In this episode of Ready for Retirement, James discusses what you should do with extra income after you max out your 401(k).
Questions Answered:
What are the best accounts to invest in after your 401(k)?
Should you invest in a brokerage/Roth/IRA/etc?
How can your overall retirement strategy be improved?
Timestamps:
00:00 – Introduction
1:00 – Key Benefit
2:23 – Order of Operations
4:30 – Where To Save Next
6:14 – Example (Person A v. B)
9:50 – HSA (Health Savings Accounts)
12:33 – Backdoor Roth Contribution
15:46 – Brokerage Account Hack
18:50 – Paying Down Debt
21:08 – ESPP
23:50 – Working With Us
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If you’ve been fortunate enough to have extra income to invest after maxing out your 401k, then you’re in a great position to start building your personal wealth. But where should you invest that extra money?
One of the best investments you can make is in yourself. Investing in yourself can come in many forms. Consider taking classes to increase your knowledge and skill set, which can lead to promotions and higher salaries. You can also invest in yourself through personal development, such as working with a coach, participating in seminars, or reading books.
Another great investment is real estate. Investing in real estate can be a great way to generate passive income and build long-term wealth. You can buy rental properties, or invest in a real estate investment trust (REIT) or exchange-traded fund (ETF). You can also look into flipping houses or investing in vacation rental properties.
You can also consider investing in stocks and bonds. Stocks are a great way to grow your wealth over time, as they can provide higher returns than other investments. Bonds are a good way to get steady income, as they offer a fixed rate of return. You can also look into mutual funds, which are a combination of stocks and bonds.
Finally, you can consider investing in alternative investments, such as cryptocurrency, private equity, and venture capital. These investments can be riskier than traditional investments, but they can also provide higher returns.
No matter which type of investment you choose, it’s important to do your research and understand the risks involved. Investing can be a great way to build your wealth, but it’s important to understand the potential risks and rewards before you invest.
MAX that HSA!
Making money is an action. Keeping money is behavior. Growing money is knowledge. Growing your capital in a bear market is an art.
I always contribute to get my 401k match, then max out my HSA, then max out my Roth IRA, and then put more in my 401k if I don't need the money and/or want to lower my taxable income. I was thrilled to hear you mention the HSA, James. Dave Ramsey needs to take your advice and update his curriculum.
There’s nothing wrong with keeping it simple, and after the 401k and Roth IRA contributing to a taxable account, as you mentioned. The nice part is other than capital gains or dividends (which are taxed at a lower rate than income) there’s no limits on using that income at certain ages.
I love your practical way at looking at life. great resource!
I did this for a half dozen or so years before retirement, putting excess money into dividend paying stocks in M1 Finance. Now practically every morning when I get up, I see a notice from M1 Finance on my phone, "You have received X dividends". What a nice way to start a day. LOL. And the funny part for today was the amount I received covered my groceries at the store. Free groceries.