401ks, IRAs, and Taxable accounts

The end of the year is getting closer and so it’s a good time to look your finances. I usually look at my finances daily (but that’s me). For most it’s a good idea to at least look at it once a month or worst case every 6 months just to see how your investments are performing.

I look at my check stubs every week to double check my 401k contributions for the year. It’s under your deductions like social security etc. Your 401k deduction is a percentage of your gross pay. If you forgot what you had set, you can do simple multiplication to figure it out. Times your gross pay by a percentage to reach your deducted 401k amount. See if you are anyway close to maximizing your contribution by the year’s end. For under 50 years old, the max is $18k and if you are over 50, you can do a catch-up contribution of $6k. Now 401k is awesome because is pre-tax dollars. If you have an employer match you should at least contribute enough so you can earn the entire match.

You can also contribute to an IRA in addition to a 401k. There are two types of IRA, Roth and a Traditional. ROTH IRA  caps out at certain wage restrictions. For under 50 years old, the max is $5,500, and if you are over 50, you can do a catch-up contribution of an additional $1,500.

You open a taxable account as well as a 401k and/or an IRA

Now with any of these accounts, you have choice of what you’ll be invested in and who you want to invest with. Depending on your fund, you may have a small selection to choice from for your 401k. When choosing look for funds with the lowest expense ratio and lower administrative fees (if they have them).  I like Vanguard and index funds. Vanguard offers some of the lowest fees and best funds.

The other issue is how much do you have taken out of your check for your 401k, what percentage? Most people recommend 10% but I’m more under the assumption what can you afford? If you have lowered your expenses and can afford more, than do it. You’ll save more pre-tax dollars. Which brings us back to looking at your pay stubs and how many weeks left in the year. If you can afford to have more of a percentage taken out of your paycheck than do it, to maximize the contribution by the year’s end.

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