Complete Guide to Retirement Accounts: Optimal 401k and Roth IRA Investment Strategies

🎯 Introduction

Today, I want to dive deep into retirement accounts. I'll share the characteristics of each account type—401k, 403b, Solo 401k, and Roth IRA—along with my actual investment strategies.

When you properly utilize tax-advantaged retirement accounts, you can maximize compound growth over decades.

📊 401k/403b: The Most Basic Retirement Accounts

401k vs 403b Differences

401k: For employees of private companies
403b: For employees of non-profits, schools, hospitals, etc.

I work at a university, so I use a 403b account.

The Reality Problem

Honestly, most investment options available in 401k or 403b plans are not great quality:

Excessively high fees
Most don't even match S&P 500 returns
Complex and hard to understand products

My Solution: The Power of Simplicity

I've been investing 100% in the S&P 500 for over 8 years.

Why such a simple approach?

Low fees: Index funds have minimal costs
Proven performance: Long-term outperformance vs most active funds
Easy to manage: No rebalancing or stock picking headaches

🏢 Solo 401k: A Powerful Tool for the Self-Employed

What is a Solo 401k?

A retirement account for self-employed individuals and freelancers. The biggest advantage is investment freedom!

My Solo 401k Strategy: The New Three-Fund Portfolio

ETF	Allocation	Role
SCHD	33%	Dividend Value
VUO	33%	Foundational/Mid-Cap
SCHG	33%	Growth

Core ideas behind this strategy:

SCHD: Stable dividend income and downside protection
VUO: Broad market exposure
SCHG: Growth potential

This combination pursues balanced growth, and performance has been excellent.

Solo 401k Advantages

High contribution limits: Both employee and employer contributions
Investment freedom: Choose any ETF or stock you want
Tax deferral: Delay taxes on gains until retirement

🌟 Roth IRA: The Magic of Tax-Free Growth

Core Roth IRA Benefits

Contributions: Made with after-tax dollars
Withdrawals: Principal + gains are completely tax-free
Tremendous advantage for long-term investors

My Roth IRA Strategy

Since I already have heavy S&P 500 exposure in my 401k, I diversified differently in my Roth IRA.

Value Section (50%)

SCHD: 50% (stable dividend stocks)

Growth Section (50%)

ETF	Allocation	Focus
SCHG	20%	Large-cap growth
QQQM	20%	Nasdaq 100 tracker
SPMO	5%	Momentum strategy
Bitcoin ETF	5%	Digital asset exposure

Why This Configuration?

Complements 401k: Exposure beyond S&P 500
Growth/Value Balance: 50:50 ratio for risk distribution
New Asset Classes: Bitcoin ETF for digital asset experimentation

🚪 Backdoor Roth IRA: Legal Workaround for High Earners

The Income Limit Problem

Roth IRA doesn't allow direct contributions if your income exceeds certain thresholds.

Backdoor Roth Strategy

Contribute to Traditional IRA first (after-tax dollars)
Immediately convert to Roth IRA
Enjoy Roth IRA benefits

This is a 100% legal strategy! If you're a high earner, you must utilize this.

When Can You Contribute for 2025?

You have until April 15, 2026 to make 2025 Roth IRA contributions. No rush, but remember—the earlier you contribute, the more compound growth you'll capture.

📈 Combined Retirement Account Overview

When I combine all retirement accounts, here's the breakdown:

Category	Allocation
Foundational	40%
Value	30%
Growth	30%

This balance is intentionally designed. By investing differently in each account, I've created an overall balanced portfolio.

⚡ Core Principles

1. Simplicity is Powerful

A strategy that's easy to understand and execute beats complexity every time.

2. Be Fee-Conscious

A 0.1% difference creates massive wealth gaps over 30 years.

3. Consider Tax Efficiency

Growth stocks: Favorable in tax-deferred/tax-free accounts
Dividend stocks: Fine in taxable accounts (qualified dividend rates)

4. Maintain Long-Term Perspective

Retirement accounts are multi-decade investments. Don't let short-term volatility shake you.

🎯 Conclusion

Retirement accounts aren't just about "preparing for old age"—they're essential tools for tax-efficient wealth building.

For your situation:

If your company offers matching, always max it out
Start Roth IRA as early as possible
If self-employed, consider Solo 401k

Manage your retirement accounts strategically! 💪