“I’m still new to all this and don’t know much”: Should I focus on my 401k, Roth 401k, or Roth IRA? How do I prioritize my savings for a secure financial future?

Hi Money Minder,

I’m a fresh college grad diving headfirst into the workforce jungle as an engineer. It’s a whole new world for me, especially when it comes to finances. I’m kind of clueless, to be honest, so any help or advice you can offer is greatly appreciated.

My company hooked me up with a fidelity account, and I’m stashing away 5% of my paycheck into both a traditional 401k and a Roth 401k. I’ve also got a HYSA with Sofi, tossing in a bit of cash from each paycheck, and chipping away at my student loans.

So, should I be pouring more love into one of these savings areas than the others? Some pals are raving about Roth IRA, but I’m fuzzy on how it’s different or how it could beef up my savings game. And then there’s the whole S&P 500 and ETFs spiel – does it make sense for me to jump into that, too?

I’m feeling a bit lost in the financial wilderness, so any guidance you can offer would be awesome. What’s your take on all this? Thanks a bunch!

Cheers,
Financially Confused Grad

Response from THE MONEY MINDER:

Hello There,

Congratulations on entering the workforce as a full-time engineer! It’s fantastic that you are already taking steps to secure your financial future by contributing to both a traditional and Roth 401k, as well as saving in a High-Yield Savings Account (HYSA) with Sofi and paying off student loans. Your dedication to financial planning is commendable.

When considering where to focus your saving efforts, it’s important to consider your individual financial goals. Since you are already contributing to both a traditional and Roth 401k, you are spreading your retirement savings across different tax treatments, which can be beneficial in the long run. Additionally, utilizing a HYSA for emergency savings is a smart move to ensure you have a financial cushion for unexpected expenses.

Opening a Roth IRA is another excellent way to save for retirement, especially if you have maxed out your contributions to your employer-sponsored retirement plans. A Roth IRA offers tax-free growth potential, which can be advantageous in the future when you are ready to withdraw your savings.

Regarding investing in the S&P 500 or certain ETFs, these are popular investment options that can provide diversification and potentially higher returns over time. It may be beneficial to research these investment options further and consider your risk tolerance before making any investment decisions.

In conclusion, it’s great that you are seeking advice on how to best manage your finances. The key is to create a well-rounded financial plan that incorporates saving for retirement, building emergency savings, and paying off debt. By continuing to educate yourself and seeking guidance from professionals, you are setting yourself up for a successful financial future. All the best from THE MONEY MINDER.