https://frum.finance logo
Join Slack
Powered by
On the FI flowchart, what is the advantage of maxi...
# general
s
On the FI flowchart, what is the advantage of maxing out an IRA before 401k?
🧡 1
m
An IRA is in your control versus your employer. You have full control. No employer dictated funds. ALSO no headache of rollover every time you change jobs
Good question!
Also there are a lot less rules/reglulations in general about an IRA versus a 401k
t
The fact that employers match contributions should matter for this calculus, no?
s
ok, interesting. I just find it easier to use the 401k because I can diversify automatically and auto rebalance asset allocations.
m
@thousands-lock-82725 that is covered by an earlier stop in the flow chart
👍 1
s
@thousands-lock-82725 I was talking about after contributing the min to receive the whole match
m
the point he is asking about is after you already received your match
👍 1
@straight-nightfall-20143 you can do all that in an IRA also
s
Not in schwab, that I can see
where is your IRA?
m
also the fact you say diversify automatically scares me and makes me think we need to look at your investment choices haha
m
If you have a solo 401k, you can roll over your company 401K into the solo 401k
m
M1's IRA has auto invest and auto rebalance
@microscopic-psychiatrist-27869 lol don’t bring a third type of account into this lolsob haha
s
By diversify automatically, I meant being able to set percentages of incoming money to be auto-invested in different asset classes.
I am going more aggressive than just using a single target date fund
👍 1
but the classes are all low cost ratio index funds
m
Yeah so m1 does exactly that for all types of accounts.
m
(Can't do 401k's at M1)
m
That is true
t
The point was you could do IRAs there, no?
m
Right
m
There are reasons though that you wouldn't want to roll a 401k into an IRA. There are benefits to 401ks that IRAs don't have
m
(which is a separate topic to why you should do your IRA first)
m
Also, if you make enough money that you're considering fully funding your 401k, you probably make too much money to be getting a deduction on your (not your spouse's) IRA contribution because there's an income limit
r
Can do backdoor IRA though
Is that only Roth?
m
Yeah I'm not sure what Mendel's point is given the backdoor Roth IRA option.
Yes backdoor is for Roth.
👍 1
Basically you can always contribute to your Roth IRA. It's just sometimes you need to backdoor. Therefore it's always an option.
c
The pro rata rule may seem like a good reason to max out a 401k before putting into an IRA if you think you may make enough for it to effect you. However, if your employer has a 401k you can always move the money from the tIRA into the 401k (would anyone know if its possible that some 401k plans don't allow that?) and if your employer doesn't have a 401k then you could contribute to a tIRA and get the deduction. So it wouldn't be a good reason either.
m
The pro rata rule is definitely my only hesitation about 401k after IRA, but I still feel pretty confident in the general advise of IRA first. If you are all in Roth then definitely.
I think this year I am just going to convert everything so I don’t have think about pro-rata again though.
c
why not transfer into the 401k?
m
It's my wife's traditional IRA and she doesn't work. Also I really just want everything to be Roth to simplify things for me mentally.
3 Views
Open in Slack
PreviousNext
Powered by