Sunday, June 29, 2008

On Priorities

Today I read a few forums and some websites regarding finance/investing. It seems that there is an unwritten consensus on the priorities of investing, which are as follows:

1. Invest in a 401(k)/403(b) up to the company match
2. Max out a Roth IRA
3. Max out 401(k)/493(b)
4. Taxable investing

Of those, I know that my goals for the year are #1 and #2 - the other two are certainly not in my income range right now! However, in terms of the 401(k) company match, the full 3% has a vesting period of 6 years, with 0% vested in years 0 to 1. I would still like to contribute some to the 401(k) once I become eligible to sign up on 10/1. As such, I will put my focus on maxing out a Roth IRA.

Do you follow this unwritten investment priority list? What are your investment priorities?


Penny June 29, 2008 at 7:56 AM  

Those are GREAT goals! I was talking to a financial advisor and he said that it would be more beneficial for me to wait to open the Roth IRA until the next tax year, you might want to look at that for yourself. It has something to do with the fact that we are only working half of the year, but I'm not exactly sure of the reasoning.

in reply: my electricity was $75 for my new apartment, but I had to pay the last bill from my old apartment at college too! At least my parents paid half of it. I do live alone, though, so my utilities will be pricey.

graduatedlearning June 29, 2008 at 5:17 PM  

Usually when I see those rules, they also mention other uses of money within up a $1000 emergency fund, pay off debts, then go back and beef up your emergency fund further. That part always gets confusing, because they sometimes come in prior to some of the other goals...
But I agree with the list, and also have the same problem, that I can only do #1 and makes a lot of sense to take advantage of free money (matching) and tax shelters (401k, IRA, etc.)
wow, long comment, sorry!

SavingDiva June 29, 2008 at 8:56 PM  

With a full time job, I made sure to max out the contributions my employer would add to my 401k. Then, I contributed what I could to my Roth IRA. I have to admit that I didn't max out either...Now that I know I'm going back to graduate school, I'm still getting my full company match, but I've stopped contributing to my Roth IRA to have more liquid savings for a decent emergency fund.

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