my work is trying to get me to join their program but who knows how long Ill be there. Im old enough that its time do do something but not sure whats the best for the developer lifestyle.
Since Devs change jobs every few years now: 401k or Roth?
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Re: Since Devs change jobs every few years now: 401k or Roth?
#2With a 401k, you can contribute up to 18,000 and your employer might match some amount. That number reduces your current taxable incoming (you pay tax when you withdraw). It really don't matter how long you're there or how often you switch jobs because it's your money and you can move it around when you change jobs.
With a Roth IRA, you can contribute up to $5,500 (depending on your income -- it phases out from $118,000 -- 133,000). You might be too rich to make use of it. You're taxed on that money now but not when you withdraw.
Indecisive? do both.
You still have another month to contribute to your 2016 Roth IRA, so if you have the money available, you should do that. (And if you don't have available money, you should probably just stick to a 401k since it's automatically withdrawn from your paycheck).
Re: Since Devs change jobs every few years now: 401k or Roth?
#3With a 401k, you can contribute up to 18,000 and your employer might match some amount. That number reduces your current taxable incoming (you pay tax when you withdraw). It really don't matter how long you're there or how often you switch jobs because it's your money and you can move it around when you change jobs. With a Roth IRA, you can contribute up to $5,500 (depending on your income -- it phases out from $118,…
Yup, the employer-matched contributions are free money! You should absolutely take as much of those as you can. You'll always have access to the 401k account even if you leave the company. It doesn't matter a whole lot if your investments are spread across a bunch of different 401k providers/accounts.
Re: Since Devs change jobs every few years now: 401k or Roth?
#4With a 401k, you can contribute up to 18,000 and your employer might match some amount. That number reduces your current taxable incoming (you pay tax when you withdraw). It really don't matter how long you're there or how often you switch jobs because it's your money and you can move it around when you change jobs. With a Roth IRA, you can contribute up to $5,500 (depending on your income -- it phases out from $118,…
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Re: Since Devs change jobs every few years now: 401k or Roth?
#5It's a no-brainer really. Start the 401K asap. It will only help you. Roth is good as an additional option but regular 401K has lot of benefits including higher contribution amounts, employer matching benefit (if any) and why pay a higher tax now than when you will retire since your tax rate will most likely be lower in retirement.
By contributing to a 401K, you reduce your taxable income for the year as well as an added benefit.
Max out the 401K first before you think of anything else. Who cares if you change jobs frequently. You can always do a roll over into an IRA with providers such as Fidelity or Vanguard for free.
Re: Since Devs change jobs every few years now: 401k or Roth?
#6Your priority should be to contribute to your 401k up to the max company match, Roth/IRA up to federal limit (the choice between the two depends on age and income), then finally 401k up the the limit you are comfortable.
The reasoning for this order is that any company match is free money that you are leaving the table if you don't contribute. However, many 401ks have limited investment options, restrict you to a particular bank, and involve added paperwork when moving jobs. That is why Roth/IRAs come next. However, those have fairly low limits at $5,500 per year. Therefore if you are planning to save more you should take advantage of the tax breaks of a 401k before investing retirement savings in a traditional brokerage account.
Re: Since Devs change jobs every few years now: 401k or Roth?
#7https://dl.dropboxusercontent.com/u/29031758/If%20You%20Can.... Echoing other comments - at a bare minimum max out your employer match, it's free money!
Re: Since Devs change jobs every few years now: 401k or Roth?
#8It's a no-brainer really. Start the 401K asap. It will only help you. Roth is good as an additional option but regular 401K has lot of benefits including higher contribution amounts, employer matching benefit (if any) and why pay a higher tax now than when you will retire since your tax rate will most likely be lower in retirement. By contributing to a 401K, you reduce your taxable income for the year as well as an a…
This is great advice.
Just want to tack on for the OP (or anyone else): Look at the fees. The fees will destroy your retirement. Both the individual fund fees and the account management fees.
For example on my 401K provider they have funds with fees ranging from 0.19% (index fund) up to 0.58% (fully managed fund). You'd think that the fully managed funds outperform the index funds which makes the fees worthwhile, but actually the reverse is true (that the index funds have outperformed the managed funds historically).
If you don't manually select which funds to invest in they put a lot of your money into the more expensive funds.
Re: Since Devs change jobs every few years now: 401k or Roth?
#9It's a no-brainer really. Start the 401K asap. It will only help you. Roth is good as an additional option but regular 401K has lot of benefits including higher contribution amounts, employer matching benefit (if any) and why pay a higher tax now than when you will retire since your tax rate will most likely be lower in retirement. By contributing to a 401K, you reduce your taxable income for the year as well as an a…
This is great advice. Just want to tack on for the OP (or anyone else): Look at the fees. The fees will destroy your retirement. Both the individual fund fees and the account management fees. For example on my 401K provider they have funds with fees ranging from 0.19% (index fund) up to 0.58% (fully managed fund). You'd think that the fully managed funds outperform the index funds which makes the fees worthwhile, but…
Yep another great point. There was another thread about funds question yesterday and I said the same thing. Almost all "managed" funds offered in retirement plans don't even beat S&P 500. So you are probably better off putting most of the contribution in an index fund and just enjoy the "meager" S&P 500 returns. The expense ratio etc. are so much lower for these index funds.
Re: Since Devs change jobs every few years now: 401k or Roth?
#10I like this flowchart [0] I got from r/personalfinance. That subreddit is a little different from my taste but this is useful. If you are a typical older Silicon Valley dev (sorry for presuming any part of that), you might not be eligible for a Roth (without some extra work), so be careful. If you didn't contribute to an IRA in 2016, you can still do so.
And like the others said, if you have an employer match, definitely max that part out.
