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401(k) (pg. 2)
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| Floorfiller |
| quote: | Originally posted by igottaknow
do as much as they match if they match |
exactly...if you can afford to put in as much as they'll match you up to...try and put that amount in...it's the best investment... |
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| tribu |
| quote: | Originally posted by Boomer187
You should try to get into a Roth IRA....mucho better ;) |
He's right you know. Pay those taxes now so if sometime between taxes and retirement, you need emergency funds, there is no penalty |
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| Zenchowdah |
| quote: | Originally posted by ivanbee
for some reason 6% seems really high to me. i was thinking more along the lines of 2-5...do you notice a big difference in your paychecks? |
im putting in ten percent. you notice it at the beginning, but you get used to it. been in for 10% for about the last year, ive got a total of about 2500. they're gonna start matching mine contributions soon (i hear, the navy's kinda shifty sometimes) |
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| Groundhog Boy |
I don't contribute any percentage of my check, but my firm has profit sharing contributions to the 401(k), so in less than 2 years, they've dropped like $10K in for me.
I have a conservative plan, but after talking with my girlfriend about it and hearing what her father said to her, I think I'm going to up it to a moderate/higher risk one. As he put it, we're still young and have plenty of time to make it up if we notice ourselves losing money. The market fluctuates, but overall it's going to grow. |
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| ivanbee |
| just found out my company DOES NOT match...i'm thinking 5% HIGH RISK... |
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| Jocker |
| quote: | Originally posted by ivanbee
well i just got promoted and now have the option to partake in the company's 401(k) program.
question: should i? do you? what percentage? which plan? high risk? low risk?
i don't know anything about it really |
you should (if they have matching - that means free money in addition to your salary). even if they don't - you still should (such things as tax-free earnings, and exponential interest frowth). you're young, so high risk. for example, split equally among the following: a Real Estate fund, a small-cap growth stocks fund and an international stocks fund.
use http://morningstar.com to learn more about the funds that your 401k offers, use the free http://portfolio.morningstar.com to track your portfolio return.
so far, my 401k has outperformed the market by more than 100% each year.
here is a snapshot: http://u-antona.vrn.ru/forum/attachment.php?attachmentid=50758&d=1146861635
"shares held" is actually the percentage (they add up to 100%), and the index fund (spartan 500) is there to track performance against the market. as you see, my portfolio's performance so far this year (12.74%) is more than twice than market's (5.74%) |
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| dollaroff |
I'm not a financial advisor, but I play one on TV:
1a. The main answer is: it depends. However, the earlier you start, the more chance you have for the money to keep growing (and you'll need it as you'll see).
1b. If your company matches _any_ part of your 401k, YOU MUST CONTRIBUTE AT LEAST THAT MUCH! (otherwise, you're throwing money away). Most places that match do 3% or 6%.
1c. After looking at matching, then I'd run numbers (use Excel & IRS tax tables). The benefit of putting money into a 401k is that it reduces your taxable income dollar for dollar (i.e. your AGI); what this means is that if you earned $20,000 in a year, and you contributed 10%, the IRS thinks you only made $18,000. But*, on your paycheck, your taxes were calculated at the $20,000 level, so you'll get more of a refund next April.
*(only if your exceptions are at 1 for a single person taking a standard deduction)
2a. If you're under 30, then you want the _most aggressive stocks/funds available_ (these are usually international small-cap funds). This is no time to be conservative. You can be that at 35 :)
2b. Don't worry about your money each quarter. If you're 30, you're looking at retiring in 35 years (or longer... expect to retire at 70 f you were born past 1985): that's more than double your current age! Most financial analysts can't figure out what's going to happen next quarter, let alone in 35 years!
3. Social Security will be around when you retire, but no one knows at what benefits. It's better to assume that you'll get $0 (and then when you get it, it's a bonus). If you want to include it in your calculations now, assume you'll get 20% of your current yearly income per year in Social Security, pre-tax (you'll have to pay income tax on most of it).
4a. How much money do you need in retirement? IMHO, all of the current "advice" is completely wrong. Most of them assume that you're going to own a house (and a car or two), and you'll be debt-free at retirement. Then, they say, because of these factors, you'll _only_ need 70% of your current income in future dollars to keep the _same_ living expenses as what you have now.
5a. Example: Let's say you make $50k a year (in today's dollars), and you rent, you pay car payments (to own a car), and you have student loans. You're 30. You want to retire at 65. When you're 65, you'll own your house, a car, but you'll have medical expenses.
You put 10% of your 401k away ($5k/year). Assume your raises are offset by inflation (not really true, but it'll be easier to calculate without factoring raises vs. inflation into the scenario) and your savings rate is 8%.
In 35 years, you'll have $930,510. Which is worth $330,688 in today dollars. Ignoring future compound interest of the $930k, that money will last you about 7 years (at a $50k today dollars/y usage) before you run out.
Which means: If you save 10% of your GROSS for 35 years, when you retire, you'll have about 7 years of savings. Factoring in compound interest, you'll last 11 years.
5b. If you're a guy, you have a <50% chance of living to about 75. About a 50/50 chance to 78 and after that, you're beating odds :) I don't want to be miserable when I'm 85+, but I'm only looking to survive to then. Everything else is gravy.
5c. Assume, unless you become extremely wealthy (i.e. you currently make $110k+ in Los Angeles), you will not be able to retire until 70 at the earliest. Oh, don't have kids either; if you, you'll probably can't retire for another additional 5 years unless your kids go to public elementary/high school/college.
6. I would always fund a 401k before an IRA (but it still depends). Only look at IRA/Roth IRA when you have $4k extra (above and beyond your 401k & emergency fund {you have an emergency fund, right?}) sitting around each year.
I'm not trying to give you bad vibes, I'm just trying to give you the information you need to make educated decisions.
Money sucks.
prvt msg me if you have more questions. |
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| ivanbee |
| sweet ;) check yo PM |
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| SidMl |
| quote: | Originally posted by Zenchowdah
im putting in ten percent. you notice it at the beginning, but you get used to it. been in for 10% for about the last year, ive got a total of about 2500. they're gonna start matching mine contributions soon (i hear, the navy's kinda shifty sometimes) |
DO IT!
+ I say, max it out. It's an easy way to put away money since you don't have to consciously do it. You are less likely to dip into for things you think are emergencies.
+ after the first couple of months, you won't miss the money.
+ start early and the tax free compounding will really add up.
counter-argument:
if you make <$30k you're in a lower tax bracket and the savings might not be so much
if you're young a couple of extra hundred dollars has more value to you now, than later. 10 years from now, you'll be making 2 or 3 times as much as you do now should may more easily be able to save then |
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| dollaroff |
You never want to throw good money after bad money, but even saving $100 to get savings of ~$25 is still a decent deal.
The problem with the "saving later" idea is that no-one ever does that. :)
Even if it's _easier_ to save $100 later (cause you'll supposedly earning more), it costs more, as you will not be able to compound the money over the extended period of time.
In any case, it's always better to save a little each month ($25 or $50) rather than $0.
Oh, make sure you have an emergency fund setup first. Don't raid it; it's an _emergency fund_, not a vacation fund or a party favor fund or a iPod fund. |
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| grooviebeats |
| i do 6 % and im in high risk funds.. reason why they younger you are the longer you have to recover from any kind of loss. That being said its up to you. Higher risk means you can get more bang for your buck but you can go under ,low risk not as big of a return but safe and not going to go under. |
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| Groundhog Boy |
| quote: | Originally posted by dollaroff
1c. After looking at matching, then I'd run numbers (use Excel & IRS tax tables). The benefit of putting money into a 401k is that it reduces your taxable income dollar for dollar (i.e. your AGI); what this means is that if you earned $20,000 in a year, and you contributed 10%, the IRS thinks you only made $18,000. But*, on your paycheck, your taxes were calculated at the $20,000 level, so you'll get more of a refund next April.
*(only if your exceptions are at 1 for a single person taking a standard deduction) |
While this is great for taxes, this can present a problem if you are young and looking to rent a new apartment. For example, in my building, the person/s on the lease must have an AGI of 40x the monthly rent. When I first moved to NYC, my first roommate and I had to get a guarantor, which fortunately he had, because I didn't, because we'd deducted student loan interest and other things that you deduct before the AGI is calculated. As a result, we were like $3K short. |
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