Re: Maxing out my 401K
The mega-positive thing to do is make sure you contribute enough per year to get those matching funds from the employer. This is an automatic 100% return (subject to standard vesting rules). So you always 'max out' your contribution such that you capture ALL of what the employer is offering in terms of match.
If you want to go over and above, contribute more. But, after the employer match gives you an instant 100% return (subject to vesting rules,) each additional dollar saved in that 401K offers you much less reward. If the employer matches dollar-for-dollar up to 3% of annual salary, by all means contribute that 3%.
All contributions up to IRS maximums for 401K accounts reduce your taxable income and can generate tax-deferred gains to the extent you actually have gains. This can greatly boost total return because there is no immediate "rake" on your profits, allowing you to compound with those profits.
The tax on these accounts comes out when you withdraw the cash. The cash comes out taxed at your then-current tax rate.
Regarding your question about where to focus new contributions: be careful about the 401K at work-- look at the rules. They may limit the scope of investment options you have. See what kind of limitations are imposed on your investing universe in the company 401K. If you are OK with the limits then focus money there. Often the employer match has a limited universe of investment options also. They can impoise these limitations because after all it is "their money" until you vest 100%.
Anything YOU contribute comes with you 100% when you leave, but the employer contribution-- those 3% matching funds-- they have a vesting schedule (meaning you gain more and more of it over your employment time) so make a note to find out exactly what the schedule is, because that may impact the timing of any decision to bug out of the current job for a better one. For example is you are 60% vested on a total of $50,000 employer contribution, you wil be leaving 40% of that if you bug out now. That 40% of 50K is not chump change. Usually the vesting is 20% per year or a "cliff" vest of 100% typically 5 years after the contribution. These gotchas are designed to keep you retained by your employer.
Gotta watch those employers.
I hope this helps.
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