Ask Stacy: Should I Buy Stocks or Contribute to a Retirement Plan?

Seniors retirement
Photo by pikselstock / Shutterstock.com

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers. You can learn how to send in a question of your own below.

If you’re not typically a video watcher, give it a try. These videos are short and painless, and you’ll learn something valuable. But if you can’t deal with video, no problem: Just scroll down this page for the full transcript, as well as some reader resources.

Today’s question is about how to invest; specifically, whether you’re better off putting money into stocks or into your company’s retirement plan.

I’ve been maxing out my retirement contributions for many years now. That’s a good thing, since I’m nearing retirement age. I also occasionally put money in the stock market. This reader, on the other hand, doesn’t have enough extra cash to do both. He has to choose between the two. Given these two choices, which would you do? Hit “play” on the video below to find out my advice.

For more information on this topic, check out “7 Tips for Stress-Free Retirement Plan Investing” and “Roth, Regular IRAs and 401(k)s Made Simple.” You can also go to the search at the top of this page, put in the word “investing” and find plenty of information on just about everything relating to this topic.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everybody, and welcome to your money Q&A question of the day. I’m your host, Stacy Johnson, and this question is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Here’s today’s question — it comes from Anthony. Anthony says, “I’m contributing a good amount to a 401(k), and 457 retirement plan, but not maxing them out. I’d like to dabble in stocks with whatever extra dollars I have, and I was wondering what the smarter play is?”

Three things to know, Anthony.

Number one, I’d recommend maxing out your retirement plans, at least to the extent you get any match offered by your employer. There are very few opportunities in life to get free money. And when an employer’s offering to match your contributions into your company retirement plan, that’s free money. Put in enough to get that full match.

So that’s priority one: Get the free money, Anthony.

Number two, you’ve got a tax benefit when you’re investing in retirement plans, something you’re not getting when you’re just buying stocks. Whenever you’re putting money into a retirement plan — if it’s a regular plan — you’re getting a tax deduction, which is pretty sweet. And if it’s a Roth, you’re going to take money out of it tax-free, also pretty darn sweet.

Number three, if you really enjoy stocks, buy them. Many people consider this a hobby, and it can be a lucrative hobby. I myself do this. So, if it’s something that you really enjoy, Anthony, do it. Just make sure you put as much as possible in retirement plans first. If you don’t have enough to do both now, fund your retirement plans. Stocks will be around for a long time. When you’re ready, they’ll be waiting.

Bottom line? I really want you to focus on A, getting the match, and B, funding retirement plans so you capture those tax benefits. Once that’s done, dabble in stocks if it makes you happy.

Make sense? I hope that answered your question, Anthony.

Got a question of your own you want to ask? All you have to do is hit reply to the Money Talks newsletter, which arrives in your email inbox every day. If it doesn’t, subscribe on our website. It takes five seconds. Then, when you get our email in your inbox, hit reply, ask your question, and maybe it’ll show up right here.

Let’s close with our quote of the day. This one comes from Greek philosopher Epictetus.

“Wealth consists not in having great possessions, but in having few wants.”

A thought to keep in mind today. Make it a profitable one, and I’m going to see you right here, next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
25 Things You Should Never Buy — and What to Buy Instead
25 Things You Should Never Buy — and What to Buy Instead

If you really want to save money, become a more intentional shopper.

7 Reasons Workers Age 65 and Older Have Not Retired Yet
7 Reasons Workers Age 65 and Older Have Not Retired Yet

For some, the golden years are a time to increase the gold — but their reasons for delaying retirement vary widely.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

The 10 Best Outdoor Home Upgrades for Your Money
The 10 Best Outdoor Home Upgrades for Your Money

There’s still time this summer to make improvements to the exterior of your home. These offer the best payback.

The 2 Biggest Retirement Fears of Baby Boomers
The 2 Biggest Retirement Fears of Baby Boomers

Boomers have a lot of worries as they age, but two stand out.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

The 16 Cars Most Likely to Last 200,000 Miles
The 16 Cars Most Likely to Last 200,000 Miles

One automaker takes half the spots on a list of the longest-lasting vehicles.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

9 Millionaires and Billionaires With Surprisingly Frugal Habits
9 Millionaires and Billionaires With Surprisingly Frugal Habits

Some of the world’s richest women and men drive modest cars, clip coupons and love a bargain.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.