Maxing out your 401k isn’t the end of the road for your retirement savings.
James discusses several smart savings options by walking through real-life examples of unique retirement saving goals and explaining how to allocate your funds to reach them. From investing in a brokerage account to paying down debt, there are a number of ways to continue to grow your savings even after maxing out your 401k.
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⏱Timestamps⏱
0:00 Introduction
0:47 Example 1
2:11 Example 2
3:06 Example 3
4:07 HSA
5:34 Roth IRA
7:37 401k Options
9:52 Brokerage Account
11:05 Pay Down Debt
12:14 Employee Stock
14:35 Savings and the Future
15:59 Outro
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After maxing out your 401k, you may be wondering where to put your extra savings. A 401k is an excellent retirement savings option, as it allows you to invest pre-tax dollars and provides tax benefits that can lower your taxable income. But what do you do with additional funds? Here are some options to consider:
1. IRA (Individual retirement account): IRA is a popular option for those looking to save more for their retirement. Like a 401k, an IRA provides tax benefits, and the money invested in IRA grows tax-free. There are two main types of IRA: Traditional and Roth. Traditional IRA contributions are tax-deductible, and the withdrawals are taxed while Roth IRA contributions are not deductible, but the withdrawals in retirement are tax-free. You can contribute up to $6,000 per year to an IRA, and those who are over 50 years can contribute up to $7,000 per year.
2. Taxable investment accounts: If you have maxed out your tax-advantaged retirement accounts, you may want to consider taxable investment accounts like mutual funds, individual stocks, or exchange-traded funds (ETFs). While these accounts do not provide the same tax benefits as a 401k or IRA, they provide more flexibility and can be used for various purposes outside of retirement.
3. Real Estate: Investing in real estate is becoming popular among investors, particularly those with significant savings. Real estate provides diversification to your portfolio and could be an essential source of passive income. There are several options available for investing in real estate, including rental properties, real estate investment trusts (REITs), and crowdfunded real estate investments.
4. Pay Off High-Interest Debt: If you are carrying high-interest debt like credit card debt, student loan debt, or personal loans, it may be beneficial to pay off your debt first before investing more. High-interest debt can eat into your savings, and you may end up paying more in interest than you earn from investments.
5. Health Savings Account (HSA): If you are eligible for an HSA, it can be a great way to save for medical expenses while reducing your taxable income. HSAs are like 401ks and IRAs, but the money invested in them grows tax-free, and the withdrawals are tax-free when used for qualified medical expenses. You can contribute up to $3,600 per year for an individual and $7,200 per year for a family.
In conclusion, there are several options available for investing after maxing out your 401k. You can consider investing in an IRA, taxable investment accounts, real estate, paying off high-interest debt, or contributing to an HSA. It is essential to consider your risk tolerance, investment goals, and financial situation while making investment decisions. A qualified financial advisor can help you make the best decisions and create a personalized investment plan.
If you don't use your HSA to pay medical bills before retirement, keep reciepts of all the medical costs you have, and you can reimburse yourself at anytime. For example, you turn 65, you paid $30,000 in medical bills and have the reciepts, you can pull $30,000 from your HSA tax free and use it for anything.
I'm so happy I made productive decisions about my finances that changed my life forever,hoping to retire next year… Investment should always be on any creative man's heart for success in life.
For my 401k after tax (mega back door Roth), I had my plan administrator set an automatic sweep from the 401k traditional to 401k Roth to avoid any tax burden on growth without my having to remember to do anything each payday.
Many employee stock purchase plans (ESPPs) include a six-month lookback, where you get the lower of the stock price at time of purchase or the start of the six months, plus whatever percentage discount. That lookback feature has made a huge difference for me a couple times when the market was moving. I agree ESPP should be near the top of the list if someone has it available. The immediate ROI is a no brainer.
I would add “consider gifting money to others”.
What do you think about ibonds?
Don't we need to understand this income needs upon retirement, first?
I know you're focusing on investment (and thanks for the great video!), I would also add that buying real assets can also a good use of money, especially if those assets have some cash flow potential in addition to any long-term appreciation.
Regarding the HSA, if my spouse is retired and is not covered by my HDHP, can they use my HSA to pay medical expenses not related to a HDHP plan?
LIRP