Comments on: The Best Order of Operations For Saving For Retirement

By: Robert Farrington

Robert Farrington — Tue, 18 Jul 2023 16:15:04 +0000

In reply to Ellen Loh. I would not include or use a 529 plan as an investing for retirement option. It's a saving for college tool. And we only recommend saving for college once you've taken care of yourself first. See this guide: how to save for college. With that said, a lot of people are intrigued by the new "529 to IRA" conversion potential. And it's way too much hype for what you get. In fact, a lot of people won't be allowed to do it (because states won't comply with the laws - notably California, which also still doesn't even allow K-12 education via 529 plans). See our guide to the 529 to IRA conversion, and why it's not great.

By: Ellen Loh

Ellen Loh — Tue, 18 Jul 2023 00:23:04 +0000

Thank you very much for the advice, Robert! I really appreciate it. Would you please let me know if we could use 529 plan as an investment option? If so, where should it be placed? Thanks!

By: Robert Farrington

Robert Farrington — Sat, 29 Apr 2023 17:11:21 +0000

In reply to Sophie.

I would max it if you think it’s actually “free” money – in terms of the strength of the company and assuming you’re also NOT investing in company stock in your 401k. I’d slide in this contribution after Step 1.

By: Sophie

Sophie — Sat, 29 Apr 2023 14:30:06 +0000

I doubt I will get a response as this is an older article, but I am hopeful, and I appreciate this article, thanks for taking the time to write it. Where would ESPP plans fall into this? I get a 10% discount on my company stock and believe I read elsewhere that ESPP should be obviously after 401k contributions up to the employer match in the order of operations, but not so obviously, before the maxing out 401k contributions. I don’t make enough (yet) to max out 401k anyway. Of course with the ESPP and lock up provisions diversity becomes an issue. Mine are locked up until 1 year after purchase date, but if I sell before 2 years the tax situation is less favorable because the discount amount is taxed at ordinary income rates. Does any one else have thoughts on this? I suppose it depends on whether you are bullish or bearish regarding your own company. Also agree HSA should come 2nd in order of operations as someone else mentioned – cant argue with that triple tax advantage. I personally am not following the order of operations to a T though because I am relatively young and don’t have underlying health issues. Currently, I am doing 16% contribution to 401k (9% pre tax, 7% roth, both are eligible for company match which is 6%). I contribute 2k a year to my HSA, so I am not maxing that out. I have a rollover IRA which I don’t contribute to, because I want it to be eligible to rollover into workplace plan should I ever decide to, right now, I just enjoy having something to self manage and enjoy increased investment options. I also have an old 401k that I dont want to consolidate into the new plan because I think the performance on the old one as well as the user interface is a lot better, I digress, I am probably doing many things wrong, but my main question is: where does ESPP come in in this order of operations? should I be maxing out HSA, $1850 additional per year seems doable, or should I be taking advantage of the 10% discount with the ESPP?

By: CommonSenseInvestor

CommonSenseInvestor — Fri, 18 Sep 2020 15:47:33 +0000

In reply to Robert Farrington. I hear you on most of what you said. But not sure if you're correct about "most companies"—plenty offer Vanguard, Fidelity, etc. funds with plenty of options and very low costs.