Hello! I need some advice.

I started a new job in November (after a covid layoff, very thankful) but I’m not eligible for the company 401k until the start of my 7th month (aka June). At this point, I have a nice nest egg saved up as well as replaced any savings that I spent during my layoff. But at this point I don’t want my money just sitting there in a savings account and not “working” for me.

My main question is: what should I do with the extra money that I have until I can start contributing to my companies 401k ?

For more information:

  • I am already maxing my HSA
  • I’ve already contributed $3000 (50%) of my 2021 roth IRA contributions and will most likely be completing my 2021 contributions at the end of Feb
  • I am planning on maxing my 401k once I can start contributing
  • I’ve been semi-saving for a house down payment but don’t have set in stone plans about when that will happen

My sub questions are:

  • Can I retroactively deposit money into a 401k? Like, I continue to save and then dump it in as soon as I’m eligible? Or does that money have to come directly out of my paycheck?
  • My roth IRA is through Vanguard and I’ve really been loving Vanguard. Is there another type of Vanguard account I can utilize well in this scenario?
  • Along the same lines of above, is there an account type where I can pull my contributions at any time? For example, I’ve been saving money for a house down payment, but I also want it to work for me. Is there an account type that I can put it in, but then pull out my contributions when I want to buy a house?

Also, I know for sure I’m probably not aware of/thinking about all my options, so please let me know if I’m missing something important. Thanks for your help in advance, can’t wait to learn from you all!

1. No, has to come out of wages.

2. Open a taxable account.  All the same funds available.

3. Same as 2 a taxable account.

Now, its called a taxable account for a reason–you pay taxes on it–often annually even if you don’t take any money out.  That’s not a bad thing, just how the game is set up.  I suggest you read up on the tax implications of owning mutual funds.

Also, since you will be starting mid-year in your 401k make sure you calculate it correctly to hit the max this year (19,500).  Then in January readjust your contribution since in 2022 you will have 12 months to contribute instead of 6. 

You can either save up the money and then live off that while maxing out 401k contributions later in the year or go ahead and invest the money in a taxable brokerage account and make the most of your 401k contributions next year.

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