If you want to save for retirement or financial independence then you should be investing in a retirement account. There’s many retirement accounts out there, but in this video I’ll break down a 401k vs Roth 401k. I’ll also explain the difference between a 401k and Roth IRA, and the order of accounts you should be investing in between a 401k, Roth IRA and taxable brokerage account. At the end I walkthrough how to look at the funds available in your 401k and how to select the best ones. I do this through a Fidelity 401k, but the process in selecting funds is the same no matter the company holding your 401k.
0:00 Video Breakdown
1:19 Traditional 401k vs Roth 401k
4:45 Which one is better
8:10 401k, Roth IRA, Taxable Brokerage Order
10:54 Selecting the best investment in Fidelity 401k
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When planning for retirement, investing in a 401k account can be a great way to save for the future. However, there are two main types of 401k accounts: traditional 401k and Roth 401k. So, how do you choose which one is right for you?
Traditional 401k vs Roth 401k:
A traditional 401k account allows you to contribute pre-tax money, meaning you won’t pay taxes on that money until you withdraw it in retirement. This can be beneficial if you expect to be in a lower tax bracket in retirement than you are now. However, once you start withdrawing funds, you will pay taxes on both the original amount and any earnings.
On the other hand, a Roth 401k account uses after-tax money, meaning you pay taxes on the money upfront. However, any earnings are tax-free, and you won’t owe taxes when you withdraw the money in retirement. This can be a better option if you expect to be in a higher tax bracket in retirement.
Investing in a 401k Fidelity:
Once you have decided which type of 401k account is best for you, you can start investing in a 401k account through a broker such as Fidelity. Here are the steps you can take to invest in a 401k Fidelity:
1) Enroll in your employer’s 401k plan: Contact your HR department to enroll in your company’s 401k plan. This process usually involves completing some paperwork and selecting your investment options.
2) Determine your investment strategy: Once you are enrolled in the plan, it’s important to determine your investment strategy. Fidelity offers a variety of investment options, such as mutual funds and ETFs, that can align with your investment goals.
3) Set up automatic contributions: Many 401k plans allow you to set up automatic contributions, which can help you consistently save for retirement without having to think about it.
4) Rebalance your portfolio: Over time, your investment strategy may need adjustments. It’s important to periodically review your portfolio and rebalance it to ensure it still aligns with your goals.
Investing in a 401k account can be a great way to save for retirement, and Fidelity offers a variety of options to help you reach your goals. It’s important to choose the type of 401k account that aligns with your tax situation and investment goals, and to work with a broker like Fidelity to create and maintain an investment strategy that will help you achieve financial independence in retirement.
Do you think a traditional 401k or a roth 401k is better for you? Share your investing plans below!
Seen a lot of videos on this but you broke it down very very well. Great video!
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hey what salary range is advisable for ROTH 401k and Pretax 401k?
If my company offers the ability to invest in BOTH a 401k Roth and Traditional at a 6% match each is that overkill? I want to save as much as possible but I also do not have a high salary. Is one account enough and which is best for a lower income?
On Fidelity I have a traditional 401k and started putting a 4 percent into a Roth 401k but the total looks like one sum not separate? How does this work down the road how is this tracked?
Sean what are you thoughts on splitting your contributions 50/50 in both traditional 401k and ROTH 401k?
I am contributing to a Roth 401k. I understand that all of my contributions are made after taxes have been paid. So when I withdraw the money I will not have to pay any taxes on my contributions and on the earnings. I get a company match every time I contribute to the Roth 401K. Why can't they or wont tax the company match? Thanks
Hi Sean, great video! I was curious as to why you use a Roth IRA versus a traditional IRA — especially after you argued in favor of traditional 401ks over Roth 401ks earlier in the video. In support of the Roth IRA over the traditional IRA, you said that individuals can grow their money tax-free; however, before when you were discussing 401ks, it seemed like the ability for individuals with Roth 401ks to grow their money tax-free was a non-factor for you. Could you please explain this distinction in choosing a Roth for your IRA & traditional for your 401k? I'm also interested in FIRE, so I'm trying to determine how would be the best way to invest my retirement savings. Thanks!
I only own 2 funds in my fidelity 401k and they are FDGRX and VFTNX. Is this ok or should I own more funds?
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I have both Trad and ROTH 401k! This was a great breakdown and people don't know how to capitalize and get the benefits of both. Although my 401k is somewhere else, I have a taxable brokerage with Fidelity and really like the interface and the ease of use too. Great video Sean!
Preach brotha!
Sean out here telling us how to get rich. Mad respect homie.
I use my Roth 401k and love it! Use fidelity as well, the interface is easy to navigate and the fees are minimal.