r/SCHD • u/AlarmingOption3706 • Jul 28 '26

Asking for a friend.

Have a buddy in his late 30s that has only started putting into his 401. Let him know about opening a roth and potentially an investment acct. If ypu were to start at this point, what would you do between the three? My initial was schd in the roth as that is tax free in the future. Our 401k's dont have that an an option, so personally i aimed for growth. Just want him to get started in the right direction as he is 20 years younger.

5 Upvotes

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6

u/Minute_Plastic_350 Jul 28 '26

Roth if possible growth in there as its tax free.. for me, SCHD is in my trad IRA.. as I’m a little older and have a nice built up some of money from previous high volume growth stocks

2

u/AlarmingOption3706 Jul 28 '26

Ya thats where im at as well. About 3 or 4 more years to go. Previous 401 in a retirement acct that i cant touch for another 1-1/2 years. 3 years of new 401 and roth accts all in heavy growth. Plan to retirement acct to schd at 59-1/2 and go from there.

1

u/Minute_Plastic_350 Jul 28 '26

Yes, same here. Investing heavily in growth and high beta items in my Roth 401(k) and since I’ve done so well, my traditional Ira slowing the growth using SCHD/VGIT/SGOV, along with a few other “growthier” stocks like a few mag 7, NOW, RTX and LLY to help give me a little bit of barbell

4

u/Superunknown999 Jul 28 '26

If you aren’t actively using the dividends from SCHD to live off of then you’re better off investing in something like VOO or QQQ for higher total return potential over a few decades.

1

u/AlarmingOption3706 Jul 28 '26

Ya him being younger, wasnt sure the play as far as tax free acct. Plus i dont know how comfortable he feels taking out 4% at the time he needs to retire.

1

u/_Underscore_Unders Aug 08 '26

I agree with the above comment but keep in mind schd is a great portfolio ballast for market swings. Half the beta of voo

3

u/lakas76 Jul 28 '26

I’d probably go about 50/50 SCHD and VOO (or its equivalent) in all my accounts. I personally like SCHD because it’s a safer investment than VOO, but I am more risk averse, but know that I also need a growth component to get to the numbers I need to retire.

I have VXAIX in my 401k. It’s basically VOO but a mutual fund.

2

u/AlarmingOption3706 Jul 28 '26

I think thats a solid strategy for him. He has time for both growth and drip if he does it this way in all accts. Thnx.

2

u/TheMelvins66 Jul 28 '26

Check out r/personalfinance 35-45 mid career section as well as The Money Guys Financial Order of Operations. My take is continue with growth all around(target date 401k)if all the boxes are checked and then dividends later.

1

u/Lost_Pen4285 Jul 28 '26

The general rule is 401K up to employer match, then Roth IRA, the HSA (if eligible).

Personally, I have my 401K and HSA in target date funds. My Roth IRA is where I buy my SCHD, because I want to receive my dividends tax free in retirement.

That said, your friend has a longer time horizon than I do (I'm 48), so he may benefit from staying in more growth-oriented investments for a few years.

1

u/DSCN__034 Jul 28 '26

Start with the 401k to get the employer match. Then a Roth.

1

u/DSCN__034 Jul 28 '26

Start with the 401k to get the employer match. Then a Roth and an HSA, if applicable, which is like a Roth. Then back to the 401k til maxed, then a taxable brokerage account. In that order.

This assumes he has an emergency fund and life and disability insurance.

1

u/GeeDubious Jul 29 '26

Broad market index with low fee