The goal of achieving financial freedom is to have the opportunity to only do purpose

[target2019]

Many thanks for the warm welcome here in the forum! I can already see that it has been worthwhile to register. All the tips are very helpful and I now have material to read, think about and try out

Keep it Simple, Sabrek.

 

[freedomatlast]

Max out your 401K if available, and in addition, save at least an equal amount in after tax accounts. This will allow you to have many more options when you finally pull the trigger to retire. Broad based index funds with low expense ratios are key as is not trying to time the market. You're thinking about all this in your 20's which enables a high probability of success.

 

[Gumby]

Max out your 401K if available, and in addition, save at least an equal amount in after tax accounts. This will allow you to have many more options when you finally pull the trigger to retire. Broad based index funds with low expense ratios are key as is not trying to time the market. You're thinking about all this in your 20's which enables a high probability of success.

I would advise a slightly different order of saving. First, contribute as much as necessary to your 401k to get any employer match, since that is an instant, risk free return on your money. Once you maximize any employer matching in your 401k, start directing your saving to a Roth IRA. If you max out your Roth and still have money left, go back to your 401k until you hit the limit. And if you still have money left after that, put it in a taxable account and invest in a tax efficient manner.

 

[LateToFIRE]

^^^

To the OP, I'm sure you've noted a variety of different recommendations and approaches, each prioritizing various elements of saving and investing, often with the goal of maximizing/optimizing your accumulation phase.

That's all fine and well, but I'm going to cut thru all that and just say, the best plan is the one you can stick to over a very long period of time. Usually, for most people, that is best accomplished via some form of automated, passive, forced, set-it-and-forget it savings plan, such as a payroll deduction for 401k.

I have coached a significant number of Millennial and Gen-Z employees who have reported to me over the years - quite a few of them are multi-millionaires today.

Conversations usually went something like this:

Me: You're contributing to the 401k right?
Them: Yeh, of course Boss, I'm not an idiot.
Me: You're contributing the max, right?
Them: Of course.
Me: Like the absolute legal max?
Them: Oh, well, you know just enough to get the company match
Me: You gotta do the absolute max.
Them: You're joking right? I can barely make ends meet, NYC is sooo expensive [mind you these are very well paid young persons, IMO]
Me: You gotta do the absolute max.
Them: But, I can't.
Me: But, you can. Just cut out one chai mocha latte or expresso martini per day. You won't notice the $$$ missing from your paycheck. I promise.
Them: Well, ookkkaaayyy Boomer.
Me: In a couple decades, let me know how that worked out for you.

 

[freedomatlast]

I would advise a slightly different order of saving. First, contribute as much as necessary to your 401k to get any employer match, since that is an instant, risk free return on your money. Once you maximize any employer matching in your 401k, start directing your saving to a Roth IRA. If you max out your Roth and still have money left, go back to your 401k until you hit the limit. And if you still have money left after that, put it in a taxable account and invest in a tax efficient manner.

I agree if OP is eligible to contribute to a Roth. I was never eligible to contribute to a Roth so that's an option I didn't have.

 

[LateToFIRE]

I agree if OP is eligible to contribute to a Roth. I was never eligible to contribute to a Roth so that's an option I didn't have.

Same - didn't exist early in career, made too much to contribute later on. DW was able to backdoor some Roth, so will let that marinate. Thankfully more and more employers are offering Roth 401k options.

 

[Martlet]

I didn't follow any of those approaches. In my tax-advantaged retirement savings I generally invested 50% S&P 500, 15% International, 15% Small and Medium Cap US, 20% Total Bond Fund. Moderately expensive mistake was to rebalance to 50/50 equity/bond during the great recession.
For taxable accounts, I typically adopted something close to the Buffet portfolio with 90% equities / 10% bond funds and cash. But the equities were mostly (80%) individual stocks. This approach seems to have significantly outperformed the tax-advantaged accounts. It seems to have also slightly outperformed the S&P 500 since 2003 (cumulatively).
I think that it's a given that a professional money manager is unlikely to beat the index, because of expenses but also the other drags on performance such as funding redemptions, needing to show competitive performance quarterly. An individual investor has none of those constraints and can assemble a decent portfolio without much risk. If after a few years, you find you're not getting results and not enjoying identifying good investments, you can always stop and go 100% passive. Personally, I found it interesting and profitable to pick stocks. There's an interesting substack post about the Coffee Can portfolio -- basically extreme buy and hold, selling only bad losers.
https://rationalwalk.com/wp-content/uploads/2023/07/Kirby-Coffee-Can-Portfolio.pdf
I suppose in aggregate I'd say I recommend the Buffett portfolio for retirement accounts and 70% Coffee Can/20% Buffett/10% Fixed Income for taxable accounts.

 

[Gumby]

I agree if OP is eligible to contribute to a Roth. I was never eligible to contribute to a Roth so that's an option I didn't have.

In our entire careers, we were only eligible to partially contribute to a Roth (< $1k) for two years. And we never had any 401 k match. So my advice is theoretical, since I never actually did it that way.

 

[38Chevy454]

Lot of good advice on educating yourself about investing. MY additional comments are three things, as mentioned by some previous replies.
1) LBYM, Live Below Your Means. Can't save if you have more going out than you have coming in.
2) Pay yourself first. Max out your 401k, Roth and if you can additional after tax savings. Always save at least the amount to get the free company match if you have that. You should strive for 15% minimum of your paycheck going to savings, including any match.
3) Understand power of compounding. The more you can save, and the earlier you start, the more you benefit the power of compounding. BTW, compounding also works in reverse for debt - stay out of debt except for mortgage or needing a reliable vehicle.

Oh, and along the way don't forget to have some fun and enjoy life. It's not an opposite of the principles above, it is making sure you have some fun along the way. Just keep the fun expenses in control and meeting the principles above.

 

[Koolau]

Oh, and along the way don't forget to have some fun and enjoy life. It's not an opposite of the principles above, it is making sure you have some fun along the way. Just keep the fun expenses in control and meeting the principles above.

Good point. Life (and preparation for early retirement) is a process. It's not either/or. As the old saying goes: "Stop and smell the roses."