What do I do with money after maxing 401k and Roth IRA?

Personal Finance

Im 34, make k, no debt, max my 401k (k) and Roth IRA (k). I have 6 months emergency fund. After all that I still have like ,500/month I could save or invest. Where should this go? Just a regular brokerage account? I bonds? Save for a house down payment? Feels like good problem to have but I genuinely dont know the best move.

Amanda Wilson

3 Answers

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Great position to be in! Heres the general order:

1. HSA if available - triple tax advantage, can invest it, ,150 limit for 2024

2. Mega backdoor Roth - if your 401k allows after-tax contributions and in-plan conversions, you can add up to k more tax-advantaged

3. Taxable brokerage - VTI/VXUS or similar index funds. Youll pay capital gains taxes but thats fine. This is your early retirement fund or big purchase fund.

4. I Bonds - k/year limit, currently ~5% with inflation protection. Good for medium-term savings.

For your ,500/month:

If no HSA: ,500 to brokerage

If HSA available: /month to HSA, rest to brokerage

If saving for house: high yield savings account

At k with k+ going to retirement already, youre on track to be wealthy. The brokerage account gives you flexibility the retirement accounts dont - can access anytime, no age restrictions.

Ashley Davis

Taxable brokerage for sure. Same index funds you use in retirement accounts. Yes youll pay capital gains but long term gains are taxed favorably. Plus no age restrictions on when you can access it.

Joshua Anderson

If you might buy a house in 5+ years, I bonds (k/year limit) and HYSA are good options too. Dont want to risk the down payment money in the market if you have a specific timeline.