401K: Just Getting Started

I was told 10% when I started, and that's what I do. It isn't painless, but remember that it comes out pre-tax, so will hurt a little less than what you might think.

Whatever you think you can afford!

Maybe you should set up a poll and find out what % others put in...I'd be curious too. I think I put in 10%.

You're setting it up for the company, right? Ours is 50% matching, or 3% of gross, whichever is less. That is, you contribute (defer) 6% of your own gross, and the company contributes 3% of gross, which is 50% matching. Max employee deferral last year was 14,000. I think it's up to 15,000 this year. I'll dig it out if you need it.

401K deferrals are pre Federal Income tax, but not Social Security and Medicare. It is after FUTA. In weird little NM, it is pre SUI.

Let me know if you need help. If someone else is doing the company setup, just forget most of the above.

rogers right, set it up so that at least you put in enough percentage to get the maximum company max. That's free money, honey.

If that's all you can afford now, fine. The important thing is to start.

Then, when you get your next increase, just take that percentage (or at least some of it) and add it to your 401K contribution. If you do that, you'll have never seen the money, and won't miss it.

The company will match 50% up to 6%. I can't do 12% right now.

I was just wondering what the norm is....

I think I will start with 5%. I can add or subtract if I want to. I need to see how this will affect me.

Do enough to get the full company match. It's free money. Look at it this way- You are getting a 50% return on the money the minute you put it in. You will never get that kind of return again.

Start with the maximum 12 % and if you have to, work your
way down a few percentage points over the years. A good
retirement plan is more important than you think Bella.
Rather cut corners someplace else sweetie.

It's really a weird part of my life right now...the whole actually starting to save for the future...a 401K...retirement....so bizarre...

I know I can't do 12% right now....I will sit down and figure what I can do. I guess I can call the 401K people.

Remember, Bella, that 12% is going to lower your taxable income for federal, and probably state income taxes. Depending on your tax bracket, your decline in take home pay, might be lots better than you expect.

6% company matching is very good, by the way.

Oh, is this an enron type plan in which you are getting company stock as the investment, or is it a sort of mutual fund? Mutual fund - go for the max.

wait, I just wanna be sure of what you're saying.....

Is the 6% matching on their part, or yours?

Is it that you contribute 12% to get their maximum contribution of 6%, or...
Is it that you contribute 6%, which is the maximum they will match to, and contribute the equiv. of another 3%.

Does that question make sense?

They match 50 % Chai. If Bella contributes only 6 %,
the company is contributing 50 % thus 3 %

ok

like roger said, 6% match is very good.

I was thinking that sounded higher than normal.

It is higher than normal, that's why Bella should invest
the maximum of 12 %.

Good question....I don't know. I have the option to invest in several options but haven't. So it must be a fund, right? Oh this is complicated.

Sounds like a fund. If you're young, lean towards the growth funds. If you're old, lower yield but safer might be better.

Investments in your own company can have tax advantages, but the pitfalls can be deep and wide, as we have seen.

I think the amount you invest is different for everyone. It depends on your age, how much the company matches and your salary (i.e. how much you can afford).

If you're just starting out with your career 5-7% is a good range, especially if your company matches.

I know this sounds silly, but when I was starting to invest, a family member suggested checking for information on the AARP website...they have some good overviews of things to consider like age, salary, costs,etc. Here's a link if you're interested in checking some other sources out.

http://www.aarp.org/money/financial_planning/

maybe I missed it? did you say what you can afford defer?

I work in the mutual fund industry. The best thing is to invest as much as possible - especially if you are young. You can take great advantage of the reinvestments of the mutual funds - that alone increasing your earnings huge.

Not only if you invest the whole 12% you get the 6% matching -FREE MONEY!! You will be investing before taxes (so your "real" money coming out of your pay will more likely be 7 or 8%?? depends on your tax rate/deductions, etc. and any money earned on your 401k is tax deferred. That means you do not pay any taxes on earnings until you take the money out. Since you will not be taking it out until you retire - your tax rate will be lower than it currently is - this is a win-win situation - not too many of those - take advantage.

When my company said they'd match 50% up to 6% they meant "up to the first 6% taken out of my paycheck". I could have 10% taken out, but the company would consider only the first 6% when it came time to match...