Should my extra income go towards my 401(k), Roth IRA, or non-retirement account?

I'm a 26-year-old professional with a 401(k), a Roth IRA, and a non- retirement account. I contribute enough to my 401(k) to get my employer's match, and I try to max out my Roth IRA every year. But of those three accounts, where should my extra income be going? I'm not sure what's best to focus on at this point in my career. Additionally, I work for a non-profit, so I only have an extra $5,000-$10,000 to play with.

Retirement Savings, 401(k), IRAs
Answers
Sort By:
Most Helpful
February 2017
100% of people found this answer helpful

I love your commitment to saving at a young age, it's definitely going to pay off!

With an extra $5,000 - $10,000 in savings capacity at your age, I would first try and save in a Roth account. Since you are already maxing your Roth IRA, you could contribute to a spouses Roth IRA (if you're married) or look into your employers 401(k) plan to see if they offer a Roth 401(k) option. If they don't, make the recommendation, it's not going to cost them time or money and is easy to add on to a retirement plan. In the case you can't contribute to a spouses Roth IRA or your employers Roth 401(k), put additional money into your Traditional 401(k). If you get to the point where you're maxing that out, then put the remainder in your taxable brokerage account. At your age, you'd most likely be investing in high growth funds or stocks that shouldn't generate much income, so your tax bill won't be high unless you build up a large capital gain and sell.

February 2017
February 2017
February 2017
February 2017