with 401K. Either way your dollars are pre tax. If you are early in your career be sure to match the employer matches otherwise you are leaving money on the table. So if your company matches 5%, put in 5%.
The reality is most creatives get bounced out by this ageist industry well before the age you’re required to take money from your 401k (early 70s). And if you beat the odds and are in a high tax bracket in your 60s, then your salary should be enough that you won’t need to dip into your retirement money anyway.
salaries drastically decrease is news to me
Yes, you should def max out your Roth IRA contribution each year if you can, because once you hit the salary cap limit you can no longer contribute. I’ve put 7k into mine each year of my career and I actually just hit the salary limit a few weeks ago, so I can’t put any more money in. That Roth is professionally managed fidelity account has had much better returns than my several rolled over 401ks
That said, you should absolutely do both. If you have to pick one, 401k
Does someone want to break the news to OP?
Please do it
I was taught something different for early career investors (who expect their earnings to increase).
You're likely making less now than you expect to be withdrawing in the future. IE you're taxed less now than you will be. So, it's worthwhile adding what you can to a fund that will not be taxed when you withdraw (that's your Roth).
General advice I've seen:
Max your 401K to your employer match.
Potentially max your HSA if that's an option (another conversation)
If you have money left over, that goes into your Roth
Then you focus on maxing out the rest of your 401K (usually not possible for people early in their career).
Beyond that, we get into backdoor Roths, taxable accounts, etc.
Rising Star
Go with the 401k. The tax deduction and the employer match make a real difference. And don't hold off because of what might happen to your salary in future. Your money is maturing over time. The money you put away at 30 will make a bigger difference to your future than the money that you put away at 50.
401k up to company match then Roth IRA. If Roth IRA is maxed out go back to contributing to your 401k.
Prioritize 401k first then try to max out your Roth IRA.
Max contribution for a 401k under 60 is 23.5k a year and that DOES NOT include company match.
Try your best to do an auto deposit into your bank account each paycheck but also try to save money on the side. If you are able to at the end of the year, whatever you have left to max out, try to add that in if you can afford to.
(I do a $125 deposit into VOO and VGT on a weekly basis in my 401k which amounts to $13000 a year in contributions and then play around with the other 10k a year) if annual growth is even 1-2% less than the last 50 years of SP500 & NASDAQ, worst case just from the $250 a week I’ll have about 4-5 million in savings in 35 years.