Vanguard employees have an advantage: they understand low-cost index investing better than most people. What they sometimes lack is a deliberate strategy for their own 401(k): contribution rate, Roth vs. traditional elections, fund allocation, and the rollover decision at departure. Blackshire Wealth Management fills that gap with fee-only, fiduciary advice.
The IRS 401(k) contribution limit for 2025 is $23,500, with an additional $7,500 catch-up for employees 50 and older. If you are not maxing the plan, that is the first priority. The second question is traditional versus Roth contributions.
For high-income Vanguard employees in the 32% or higher bracket, traditional pre-tax contributions reduce taxable income now, when the reduction is most valuable. For employees earlier in their careers or in lower brackets, Roth contributions build a tax-free asset that compounds without future tax consequence. Many financial planners recommend a mix of both to diversify future tax exposure.
Vanguard's own 401(k) plan offers access to Vanguard funds at institutional expense ratios that are among the lowest available anywhere. The key decisions are asset allocation (stocks vs. bonds, domestic vs. international) and whether to use a target-date fund or build your own mix.
Target-date funds are excellent defaults. But if your outside accounts and your overall financial picture mean a different allocation makes more sense in the 401(k) specifically, building your own mix gives you more control. Asset location, holding bonds in the 401(k) and equities in taxable accounts for example, can improve after-tax returns over time.
When you leave Vanguard, rolling your 401(k) to a Vanguard IRA is often a natural choice since the funds and the platform are familiar. The IRA gives you slightly more flexibility in distribution timing and Roth conversion access than the 401(k) plan allows. One exception: if you are 55 or older and leaving Vanguard this year, keeping the assets in the plan preserves penalty-free access under the rule of 55 that an IRA does not provide.
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The employee contribution limit for 2025 is $23,500, with an additional $7,500 catch-up contribution for those 50 and older, bringing the potential total to $31,000. If your employer also contributes, the total combined limit from all sources is higher. If you are not already contributing the maximum, increasing your contribution rate is typically one of the highest-return financial moves available.
For senior Vanguard employees in the 32% or higher bracket, traditional pre-tax contributions provide an immediate tax reduction that is meaningful. For employees earlier in their careers or expecting to be in a similar or lower bracket in retirement, Roth contributions build tax-free wealth. A mix of both is common and reduces uncertainty about future tax rates.
Asset location is the practice of holding different types of investments in different accounts based on their tax treatment. Bonds and other income-generating assets are generally more efficient in tax-deferred accounts like a 401(k) because the income is not taxed annually. Growth-oriented equities are often better in taxable accounts where long-term capital gains rates apply. For Vanguard employees with both a 401(k) and a taxable brokerage account, thinking about the allocation across both accounts together improves after-tax returns.
For most departing Vanguard employees, a Vanguard IRA is a natural destination for the rollover. The funds are familiar, the platform is the same, and the expense ratios are excellent. The IRA also provides more flexibility for Roth conversions and distribution timing in retirement. The one exception is if you are 55 or older and leaving Vanguard this year, in which case keeping the assets in the plan may preserve penalty-free access under the rule of 55.
We are fee-only and fiduciary. We are paid only by our clients, never by commissions on fund recommendations or product sales. Our only incentive is to give you the best advice possible.