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My employer does not offer a 401(k) plan, but I am making maximum contributions to my Roth IRA account every year; how else should I be saving for retirement?

I recently started my first full-time job. I make $42,000 a year pre-tax. The company does not offer a 401(k). I have already made the maximum contributions to my Roth IRA account for 2017 and 2018, and I plan on reaching the maximum contribution for 2019 in January. How else can I save for retirement without a Roth 401(k)? I live in California, where there are high state taxes. I plan to spend my entire life here. At my current savings rate, I hope to have around $16,000 saved for retirement by the end of the year. I also have $15,000 saved up for future expenses like buying a house or a car. Should I put all of it into a taxable brokerage account?

Financial Planning, Retirement, Retirement Savings, 401(k), IRAs
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March 2018

Congratulations on starting your first full-time role, the value that you earn is the best way for you to save for your retirement. Unfortunately there are no clever options for you to have more invested and out of the way of the taxman I am afraid.

But just because there isn't an incentive for you doesn't mean that its a bad idea, investments are the best place when you have such a long time line, so the taxable account is your way forward. In terms of the actual holdings and strategy, being aggressive is fine, it will be bumpy, but in a taxable account that gives you the opportunity for tax loss harvesting.

One other option if it is available to you could be a HSA, this would give you 3,450 that you could save pre-tax and have invested tax deferred. But you should not select a HSA insurance policy purely for this tax break though, it needs to make sense for your medical insurance needs also.

Annuities do offer tax deferral from capital gains, but with the tax bracket you are in at the moment I do not think that they add value to you. You can find very basic annuities that have low fees and a wide range of investment options, but until you move into higher tax brackets the taxable brokerage account is the best way to go for now.

Good luck, 

Paul Robertson


March 2018
March 2018
March 2018
March 2018