another 401k question...

[keel252]

so my job matches our 401k input after 4%. The question I have is what if I put that same total amount or more into my personal saving instead of investing into the 401k...whats the benefit of the 401k?


thanks fellas

 

[luckyluchiano]

so my job matches our 401k input after 4%. The question I have is what if I put that same total amount or more into my personal saving instead of investing into the 401k...whats the benefit of the 401k?


thanks fellas

I'm not the best on this stuff but I do know a regular savings account is a joke because of the intrest rate but it's good for a rainy day fund. If you don't want to do 401k look at IRA's

 

[nydunkhead]

so my job matches our 401k input after 4%. The question I have is what if I put that same total amount or more into my personal saving instead of investing into the 401k...whats the benefit of the 401k?


thanks fellas

One benefit is you deffer your salary, which means your taxable income will go down every dollar you put in. The total 401(k) limit for 2014 is $17,500 per year so anything you put away $17,500 and under in your 401(k) you will save in taxes.

 

[waukeganwill]

have a question regarding my 401k, or basically setting it up. if anyone can help out it would be greatly appreciated. Im quite confused

 

[crcballer55]

so my job matches our 401k input after 4%. The question I have is what if I put that same total amount or more into my personal saving instead of investing into the 401k...whats the benefit of the 401k?


thanks fellas

They match AFTER you have already put in 4%? I've heard of matching up to that amount, but not AFTER. Correct me if I read that wrong.

a 401k and savings accounts are two completely different animals for two completely different purposes. A savings account should primarily be used as an emergency fund (Which is a MUST) or other shorter term goals (under 5 years). An investment vehicle (401k, Roth IRA, mutual funds, ETF's, etc.) should generally be used for longer term goals. What makes a 401k unique is that it's pre-tax dollars you're investing, meaning you invest $1000 and you're in the 25% tax bracket, it's equivalent to only earning $750. A savings account, you'll be taxed at 25% of whatever the interest gained that year from the account is.

 

[pdino]

so my job matches our 401k input after 4%. The question I have is what if I put that same total amount or more into my personal saving instead of investing into the 401k...whats the benefit of the 401k?


thanks fellas

I haven't heard of jobs matching AFTER the 4%, but if so, this is an excellent deal. 401k builds on itself as it is usually invested into "safe" stocks. The earlier you start investing into it, the better. 401k is tax deductible, so lets say hypothetically you make 50k, and you put 15k into your 401k. Instead of making 50k, it will show that you're making 35k (50k-15k put into the 401k), this considerably lowers your tax burden, and makes you eligible for several tax/financial incentives. For someone in the 25 percent tax bracket, contributing the maximum will save you $4,375 in federal income taxes. The gov't is rewarding you for investing/saving. However, it is hard to access that money until retirement (there are several rules, depending on company policy).

By investing now you save roughly 1:4 ratio on taxes. You put 400$ in 401k, you save 100$ in taxes. I'm not a CPA or anything, I just oddly like tax stuff.

 

[nazdrowie]

 
I haven't heard of jobs matching AFTER the 4%, but if so, this is an excellent deal. 

if true, that is redic...wish i could get in on that...my current job matches half, not the best, but better than nothing...

 

[keel252]

yea so after double checking my matches up to 6% max...anything after that they won't. I haven't been taking advantage of this 401k as I should. I'm almost 30 with no kids. I should be maxing out right now but I'm not.

 

[Chopper]

Put enough in to get at least the full 6% match. Then, either contribute to a Roth IRA (max you can contribute is $5.5k per year) and/or, if possible, go back and try and max out the 401k (at $17.5 per year in personal contributions). 

Putting 6% in to get 6% isn't going to get you enough to retire comfortably if you don't have much in there at age 30. 

 

[wsdesigner14]

Simple savings/investing that everyone should do:

1. Have an emergency fund of preferably 6 months worth of living expenses in a simple savings account (use Ally or CapitalOne360 as they have the highest interest rate)
2. Invest in your company's 401K at least up to the full match. It's free money, there's no reason to pass up on it. If you can invest up to the max of $17,500, do it!
3. Open an IRA (Vanguard is great) and contribute as much as possible, up to the $5,500 limit

If you are in a low tax-bracket now, you should set up the above accounts as Roth to take advantage of less taxes in retirement once withdrawing.

Got to Bogleheads and invest in a 3 fund simple portfolio consisting of index funds. Invest in the ones with the lowest expense ratios. You should probably have 80% of your portfolio in stocks, and 20% in bonds at this point in your life.

 

[crcballer55]

yea so after double checking my matches up to 6% max...anything after that they won't. I haven't been taking advantage of this 401k as I should. I'm almost 30 with no kids. I should be maxing out right now but I'm not.

Not to put a damper on things, but you've already cost yourself a couple hundred thousand in gains by not contributing anything. If I were in that position, I would live on nothing for the next year or two and throw as much into retirement as possible (assuming you already have an emergency fund). Listen to what @wsdesigner14 said. Some solid advice right there. Preferably with a mix of at least 4 different types of funds so you're well diversified across asset types (dividend, large cap, small cap, international).

 

[da hen]

401k is the easiest money you'll ever make.

Start young, put in as much as you can. I've been in one for the last 13 years, my money has grown greatly. As others have said, diversify your portfolio, re-balance maybe twice a year, and be aggressive when you're young, 80-20%.

 

[keel252]

Thanks fellas. Starting Monday I will be maxing out my 401k, continuing to put into my personal saving and callin around to start my Ira. I feel a fool for not taking advantage, I think I have like 10k in there or something like that. I stop like a year ago bc events in life happen and I needed the extra money. But I've seriously been thinking about my future and I'm scared of working when I'm 60 or 70.

 

[waukeganwill]

can someone please help me with this. Im not sure what to put for any of this. first job so any assistance/suggestions would be greatly appreciated

 

[nrg1604]

I would just put however much they match up to on pre-tax contribution.

 

[waukeganwill]

I would just put however much they match up to on pre-tax contribution.

Thanks

 

[royalty d]

I have about 8500 in my roth ira, havent contributed for a year though (should i continue to contribute?)
I have about 52k in my 403b (employer doesnt offer a match, we have a pension though)
I contribute 15%
Ill be turning 27 this year with one kid
Am i on track?
Ive seen ppl my age have have near 2x in a retirement portfolio

I figure with my pension plus what i continue to earn in my roth plus my 403b , i should be able to have a decent retirement, maybe retire early???
Wise elderly heads chime in

And i forgot to mention i also have a emegency savings fund which also doubles as my house purchasing account...
Buying a home is redic in LA

 

[da hen]

^^^ you're on track, keep contributing to both the IRA and 403.

Also, don't worry about what others do, keep focused on your path. I'd suggest increasing your contribution every time you get a raise, you wont feel the difference.

 

[crcballer55]

Thanks fellas. Starting Monday I will be maxing out my 401k, continuing to put into my personal saving and callin around to start my Ira. I feel a fool for not taking advantage, I think I have like 10k in there or something like that. I stop like a year ago bc events in life happen and I needed the extra money. But I've seriously been thinking about my future and I'm scared of working when I'm 60 or 70.

FYI... before you just max it out, I would contribute up to the match, then start maxing out my Roth IRA, then go back to the 401K after that's maxed out. The reason being is that typically a 401k plan doesn't have as much choice and the fees can be higher. Plus, with a Roth IRA, your contributions are already taxed, so the the growth from the funds will be tax free. Not to mention once you leave your job, you won't have to worry about transferring the funds to a new account (which can get you if you don't do it right).