Investing: Difference between revisions
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In general, you should save money in the following accounts in order: | In general, you should save money in the following accounts in order: | ||
# 401k, 403b, or thrift savings | # 401k, 403b, or thrift savings | ||
# Traditional or Roth IRA (up to IRS limit) | # Traditional or Roth IRA (up to IRS limit) | ||
# Investing account | # Investing account | ||
# High-yield Savings, Cash account, or CD | # High-yield Savings, Cash account, or CD | ||
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A 401(k) or 403(b) is an employer-sponsored retirement plan.<br> | A 401(k) or 403(b) is an employer-sponsored retirement plan.<br> | ||
That means, it is managed by a company cooperating with your employer.<br> | That means, it is managed by a company cooperating with your employer.<br> | ||
If you work for a for-profit company, you will have a 401k. | If you work for a for-profit company, you will have a 401k. | ||
If you work for a public school or non-profit company, you get a 403b.<br> | |||
If you work for the federal government, you will have a thrift savings plan.<br> | If you work for the federal government, you will have a thrift savings plan.<br> | ||
For the most part, 401k and 403b rules are identical. | For the most part, 401k and 403b rules are identical. | ||
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;Notes | ;Notes | ||
* To avoid tax complications, you should eliminate all other pre-tax IRAs beforehand by rolling them over to a 401k | * To avoid tax complications, you should eliminate all other pre-tax IRAs beforehand by rolling them over to a 401k. Otherwise, you will be subject to the pro-rata rule. | ||
===Mega Backdoor Roth | ===Mega Backdoor Roth=== | ||
Requirements: Your 401k allows after-tax contributions and non-hardship | Requirements: Your 401k allows after-tax contributions and non-hardship withdrawals. | ||
;Basic Idea: | ;Basic Idea: | ||
* Max out after-tax contributions to your 401k | * Max out after-tax contributions to your 401k | ||
* Rollover or withdraw the after-tax portion to a Roth IRA | * Rollover or withdraw the after-tax portion to a Roth IRA or Roth 401K | ||
==ETFs== | ==ETFs== | ||
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Exchange-traded funds. Typically these will have a fee called an expense ratio.<br> | Exchange-traded funds. Typically these will have a fee called an expense ratio.<br> | ||
The expense ratio is measured in basis points.<br> | The expense ratio is measured in basis points.<br> | ||
25 basis points is an annual fee of 0.25%.<br> | 25 basis points is an annual fee of 0.25%.<br> | ||