401K advice

[TechHead87]

I'm 24 years old, and am new to this whole investment thing...

The company matches half, up to 4%. That's about all I understand about this 401k stuff. I dont make too much money, and I'm not quite sure how this thing actually works. Somebody please fill me in!

Thanks in advance!

 

[thegimp03]

If you put in 4% of your salary, then they will match 50% of that. So say your salary is $50k. You put in 4% which is $2k, they will put in $1k "matching". I'd recommend putting in at least 4% so that you can take advantage of the full-matching. You can put in up to $15.5k for FY'08.

 

[her209]

You choose how much % of your income to contribute. This amount is deducted from your pay (pre-tax) and put into an account. You can choose which mutual funds, etc. to invest your money in. You are taxed when you start to withdraw in retirement.

 

[PhoenixOrion]

It would mean that if you put 8% of your salary into the 401K retirement fund then your company will put 4% to match your contribution. If you put more than 8%, then company will only put the max 4%. If you put 6% then they'll match it with 3%.

I suggest that you put your 8% so that you get that 'free' match of 4%. Free money is always good....and the earlier you save up the better you'll be.

 

[her209]

Originally posted by: PhoenixOrion
It would mean that if you put 8% of your salary into the 401K retirement fund then your company will put 4% to match your contribution. If you put more than 8%, then company will only put the max 4%. If you put 6% then they'll match it with 3%.

I suggest that you put your 8% so that you get that 'free' match of 4%. Free money is always good....and the earlier you save up the better you'll be.

The company matches 2% on 4% contribution.

 

[PhoenixOrion]

Originally posted by: her209

Originally posted by: PhoenixOrion
It would mean that if you put 8% of your salary into the 401K retirement fund then your company will put 4% to match your contribution. If you put more than 8%, then company will only put the max 4%. If you put 6% then they'll match it with 3%.

I suggest that you put your 8% so that you get that 'free' match of 4%. Free money is always good....and the earlier you save up the better you'll be.

The company matches 2% on 4% contribution.

...then I suggest for OP to contribute to 4% then if he has leftover to put it in Roth IRA instead.

 

[HeroOfPellinor]

Don't worry too much about it right now. Just know that it's free money in two ways.

One, they'll match which means free money. And that 4% you contribute is subtracted from your taxable income at the end of the year so you owe less taxes......free money again.

So, even if you aren't making much, just max out what they'll match. It adds up over time and the impact on your paychecks will be practically nothing because you will be taxed after the 401K money is deducted which will decrease your taxes thus ofsetting some of that 4% coming out.

At some point your company will probably have a training.

 

[TechHead87]

Thanks much everybody! They aren't planning on a training session, but they did give us some a pamphlet to read through. It shows us our options as to where we'd like our money invested (a co-worker has already mentioned that some overseas stocks aren't as bad as they sound). That's the part I'm still undecided about...where to invest: more inflation/less investment risks or vice versa...

 

[thepd7]

Originally posted by: TechHead87
Thanks much everybody! They aren't planning on a training session, but they did give us some a pamphlet to read through. It shows us our options as to where we'd like our money invested (a co-worker has already mentioned that some overseas stocks aren't as bad as they sound). That's the part I'm still undecided about...where to invest: more inflation/less investment risks or vice versa...

All good, but note: you should have dome money for retirement that is completely secure, especially when that money is pre-tax and matched 50%. the LEAST you should be putting in is 4%, I will probably max out my 401k for a few years (single, new job, no kids, etc) just to get a retirement nest egg started before I possibly get married have kids whatever and need more of my income at my disposal.

 

[BigJelly]

Originally posted by: TechHead87
I'm 24 years old, and am new to this whole investment thing...

The company matches half, up to 4%. That's about all I understand about this 401k stuff. I dont make too much money, and I'm not quite sure how this thing actually works. Somebody please fill me in!

Thanks in advance!

You should be investing most of your money in stocks and very little into bonds and other short term investments.

FFS get a roth ira too--given that you're 24. Invest the minimum to get the matching from your company. Put in the max for the roth--4k this year (07) and 5k next year (08). Then if you have any left over put it into your 401k.

Make sure you are deversified:
30% overseas stocks (international)
70% in domestic stocks--make sure you have large, medium, and small caps.
Or you don't want to learn how to deversify get a target date fund (date that you should retire) and put all your money in there...like a 2050/2055 fund for a 25 year old. Target date funds take the thinking out of it--they deversify it given your age. They cost more--how much they charge you, but you don't have to do anything but contribute to your 401k/ira.

Here is CNNs link to retirement guides:
CNN's Retirement Info

As others have said, pack as much in as possible. I'm 24, not married, and in the last year I maxed out my roth for '06 and '07 and was able to put 16% into my 401k. This will be very nice to me in retirement--should be able to retire a couple of years early given this last years contributions. Goal is to keep it up as long as possible--until family, kids, and wife limit the contributions.

As far as a IRA provider, I love fidelity. My company has the 401k through them, so I got my roth ira there also. They have a ton of research and guides to make sure you are on track.