What order of investment options should I focus on investing in first?

Submitted by InfiniteImmortality t3_1002pwp in personalfinance

A little background, I am 22 years old and make around 17k a year. I am currently investing in an employee 401k through capital group and contribute 10% of my paycheck and my employer matches up to 3%. My second fund is Vfiax (vanguard s and p500 index fund much lower .04 expense ratio) in my Roth IRA. I make sure to max out my Roth IRA every year but which fund should I prioritize first my Roth IRA or the 401k since i obviously can’t max them both out with my current income? Is there specific funds such as voo or spy (more s and p 500 based) I should be investing in my 401k? I am currently invested in American Funds 2065 Target Date (AAOTX) at a 0.81 expense ratio through capital group but it’s worthy noting I don’t really trust my employer financial advisor who runs it which has steered me away from putting much in my 401k but I don’t see too many different options to invest in other than growth funds and target funds that don’t necessarily mirror the s and p500. I am considering boosting my contributions from 10% of my income since I hear a lot of good things about 401k just not sure about this one. Should I invest in a traditional IRA as well or just focus on the Roth IRA and 401?Also what is the difference between a 401k and a traditional IRA since they are both pretax? Also I have heard that T bills are a very secure investment that doesn’t lock up your money until retirement like most funds. Do you feel they are even worth it or are the returns so small you might as well put it in an index fund long term?
Also how do I know if i have maximized my employer matching on the 401k? How do people get a match of up to 6% from employer through 401k?

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[deleted] t1_j2f4umt wrote

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InfiniteImmortality OP t1_j2f638q wrote

I should’ve mentioned this. I currently have 21k sitting in the bank ready to invest roughly 11k keep 10k as an emergency fund when I settle which funds I want to invest in. My income is $1,666 and hope to invest around $1300 a month. This will obviously max out my Roth but I don’t want to put it in a 401k if it’s going to lose me money in the long run and there could’ve been better options. And I’m definitely trying my best to increase my income so I can contribute more in the future but living frugally is all I can do for now.

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nkyguy1988 t1_j2f6hyo wrote

A 401k by itself doesn't lose, or make you, money. That depends on what you invest in with money inside the 401k. It's effectively the same as an IRA but through work. Working to max out an IRA while hesitant about a 401k is contradictory.

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InfiniteImmortality OP t1_j2f74jf wrote

I just say that because I don’t trust my financial advisor and it is a actively managed fund and a target date fund of 2065 since I’m 22 but it has the highest expense ratio out of all of them at 0.81 and it doesn’t even outperform the s and p 500 when it shows growth of 10k and I invest in my Roth IRA Vfiax which is purely s and p at a much lower expense rate .04. Should I not even worry and just put whatever I can’t contribute into my Roth into the target date fund?

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nkyguy1988 t1_j2f7w7m wrote

Then don't use your advisors advice. Is that the only fund options you have? Do you have passive managed funds available to you within the 401k? Not every plan is good, many aren't, and just have high ER funds. Yours could be that. If so, then I would only put in what it takes to get the match then focus on IRA. Only come back to the 401k after the IRA is capped out. Few things outperform the S&P 500 as that's a pretty close measure to the whole market. Not the most inclusive, but close.

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