I plan on taking a new job that does not allow employee 401k contributions for the first 6 months. I am used to maxing out my 401k, and this seems like a dangerous amount of money that I don't want to get too comfortable with, only to have to part with it later when I can start contributing to the new 401k (by my calculations that's almost $700 a paycheck as of the year 2016).

I have a Roth IRA that I plan to continue maxing out during this time.

I have read this question, but I feel my situation is a bit different since this is temporary. I would like to know some temporary (but not necessarily short term) investments to help me stay familiar with what my salary will be like once I make contributions again.

Also, I have no debt to pay down, and have a very comfortable emergency fund (in my opinion anyway).

In summary, I will have to stop making 401k contributions while starting a new job for the 1st 6 months. How should I invest ~$350 a week during this 6 months when I already max my Roth IRA and without having ridiculous brokerage fees (buying stock every week through my bank or some other broker that charges for each transaction)?

Buy a bunch of lotto tickets? Start sleeping on a money pillow? Just eat the brokerage fees and invest in some stock anyway (or try to play around in something like Loyal3)?

What are some good options?

And sorry, sending out that money to any of you is NOT an option!

  • 1
    For the record, I hate those kind of restrictions.
    – Pete B.
    Jun 28, 2016 at 12:08
  • Do you have a spouse who is contributing to a Roth as well?
    – jkuz
    Jun 28, 2016 at 13:04
  • 2
    Does your nest egg include an emergency fund in some low-risk investment like a CD ladder? Is there any large purchase that you anticipate in the future that you might want to start saving for now? (Replacing a car, major appliance upgrades, home remodels, etc.) Jun 28, 2016 at 14:46
  • 1
    "And sorry, sending out that money to any of you is NOT an option!" Damn
    – Kevin
    Jun 28, 2016 at 15:52
  • 5
    Most of the time the company places a restriction on the amount you can contribute per year (which is the govt's limit) and not per paycheck. So, save the money in any convenient liquid place. Then, when you can contribute, due so at a rate such that you'll make your max contrib by the end of the year - and make up the difference in net pay with the amount you saved from your paycheck during the first 6 months.
    – davidbak
    Jun 28, 2016 at 20:38

6 Answers 6


$9000 over 6 months is great, I'd use it for long term savings regardless of the 401(k) situation. There's nothing wrong with a mix of pre and post tax money for retirement. In fact, it's a great way to avoid paying too much tax should your 401(k) withdrawals in retirement push you into a higher bracket. Just invest this as you would your other long term money.

  • Thank you for your quick answer. I don't have too many other investments outside of 401k, roth IRA and an ETF I am just holding onto (for some reason). Is it safe to invest past $5500 on the Roth IRA? Safe meaning, paying taxes on the contributions (as opposed to a penalty). I ask because those are really my only other long term investments. Jun 28, 2016 at 2:12
  • 3
    No. $5500 is the limit. I am saying there's nothing wrong with having 'retirement' money in a regular brokerage account. Just invest it for the long term. Jun 28, 2016 at 2:18
  • @PawnInGameOfLife opening a taxable account wherever your personal IRAs live is super easy. The 'new account' customer service is usually super fast and friendly too: they want your business. Jun 28, 2016 at 16:34

I would open a taxable account with the same custodian that manages your Roth IRA (e.g., Vanguard, Fidelity, etc.). Then within the taxable account I would invest the extra money in low cost, broad market index funds that are tax efficient. Unlike in your 401(k) and Roth IRA, you will now have tax implications if your funds produce dividends or realize a capital gain. That is why tax-efficient funds are important to minimize this as much as possible.

The 3-fund portfolio is a popular choice for taxable accounts because of simplicity and the tax efficiency of broad market index funds that are part of the three fund portfolio. The 3-fund portfolio normally consists of

  • Broad market US stock index fund
  • Broad market international stock index fund
  • Broad market bond fund

Depending on your tax bracket you may want to consider municipal bonds in your taxable instead of taxable bonds if your tax bracket is 25% or higher.

Another option is to forgo bonds altogether in the taxable account and just hold bonds in retirement accounts while keeping tax efficient domestic and international tock funds in your taxable account. Then adjust the bond portion upward in your retirement accounts to account for the additional stocks in your taxable accounts. This will maintain the asset allocation that you've already chosen that is appropriate for your age and goals.


I'm a bit hesitant to put this in an answer as I don't know if specific investment advice is appropriate, but this has grown way too long for a comment. The typical answer given for people who don't have the time, experience, knowledge or inclination to pick specific stocks to hold should instead invest in ETFs (exchange-traded index funds.)

What these basically do is attempt to simulate a particular market or stock exchange. An S&P 500 index fund will (generally) attempt to hold shares in the stocks that make up that index. They only have to follow an index, not try to beat it so are called "passively" managed. They have very low expense ratios (far below 1%) and are considered a good choice for investors who want to hold stock without significant effort or expense and who's main goal is time in the market. It's a contentious topic but on average an index (and therefore an index fund) will go even with or outperform most actively managed funds. With a sufficiently long investment horizon, which you have, these may be ideal for you.

Trading in ETFs is also typically cheap because they are traded like stock. There are plenty of low-fee online brokers and virtually all will allow trading in ETFs. My broker even has a list of several hundred popular ETFs that can be traded for free.

The golden rule in investing is that you should never buy into something you don't understand. Don't buy individual stock with little information: it's often little more than gambling. The same goes for trading platforms like Loyal3. Don't use them unless you know their business model and what they stand to gain from your custom. As mentioned I can trade certain funds for free with my broker, but I know why they can offer that and how they're still making money.


Two options not mentioned:

-No information about your emergency fund in your question. If you don't have 6 months of expenses saved up in a "safe" place (high yield savings account or money market fund) I'd add to that first.

-Could you auto-withdraw the amount over six months, then when you can start contributing, contribute twice as much so you are still putting in $18,000 a "year"? The amount you pulled into savings the first 6 months could be used to make up for the extra income coming out after the six months are over. Depending on your income, and since you have the ability to save, it's important not to "lose" access to these tax efficient accounts.

And also...

-After-tax brokerage account (as mentioned above) is also fine. But if you will use this money for downpayment on a home or something similar within the next five years, I wouldn't recommend investing it. However, having money invested in an after-tax account isn't a terrible thing, yes you'll get taxed when you sell the investments but you have a lot of flexibility to access that money at any time, unlike your retirement accounts.

  • Yea I misspoke... when I said nest egg I really meant emergency fund. I will edit my question. As for the contributing twice as much, I don't think this will help since i am starting this job mid year, 6 months from my start date will be early next year. I could make up those early months, but I think I'm out of luck for the rest of this year. Jun 28, 2016 at 21:57

Short answer is fund a Roth. If you are under 50 then you can put in $5500 or $6500 if you are older.

Great to have money in two buckets one pre tax and one post tax. Plus you can be aggressive putting money in it because you can always take money you put in the Roth out of the Roth with no tax or penalty.

Taxes are historically low so it makes a lot of sense to diversify your retirement.

  • I am actually already maxing out a Roth IRA (that information was kind of buried in my post, took me a while to find it again to make sure I had it!). Jun 28, 2016 at 21:55

If your main concern is simply the psychological effect of not seeing the money, rather than getting return on the money, you should look into whether your employer will allow you to have direct deposit into two different accounts. If so, have what would have gone into your 401(k) go into a new bank account that you never look at. You might even be able to find a bank willing to give you a bonus for opening an account.

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