Congratulations on your graduation! You’ve crossed the finish line, and now it’s time to tackle the next big challenge: managing your hard-earned money. It might feel a bit like playing a strategic game of chess, but don’t worry—this is one game where you can definitely checkmate your financial future. Let’s dive into how to split your savings between a Roth IRA and a 401k, especially when your employer offers a 401k match.

First, let’s talk about that sweet, sweet 401k match. Think of it as free money, like finding an extra slice of pizza at the party when you thought you were done. Not taking full advantage of your employer’s match is like leaving that pizza behind—don’t do it! Aim to contribute at least enough to your 401k to max out that match. If your employer matches contributions up to a certain percentage, say 6%, make sure you’re putting in at least that much. It’s a no-brainer way to boost your retirement savings without any extra effort on your part.

Now, once you’ve secured that match, it’s time to consider the Roth IRA. This account is like the superhero of retirement savings, offering tax-free growth and tax-free withdrawals in retirement. With a Roth IRA, you contribute after-tax dollars, meaning you won’t have to pay taxes on your earnings later when you retire. This can be a massive benefit, especially if you expect to be in a higher tax bracket down the road—think of it as locking in your taxes at today’s rates.

So how do you split the contributions between the two? After maximizing your 401k match, a solid strategy is to divert your next focus to the Roth IRA. Contributing the maximum to your Roth IRA (which is $6,500 for 2023 if you’re under 50) allows you to enjoy that tax-free growth. You’re setting yourself up for a bright financial future while keeping your options flexible.

Once you’re rocking the Roth and have contributed the full amount, you can shift your focus back to your 401k. Depending on your financial situation, you could increase your contributions up to the annual limit of $22,500 for 2023 (also $30,000 if you’re 50 or older). This approach ensures that you’re taking advantage of both accounts effectively, balancing the immediate benefits of your 401k with the long-term perks of the Roth IRA.

As you navigate this financial journey, remember that everyone’s situation is unique. Factors like your income, expenses, and future goals can influence your decisions. Think of it like choosing your favorite superhero—each has its strengths, and the best choice depends on your personal storyline.

In summary, maximize that 401k match first, then tackle your Roth IRA to take advantage of tax-free growth. With this strategy, you’ll be well on your way to building a financially secure future, ready to take on whatever life throws your way. Happy saving!