24 year old making 70k—Roth 401k or Traditional

[Anonymous]

Anonymous wrote:Wow that's so low , when I was that age I was make over 100k 20 years a go.

I was thinking that sounded like a good amount for someone that age. I’m 50 and I just hit $100k last year.

[Anonymous]

Anonymous wrote:Wow that's so low , when I was that age I was make over 100k 20 years a go.

person with selective memory sez wat?

[Anonymous]

OP: Roth.

[Anonymous]

Anonymous wrote:^^^ and if you are helping, I think directing to ROTH 401k locks the money in stronger than IRA (where contributions can be withdrawn) so that’s probably where I’d subsidize my own kid (even though I trust them)

Not a financial advisor but I think it works like this.
Since the money added is pre-tax, it can be used (like for a downpayment after a span of time, maybe 5 years?) but the money earned can't be (until age 59.5). I learned this while looking at "catch-up" contributions. I am at the highest tax bracket and can catch up but only via Roth and I was trying to determine if that was a good idea for me. Yes, it is b/c the earnings will go tax free. If I just save it in a brokerage, the earnings will not grow tax free. But I can take the principal whenever I want (like if I retire early).

[Anonymous]

Roth all the way.

[Anonymous]

No to traditional IRA, no to 401k, no to Roth 401k.
He needs to max out Roth on his own and invest in regular investment account.
There are barely any taxes to be paid if he invests in regular investment account. He will never learn to invest on his own if it's done for him.
When he figures out how investing is done, he will be pissed that he put any money into account tied to his job. NFI.

[Anonymous]

Anonymous wrote:No to traditional IRA, no to 401k, no to Roth 401k.
He needs to max out Roth on his own and invest in regular investment account.
There are barely any taxes to be paid if he invests in regular investment account. He will never learn to invest on his own if it's done for him.
When he figures out how investing is done, he will be pissed that he put any money into account tied to his job. NFI.

Tied to their job? Lots of 401k plans let you choose your own funds. It's not a pension in company stock, it's a 401k.

[Anonymous]

I started maxing out my ROTH a few years after I was 24. It’s grown to over 300K now. Most of it is capital appreciation. I am so glad j did and I wish the same thing to your kiddo.

[Anonymous]

My mom advised me to invest in a Roth when I was young and broke. It was the best advice ever. I now have close to a million in a Roth and am in the highest tax bracket.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No to traditional IRA, no to 401k, no to Roth 401k.
He needs to max out Roth on his own and invest in regular investment account.
There are barely any taxes to be paid if he invests in regular investment account. He will never learn to invest on his own if it's done for him.
When he figures out how investing is done, he will be pissed that he put any money into account tied to his job. NFI.

Tied to their job? Lots of 401k plans let you choose your own funds. It's not a pension in company stock, it's a 401k.

Most places make it SUPER inconvenient to choose stocks, instead of the predetermined funds. It's been that way at every job I've ever worked.

[Anonymous]

OP here. Thanks for the responses. Very helpful (most of them ).

He will do the Roth 401k. He also maxes out the Roth IRA and has investments in a taxable account from his summer internships.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No to traditional IRA, no to 401k, no to Roth 401k.
He needs to max out Roth on his own and invest in regular investment account.
There are barely any taxes to be paid if he invests in regular investment account. He will never learn to invest on his own if it's done for him.
When he figures out how investing is done, he will be pissed that he put any money into account tied to his job. NFI.

Tied to their job? Lots of 401k plans let you choose your own funds. It's not a pension in company stock, it's a 401k.

Most places make it SUPER inconvenient to choose stocks, instead of the predetermined funds. It's been that way at every job I've ever worked.

That’s because most people shouldn’t invest in stocks with their retirement fund. Retirement funds have changed over the years. Nearly all have index funds which include sector funds. Your aversion to retirement funds should be kept to yourself.

[Anonymous]

Is he getting an employer match? He should maximize that, then contribute to Roth IRA, then more 401k.

A good target overall is 15% of income

Traditional vs Roth 401k is not a big difference at this point.

[Anonymous]

Anonymous wrote:My kid has a Roth option at work for his 401k. Since this is likely his lowest income level over his career, my advice was to use the Roth 401k until he is in a higher tax bracket.

Any other opinions on that? He is already contributing the max to a Roth IRA.

He’s doing great. I wouldn’t tell him that his income will only go up from now on. He has a long career ahead of him and they’ll be ups and downs. Let him know one of the reasons families also have to save emergency funds is there might be some lean years and it’ll be easier to get through with money in the bank.

[Anonymous]

Anonymous wrote:Wow that's so low , when I was that age I was make over 100k 20 years a go.

Not that impressive. At that age 25 years ago, I was making 240k.