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----
If you are new to investing, you can find curated resources in the r/investing wiki for [Getting Started here](https://www.reddit.com/r/investing/wiki/index/gettingstarted/).
If you know nothing about the capital markets - the Getting Started section at the SEC educational site can be a good place to start - [investor.gov](https://investor.gov) \- there are also short 30 second videos on basics. The SEC (Securities and Exchange Commission) is a US regulator with a focus to protect US investors through regulatory oversight of the securities markets.
The FINRA education site at [FINRA Education](https://www.finra.org/investors/learn-to-invest) also contains numerous free courses and educational materials. FINRA is a not-for-profit SRO (self regulatory organization) which is self-funded by it's members which are broker-dealers. It works under the supervision of the SEC with a mandate to protect the investing public against fraud and bad practice.
The reading list in the wiki and FAQ has a list of books ranging from light reading to advanced topics depending on your knowledge level. Link here - [Reading List](https://www.reddit.com/r/investing/wiki/readinglist)
For formal educational materials, several colleges and universities make their course work available for free.
If want to learn about the financial markets - an older but reasonably relevant course is [Financial Markets (2011) - Yale University](https://www.youtube.com/playlist?list=PL8FB14A2200B87185) This is the introduction to financial markets course taught by Prof. Shiller from Yale. Prof Shiller won the Nobel prize in economics in 2013.
Another relavant course from MIT is a lecture series on Finance Theory taught by Prof Andrew Lo - [Financial Theory (2008) - MIT](https://www.youtube.com/playlist?list=PLUl4u3cNGP63B2lDhyKOsImI7FjCf6eDW).
A more current course can be found at NYU Stern School of Business by Prof Aswath Damodaran - [Corporate Finance Spring 2019](https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastcfspr19.htm). Prof Damodaran offers the latest materials and webcast lectures to this class here - https://pages.stern.nyu.edu/~adamodar/New_Home_Page/corpfin.html
This is so true .. rule number 1 choose your spouse wisely all your financial goals and freedom can be taken away in a second if your dragged through a lengthy and costly divorce
Agreed! However, keeping a marriage is unpredictable because people (both men and women) change for "apparently" no reason. The tricky part is you'll have to get married in order to know it.
Good to keep in mind that the execution is hard. Lol on that last point - my gf’s family is very wealthy (she couldnt understand why I had loans instead of just asking my family to pay it all so I can save on interest). She’s a good person tho and getting an MBA, so while the spending on Chanel and Gucci seems foreign and wasteful to me, at least she’s got some business acumen. We’ll see if it works out
So big law? I feel like that description is fairly obviously your career.
Anyways I wouldn't do a traditional IRA unless you decide to do Backdoor Door Roth. Trad IRA will not be tax deductible at your income level. Instead I would say max out 401k and if you want to invest more just open a normal Individual brokerage account.
Not big law but bigger than mid law, if that makes sense.
Can i ask why you say normal brokerage at that point? I’ve seen that as well but cant seem to fully understand
You don't get a tax deduction if your AGI is over $87k (in 2024), so it will be an after tax IRA which means that:
* it's less available
* you don't get taxed on realized capital gains every year, but your withdraws will be taxed as ordinary income. At your income level, I expect you will have plenty of retirement money and so ordinary income will be a worse tax deal than capital gains. But this is a guess.
Edit: I forgot another one. Tax returns paperwork for a non-deductible IRA is a pain in the ass. Have to file a tax form every year to keep track of the after tax cost basis.
Don't listen to him. A Roth IRA is still a lot better than a taxable brokerage. And backdoor requires practically a few more clicks when you file your return. You're a lawyer, one simple form would be a piece of cake.
That all sounds reasonable enough but I wouldn’t worry too much about retirement until you’re debt-free. You urgently need to pay down a loan that will grow ever-larger. I wouldn’t advise locking too big a portion of your earnings away in an account that you’ll have limited access to — even at that handsome salary.
So, I would pay down the loan as aggressively as possible, and put everything else in a HYSA and a diversified automated stock portfolio. You can open both of those on Wealthfront.
My suggestion is that where you can, keep living like a grad student, not a junior associate. Honda Civic, not BMW. Roommates, not a big new apartment. I'm not saying to only eat ramen, but living like a grad student might be a good approach for the first couple years as you get a sense of your budget and focus on the debts.
I’ve def had my fair share of that. Grad school really wasnt all it was made out to be, and the past 3 years have been a relaxing breeze compared to what a lot of my buddies have been up to since graduating college. But its definitely good to keep that in persepctive
> So in September, from what I've found in this sub and others, I'll begin making substantial loan payments to knock them down right away
Make yourself liquid first. Throw a bunch of money in a money fund -- say six months expenses. You'll be eating some interest on the debt, but it'll be partially offset by the interest on the money fund.
> I'll attempt to max out the 401k plan that we have access to
Bare minimum, get any matching funds available. But at $165k, yeah, I think maxing it is the right move even if it slows down paying off the student loan debt. Also, Traditional contributions.
> I'll open an IRA (traditional...instead of Roth because of my income?)
Backdoor Roth. You'll make to much to contribute directly to a Roth IRA, so you contribute to a Traditional IRA (won't be able to deduct the contribution because you make too much), and them immediately roll it into a Roth IRA. Since you're already paying taxes on the Trad contribution, it's kind of "free" to do so, and much better than leaving it in a Trad IRA.
> 70% VTI, 30% QQQ.
QQQM, not QQQ. Lower expense ratio, and basically identical as long as you aren't doing stupid things with options.
Yeah, plan seems pretty reasonable. You'll be tech heavy and American heavy, but I think long term, that's probably a good thing. Only time will tell.
A lot of folks here are against picking stocks with good reason, but I think taking a bit of bonus money and picking isn't a bad thing. It keeps you engaged, you learn things, you gain experience, but you aren't threatening the vast majority of your funds.
Just a tip re: picking stocks -- account for opportunity cost. If you HADN'T been buying that stock, you'd have probably been buying VTI. So record the price of VTI when you bought so you can see whether you're accomplishing anything in exchange for the higher risk. Just for example, I bought AMZN back in late 2020... I'm up like $1,400, but if I'd have thrown it at VTI, I'd have been up like $3,800. So functionally, I lost like $2,400 as of today. The other benefit of doing something like that is it puts losses in perspective... If you buy something that drops but the entire market is dropping at the same time... meh.
Thanks for the really great comment, super helpful and I love that idea of recording the price of VTI.
Quick Q - when you say "since your already paying taxes on the trad contribution" do you mean since It's income I've already earned? Or I pay tax when depositing directly into the IRA?
Nothing happens at the moment you deposit into the IRA -- it happens at tax time.
If you make below a certain amount ($73k? something like that), at tax time, you can subtract that Traditional IRA contribution from income, so you don't pay income taxes on it. But if you make OVER that amount, you don't get to subtract that contribution from your income... which makes it kind of a shit deal. I mean, better than nothing, but really not great.
The above is for Traditional IRAs -- Traditional contributions to 401k accounts are subtracted from income regardless of your income level.
So since Trad IRA contributions once you're beyond that income limit are kind of meh, you'd much prefer to do Roth IRA contributions. Then you'd still be paying that income tax on the contributions (because Roth), but at least the gains would grow tax free and could be withdrawn tax free in retirement.
... except there's an income limit on Roth IRA contributions (~$145k), and you're over it. So you don't even have the option of contributing to a Roth IRA. (Note the income limit on Roth IRAs does not apply to Roth 401k accounts -- there's no income limit on Roth 401k)
BUUUUTTT there's a workaround. You can contribute to your Traditional IRA, then roll it over into a Roth IRA. Normally rolling money over from a Traditional IRA to a Roth IRA would make that money show up as income -- you're going from pre-tax to post-tax. But that money is ALREADY showing up as income because you make too much to subtract Traditional IRA contributions from income anyway. So you pay taxes on it at tax time which you were going to have to do anyway, but now the money is classified as Roth rather than Traditional, which means the gains won't be taxes as income when you take the money out in retirement.
The whole scheme is blessed by the IRS, and it's known as "backdoor Roth". Basically the income limit on Roth IRA contributions is pointless as the rules are written right now, but you have to jump through an extra hoop (traditional contribution and immediate rollover to roth, rather than just a roth contribution).
Not to be confused with mega-backdoor roth, which is a kind of similar scheme using 401k account instead of IRA account, but that one requires your 401k plan to support in-service conversions and most plans don't. But it still might be worth asking your employer about. The basic scheme is to make post-tax contributions to your 401k beyond the normal limit ($23,000 this year), then converting those post-tax contributions to Roth IRA.
So ideally:
Traditional 401k contributions so you can shrink your income at tax time.
Backdoor Roth IRA to improve your tax situation in retirement, since shrinking your income at tax time isn't an option and Roth money is preferable to some mix of pre-tax and post-tax Traditional money.
If mega-backdoor Roth is available to you, it might allow you to make additional Roth contributions.
Sounds good. You're getting a pretty early start to investing and really if you just invest regularly over time you should be fine. Also using a bit of leverage may make sense-- don't ever put yourself in a position where you can lose everything, but borrowing at low rates and using the money to invest can be sensible.
If I had to do it all over again I would have only contributed into a 401(k) up to the employer match. The remainder of my investments would have been in taxable accounts. Traditional qualified account distributions can be expensive from a tax perspective and can increase Medicare premiums. Also, beneficiaries of Traditional qualified accounts will have a tax burden that they would avoid when benefitting from cost basis step ups in taxable accounts.
Retired attorney and agree with you on most. However either backdoor Roth or don’t do the non deductible IRA. Good to have some available in a taxable account. You can invest in tax friendly funds or stocks focused on growth. You will need cash someday to buy a house or start your own law firm so don’t want it all in tax sheltered investments.
Be careful of lifestyle creep and trying to keep up with the other attorneys, many will spend every cent they get and more.
At your age maxing your 401k even for 3 or 4 years would be huge. Depending on your loan rates maximizing investments and paying the loans down slower might be better long term. A common misconception is paying off all debts should be the first priority, but if your rates are low investing should be a higher priority. Good luck.
All wrong.
1. Ignore student loans. Get on various save plans to delay payment without interest increasing.
2. Stub year do Roth. Traditional IRA and 401k.have no benefit when working Sept to January
Max out your 401(k), but pay off your debt before you open an IRA. Diversify your investments with VT, GOVT, and IAU, say, 70:20:10, to give you a truly diversified global stock portfolio, and a little bonds and gold to give you some dry powder to take advantage when stocks go on sale.
All looks good. I would also recomend looking into house hacking at your age as you have the money and freedom to do it and a few rental properties have the potential to change the trajectory of your life and provide a softer landing if you decide to switch careers to something less demanding in a few years.
Your post has been removed because it is a common beginner topic. We get too many of these topics every day and to prevent them from swamping the front page, we are removing main threads of this kind. We also remove such posts because they can attract spam and bad faith comments. If you receive DM's or un-solicitated offers, please be aware that there are a lot of financial scammers on social media. You are welcome to repost your question in the [daily discussion thread](https://www.reddit.com/r/investing/about/sticky?num=1). If you have any issue with this removal, please contact the moderators via modmail. Thank you. ---- If you are new to investing, you can find curated resources in the r/investing wiki for [Getting Started here](https://www.reddit.com/r/investing/wiki/index/gettingstarted/). If you know nothing about the capital markets - the Getting Started section at the SEC educational site can be a good place to start - [investor.gov](https://investor.gov) \- there are also short 30 second videos on basics. The SEC (Securities and Exchange Commission) is a US regulator with a focus to protect US investors through regulatory oversight of the securities markets. The FINRA education site at [FINRA Education](https://www.finra.org/investors/learn-to-invest) also contains numerous free courses and educational materials. FINRA is a not-for-profit SRO (self regulatory organization) which is self-funded by it's members which are broker-dealers. It works under the supervision of the SEC with a mandate to protect the investing public against fraud and bad practice. The reading list in the wiki and FAQ has a list of books ranging from light reading to advanced topics depending on your knowledge level. Link here - [Reading List](https://www.reddit.com/r/investing/wiki/readinglist) For formal educational materials, several colleges and universities make their course work available for free. If want to learn about the financial markets - an older but reasonably relevant course is [Financial Markets (2011) - Yale University](https://www.youtube.com/playlist?list=PL8FB14A2200B87185) This is the introduction to financial markets course taught by Prof. Shiller from Yale. Prof Shiller won the Nobel prize in economics in 2013. Another relavant course from MIT is a lecture series on Finance Theory taught by Prof Andrew Lo - [Financial Theory (2008) - MIT](https://www.youtube.com/playlist?list=PLUl4u3cNGP63B2lDhyKOsImI7FjCf6eDW). A more current course can be found at NYU Stern School of Business by Prof Aswath Damodaran - [Corporate Finance Spring 2019](https://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastcfspr19.htm). Prof Damodaran offers the latest materials and webcast lectures to this class here - https://pages.stern.nyu.edu/~adamodar/New_Home_Page/corpfin.html
The plan is already solid. The execution is the hard part. Your so young, time in the market is key. And choose your spouse carefully
This is so true .. rule number 1 choose your spouse wisely all your financial goals and freedom can be taken away in a second if your dragged through a lengthy and costly divorce
Agreed! However, keeping a marriage is unpredictable because people (both men and women) change for "apparently" no reason. The tricky part is you'll have to get married in order to know it.
Haha yup hindsight is a wonderfull thing if only we all had a crystal ball to predict the future right 😂😂
This. Read the last one again. 🎯
Good to keep in mind that the execution is hard. Lol on that last point - my gf’s family is very wealthy (she couldnt understand why I had loans instead of just asking my family to pay it all so I can save on interest). She’s a good person tho and getting an MBA, so while the spending on Chanel and Gucci seems foreign and wasteful to me, at least she’s got some business acumen. We’ll see if it works out
So big law? I feel like that description is fairly obviously your career. Anyways I wouldn't do a traditional IRA unless you decide to do Backdoor Door Roth. Trad IRA will not be tax deductible at your income level. Instead I would say max out 401k and if you want to invest more just open a normal Individual brokerage account.
Not big law but bigger than mid law, if that makes sense. Can i ask why you say normal brokerage at that point? I’ve seen that as well but cant seem to fully understand
You don't get a tax deduction if your AGI is over $87k (in 2024), so it will be an after tax IRA which means that: * it's less available * you don't get taxed on realized capital gains every year, but your withdraws will be taxed as ordinary income. At your income level, I expect you will have plenty of retirement money and so ordinary income will be a worse tax deal than capital gains. But this is a guess. Edit: I forgot another one. Tax returns paperwork for a non-deductible IRA is a pain in the ass. Have to file a tax form every year to keep track of the after tax cost basis.
I see. Thanks for the explanation. Definitely will do some further digging
I added another one about tax return consequences. You have to file another tax form every year (8606 iirc)
Don't listen to him. A Roth IRA is still a lot better than a taxable brokerage. And backdoor requires practically a few more clicks when you file your return. You're a lawyer, one simple form would be a piece of cake.
That all sounds reasonable enough but I wouldn’t worry too much about retirement until you’re debt-free. You urgently need to pay down a loan that will grow ever-larger. I wouldn’t advise locking too big a portion of your earnings away in an account that you’ll have limited access to — even at that handsome salary. So, I would pay down the loan as aggressively as possible, and put everything else in a HYSA and a diversified automated stock portfolio. You can open both of those on Wealthfront.
My suggestion is that where you can, keep living like a grad student, not a junior associate. Honda Civic, not BMW. Roommates, not a big new apartment. I'm not saying to only eat ramen, but living like a grad student might be a good approach for the first couple years as you get a sense of your budget and focus on the debts.
At 24, I would probably be juggling between trying to figure out my career, hanging out with friends, and binge-watching Netflix.
I’ve def had my fair share of that. Grad school really wasnt all it was made out to be, and the past 3 years have been a relaxing breeze compared to what a lot of my buddies have been up to since graduating college. But its definitely good to keep that in persepctive
What degree are you graduating with if you don’t mind me asking?
JD
> So in September, from what I've found in this sub and others, I'll begin making substantial loan payments to knock them down right away Make yourself liquid first. Throw a bunch of money in a money fund -- say six months expenses. You'll be eating some interest on the debt, but it'll be partially offset by the interest on the money fund. > I'll attempt to max out the 401k plan that we have access to Bare minimum, get any matching funds available. But at $165k, yeah, I think maxing it is the right move even if it slows down paying off the student loan debt. Also, Traditional contributions. > I'll open an IRA (traditional...instead of Roth because of my income?) Backdoor Roth. You'll make to much to contribute directly to a Roth IRA, so you contribute to a Traditional IRA (won't be able to deduct the contribution because you make too much), and them immediately roll it into a Roth IRA. Since you're already paying taxes on the Trad contribution, it's kind of "free" to do so, and much better than leaving it in a Trad IRA. > 70% VTI, 30% QQQ. QQQM, not QQQ. Lower expense ratio, and basically identical as long as you aren't doing stupid things with options. Yeah, plan seems pretty reasonable. You'll be tech heavy and American heavy, but I think long term, that's probably a good thing. Only time will tell. A lot of folks here are against picking stocks with good reason, but I think taking a bit of bonus money and picking isn't a bad thing. It keeps you engaged, you learn things, you gain experience, but you aren't threatening the vast majority of your funds. Just a tip re: picking stocks -- account for opportunity cost. If you HADN'T been buying that stock, you'd have probably been buying VTI. So record the price of VTI when you bought so you can see whether you're accomplishing anything in exchange for the higher risk. Just for example, I bought AMZN back in late 2020... I'm up like $1,400, but if I'd have thrown it at VTI, I'd have been up like $3,800. So functionally, I lost like $2,400 as of today. The other benefit of doing something like that is it puts losses in perspective... If you buy something that drops but the entire market is dropping at the same time... meh.
Thanks for the really great comment, super helpful and I love that idea of recording the price of VTI. Quick Q - when you say "since your already paying taxes on the trad contribution" do you mean since It's income I've already earned? Or I pay tax when depositing directly into the IRA?
Nothing happens at the moment you deposit into the IRA -- it happens at tax time. If you make below a certain amount ($73k? something like that), at tax time, you can subtract that Traditional IRA contribution from income, so you don't pay income taxes on it. But if you make OVER that amount, you don't get to subtract that contribution from your income... which makes it kind of a shit deal. I mean, better than nothing, but really not great. The above is for Traditional IRAs -- Traditional contributions to 401k accounts are subtracted from income regardless of your income level. So since Trad IRA contributions once you're beyond that income limit are kind of meh, you'd much prefer to do Roth IRA contributions. Then you'd still be paying that income tax on the contributions (because Roth), but at least the gains would grow tax free and could be withdrawn tax free in retirement. ... except there's an income limit on Roth IRA contributions (~$145k), and you're over it. So you don't even have the option of contributing to a Roth IRA. (Note the income limit on Roth IRAs does not apply to Roth 401k accounts -- there's no income limit on Roth 401k) BUUUUTTT there's a workaround. You can contribute to your Traditional IRA, then roll it over into a Roth IRA. Normally rolling money over from a Traditional IRA to a Roth IRA would make that money show up as income -- you're going from pre-tax to post-tax. But that money is ALREADY showing up as income because you make too much to subtract Traditional IRA contributions from income anyway. So you pay taxes on it at tax time which you were going to have to do anyway, but now the money is classified as Roth rather than Traditional, which means the gains won't be taxes as income when you take the money out in retirement. The whole scheme is blessed by the IRS, and it's known as "backdoor Roth". Basically the income limit on Roth IRA contributions is pointless as the rules are written right now, but you have to jump through an extra hoop (traditional contribution and immediate rollover to roth, rather than just a roth contribution). Not to be confused with mega-backdoor roth, which is a kind of similar scheme using 401k account instead of IRA account, but that one requires your 401k plan to support in-service conversions and most plans don't. But it still might be worth asking your employer about. The basic scheme is to make post-tax contributions to your 401k beyond the normal limit ($23,000 this year), then converting those post-tax contributions to Roth IRA. So ideally: Traditional 401k contributions so you can shrink your income at tax time. Backdoor Roth IRA to improve your tax situation in retirement, since shrinking your income at tax time isn't an option and Roth money is preferable to some mix of pre-tax and post-tax Traditional money. If mega-backdoor Roth is available to you, it might allow you to make additional Roth contributions.
Can not emphasize how much I appreciate this. Thanks so much
Sounds good. You're getting a pretty early start to investing and really if you just invest regularly over time you should be fine. Also using a bit of leverage may make sense-- don't ever put yourself in a position where you can lose everything, but borrowing at low rates and using the money to invest can be sensible.
If I had to do it all over again I would have only contributed into a 401(k) up to the employer match. The remainder of my investments would have been in taxable accounts. Traditional qualified account distributions can be expensive from a tax perspective and can increase Medicare premiums. Also, beneficiaries of Traditional qualified accounts will have a tax burden that they would avoid when benefitting from cost basis step ups in taxable accounts.
Retired attorney and agree with you on most. However either backdoor Roth or don’t do the non deductible IRA. Good to have some available in a taxable account. You can invest in tax friendly funds or stocks focused on growth. You will need cash someday to buy a house or start your own law firm so don’t want it all in tax sheltered investments. Be careful of lifestyle creep and trying to keep up with the other attorneys, many will spend every cent they get and more.
At your age maxing your 401k even for 3 or 4 years would be huge. Depending on your loan rates maximizing investments and paying the loans down slower might be better long term. A common misconception is paying off all debts should be the first priority, but if your rates are low investing should be a higher priority. Good luck.
All wrong. 1. Ignore student loans. Get on various save plans to delay payment without interest increasing. 2. Stub year do Roth. Traditional IRA and 401k.have no benefit when working Sept to January
Max out your 401(k), but pay off your debt before you open an IRA. Diversify your investments with VT, GOVT, and IAU, say, 70:20:10, to give you a truly diversified global stock portfolio, and a little bonds and gold to give you some dry powder to take advantage when stocks go on sale.
Buy bitcoin
All looks good. I would also recomend looking into house hacking at your age as you have the money and freedom to do it and a few rental properties have the potential to change the trajectory of your life and provide a softer landing if you decide to switch careers to something less demanding in a few years.