My company contributes 7% to 401(k), no match. Should I max 401(k) or IRA?

[windxspiritx316]

Title, basically. I work for a nonprofit that gives me 7% no matter what in a Principal 401(k). Would it make more sense for me to contribute here, or open my own IRA through Fidelity or something?

edit: clarifying that my company contributes 7% to my 401(k) regardless of my own contribution. It's flat for everyone, and automatic. I've never heard of such a thing. My specific question is about which I should try to max first. The flowchart instructs "contribute to 401(k) the amount needed to get full match, but nothing more" and then move to max the IRA. Does it matter, or is it really based on the fee structures of the associated funds? For context I have no outstanding debt outside of student loans.

 

[kliver]

@windxspiritx316 Ideally you’d work towards maxing both out.

Order of 401k vs Ira depends on what the fund options are in the 401k and their expense ratios.

If they’re high costs then putting your first $6000 ($6500 in 2023) onto a ira or Roth IRA makes more sense bc you have access to cheaper fee funds. Any of fidelity, vanguard or schwabb are good options.

If you have more than $6k to invest you can then go back to the 401k.

Check out the flow chart in the wiki which explains this in more detail

 

[vladijc]

@windxspiritx316 Open up a Roth IRA at Fidelity if you like and max that first. Then come back to the 401k.

 

[ruella]

@windxspiritx316 7% on top of your salary? Or you're automatically enrolled in the 40(1) and required to contribute 7%.

Your title reads like the company is giving you 7% 401(k) on top of your contributions. But a 401k is your money from your salary... so they aren't contributing anything.

 

[windxspiritx316]

@ruella Thanks for asking. They don't match, per se, they contribute a flat 7% of my salary. This is automatic and not contingent on my contribution.