401K question?

[Mayfriday0529]

What is a good % to contribute?
my company is switching companies for 401k so I have to fill out a new form again and my current funds will be moved over.

I currently contribute 5% which is about 30 dollars a week, not sure if i should increase it. Also my company does not match anything.

 

[Queasy]

Your company doesn't match? That's a horrible 401k.

Put in as much as you are willing to put in then....that is, if they offer a nice diversified portfolio of funds to invest in.

 

[Tea Bag]

At least contribute what your company match is. If you can do a bit more it doesnt hurt.

EDIT: And if they don't match, that sucks. Roth IRA.

 

[Sundog]

Originally posted by: Jnetty99
Also my company does not match anything.

Then IRA>401(k) in your case.

 

[alien42]

Originally posted by: Jnetty99
Also my company does not match anything.

that pretty much defeats the point of a 401k

 

[Queasy]

Originally posted by: alien42

Originally posted by: Jnetty99
Also my company does not match anything.

that pretty much defeats the point of a 401k

Not really. The other point of a 401k is that this money is put into your fund pre-tax. The thought is is that when you retire and start drawing money, you'll be doing so in a lower tax bracket than you currently reside any.

 

[Mayfriday0529]

Originally posted by: alien42

Originally posted by: Jnetty99
Also my company does not match anything.

that pretty much defeats the point of a 401k

mmm yeah I guess...
I now have enough to open an IRA, but I don't think i could contribute the required $2000 a year to keep the IRA going.

 

[iamwiz82]

Originally posted by: Jnetty99

Originally posted by: alien42

Originally posted by: Jnetty99
Also my company does not match anything.

that pretty much defeats the point of a 401k

mmm yeah I guess...
I now have enough to open an IRA, but I don't think i could contribute the required $2000 a year to keep the IRA going.

It's only $8 more per week than you a contributing now?

 

[Tea Bag]

Originally posted by: Jnetty99

Originally posted by: alien42

Originally posted by: Jnetty99
Also my company does not match anything.

that pretty much defeats the point of a 401k

mmm yeah I guess...
I now have enough to open an IRA, but I don't think i could contribute the required $2000 a year to keep the IRA going.

I'm not sure about a Tradtional IRA, but I *think* if you go with a Roth IRA you do not need a minium contribution. The maximum is capped at 3K (or 4K this year? Don't remember).

 

[Mayfriday0529]

Ok here are the facts...
Right now in my current 401k plan After three years with the company I have 3875.10 and I contribute 5% each week.
I make an average of 580$ gross a week and final net of $400 after all other crap.
My company is moving to another company, because they said as a whole we have enough to afford the new company... We had Hartford moving to Fiserv
Again my company does not match anything.

Maybe i should think fidelity

 

[Dulanic]

Originally posted by: Queasy

Originally posted by: alien42

Originally posted by: Jnetty99
Also my company does not match anything.

that pretty much defeats the point of a 401k

Not really. The other point of a 401k is that this money is put into your fund pre-tax. The thought is is that when you retire and start drawing money, you'll be doing so in a lower tax bracket than you currently reside any.

Actually thats not really the point, Roth IRA uses that as it's advantage but reversed, you put in taxed money, but dont pay tax when you take it out as youll likely be in a higher tax bracket by then, plus you dont pay interest on the earnings that way.

If they match nothing, go Roth IRA, much more freedom on what you invest your money in instead of the few funds your company likely has.

I put 5% in 401k because of matching, everything extra goes to Roth IRA.

 

[Genx87]

I contributed upto the max of their match. If they dont match then I dont bother contributing.

 

[Tea Bag]

My opinion - if you are going to stay there for a long time - the five percent is just fine. I would talk to your bank / financial advisor (I.E fidelity) and set up a Roth asap. You're not 'hurting' anything if you do the 5% with no match, you're just not getting any value added by them not matching. The nice thing is later down the line you can 'roll over' those 401k monies to a traditional IRA, then to your Roth that you have set up. Heck, you can roll it over now and stop contributing if you think your investment goals (between 3K -4K a year) will fit in the maximum contribution. Like everyone is saying, you're pretty much getting hosed if they aren't matching squat.

 

[skimple]

The Traditional IRA option is only good if you itemize your taxes. Otherwise, I don't think you can take a deduction for contributions, so 401k > IRA.

 

[Mayfriday0529]

Originally posted by: Tea Bag
My opinion - if you are going to stay there for a long time - the five percent is just fine. I would talk to your bank / financial advisor (I.E fidelity) and set up a Roth asap. You're not 'hurting' anything if you do the 5% with no match, you're just not getting any value added by them not matching. The nice thing is later down the line you can 'roll over' those 401k monies to a traditional IRA, then to your Roth that you have set up. Heck, you can roll it over now and stop contributing if you think your investment goals (between 3K -4K a year) will fit in the maximum contribution. Like everyone is saying, you're pretty much getting hosed if they aren't matching squat.

So your saying, i should keep contributing and open a seperate Roth IRA...
Oh i don't have a financial advisor also. I'm just 25, I worry about school and work etc.
I don't really plan on staying at my current job for a longer period of time, at the most maybe another year.

Looking at a Roth IRA through fidelity, I need 2500$ to open it, the only way to do that is to take the 401k money. I could have the minimum waived if i setup automatic contribution through my bank, but it must be 200$ a month..

 

[Specop 007]

I do 12%, plus with a company match of 5 is 17% total. I also put a bit into my Scottrade account and Roth IRA as well.

 

[MrChad]

Originally posted by: Tea Bag
My opinion - if you are going to stay there for a long time - the five percent is just fine. I would talk to your bank / financial advisor (I.E fidelity) and set up a Roth asap. You're not 'hurting' anything if you do the 5% with no match, you're just not getting any value added by them not matching. The nice thing is later down the line you can 'roll over' those 401k monies to a traditional IRA, then to your Roth that you have set up. Heck, you can roll it over now and stop contributing if you think your investment goals (between 3K -4K a year) will fit in the maximum contribution. Like everyone is saying, you're pretty much getting hosed if they aren't matching squat.

How can you rollover from a traditional IRA to a Roth IRA without paying taxes and/or penalties?

EDIT: And I don't think you're getting "hosed" if they aren't matching. Certainly, employer matching is one of the perks of a 401(k) (it's free money), but that doesn't make an unmatched 401(k) a bad investment. Since it's pre-tax, you can contribute more to a 401(k) immediately than you would if you waive the 401(k) and contribute your net income to a Roth IRA instead.

 

[Tea Bag]

Originally posted by: Jnetty99

Originally posted by: Tea Bag
My opinion - if you are going to stay there for a long time - the five percent is just fine. I would talk to your bank / financial advisor (I.E fidelity) and set up a Roth asap. You're not 'hurting' anything if you do the 5% with no match, you're just not getting any value added by them not matching. The nice thing is later down the line you can 'roll over' those 401k monies to a traditional IRA, then to your Roth that you have set up. Heck, you can roll it over now and stop contributing if you think your investment goals (between 3K -4K a year) will fit in the maximum contribution. Like everyone is saying, you're pretty much getting hosed if they aren't matching squat.

So your saying, i should keep contributing and open a seperate Roth IRA...
Oh i don't have a financial advisor also. I'm just 25, I worry about school and work etc.
I don't really plan on staying at my current job for a longer period of time, at the most maybe another year.

Looking at a Roth IRA through fidelity, I need 2500$ to open it, the only way to do that is to take the 401k money. I could have the minimum waived if i setup automatic contribution through my bank, but it must be 200$ a month..

You can use that as a roll-over, but you are probably safe to just invest in both if you can. I would talk to Fidelity, cause when I rolled over from my old job, I know I didn't have 2500 to start up with, it was more like 1200 dollars. Your bank or a phone call to Fidelity or your bank and clear that up, but I'd be surprised if you really needed that much to start. But that may be Fidelity's thing. I got mine through my bank's financial institution.

As far as emptying out your current 401k, you will take a tax hit on the conversion, so I would think about that. If you are not going to stay there, I would ramp down your 401k percentage or just leave it there and roll it when you set up the Roth. But like skimple said, its pre-tax in for the 401k, and post for the Roth. Thats why so many people really ramp up their percentage on that 401k if the match is nice (6% here). I'm by NO means a financial advisor, so step one is talk to your bank. They have someone there that gets paid for this kinda thing to help clients.

 

[Tea Bag]

Originally posted by: MrChad

Originally posted by: Tea Bag
My opinion - if you are going to stay there for a long time - the five percent is just fine. I would talk to your bank / financial advisor (I.E fidelity) and set up a Roth asap. You're not 'hurting' anything if you do the 5% with no match, you're just not getting any value added by them not matching. The nice thing is later down the line you can 'roll over' those 401k monies to a traditional IRA, then to your Roth that you have set up. Heck, you can roll it over now and stop contributing if you think your investment goals (between 3K -4K a year) will fit in the maximum contribution. Like everyone is saying, you're pretty much getting hosed if they aren't matching squat.

How can you rollover from a traditional IRA to a Roth IRA without paying taxes and/or penalties?

You cannot roll from 401k to Roth. you have to go to a 401k->Traditional->Roth, which is were the tax hit comes in. More finanical mumbo jumbo.

 

[Mayfriday0529]

Originally posted by: Tea Bag

Originally posted by: Jnetty99

Originally posted by: Tea Bag
My opinion - if you are going to stay there for a long time - the five percent is just fine. I would talk to your bank / financial advisor (I.E fidelity) and set up a Roth asap. You're not 'hurting' anything if you do the 5% with no match, you're just not getting any value added by them not matching. The nice thing is later down the line you can 'roll over' those 401k monies to a traditional IRA, then to your Roth that you have set up. Heck, you can roll it over now and stop contributing if you think your investment goals (between 3K -4K a year) will fit in the maximum contribution. Like everyone is saying, you're pretty much getting hosed if they aren't matching squat.

So your saying, i should keep contributing and open a seperate Roth IRA...
Oh i don't have a financial advisor also. I'm just 25, I worry about school and work etc.
I don't really plan on staying at my current job for a longer period of time, at the most maybe another year.

Looking at a Roth IRA through fidelity, I need 2500$ to open it, the only way to do that is to take the 401k money. I could have the minimum waived if i setup automatic contribution through my bank, but it must be 200$ a month..

As far as emptying out your current 401k, you will take a tax hit on the conversion,

Really..? I thought you could rollover without any penalties.

 

[Tea Bag]

Originally posted by: Jnetty99

Really..? I thought you could rollover without any penalties.

'fraid not. 401k is pre tax. Uncle Sam won't let you off that easy!

 

[MrChad]

Originally posted by: Jnetty99
Really..? I thought you could rollover without any penalties.

You can rollover a 401(k) to a traditional IRA without taxes or penalties. This is because both 401(k)s and traditional IRAs require that you pay taxes on your earnings only when you withdraw the money.

Roth IRAs are setup with money that has already been taxed, so you don't pay taxes on Roth IRA earnings when you withdraw. If you rollover from a 401(k) or traditional IRA into a Roth IRA, you have to pay taxes first (it's basically treated as a withdraw, not a rollover).

 

[Mayfriday0529]

Originally posted by: MrChad

Originally posted by: Jnetty99
Really..? I thought you could rollover without any penalties.

You can rollover a 401(k) to a traditional IRA without taxes or penalties. This is because both 401(k)s and traditional IRAs require that you pay taxes on your earnings only when you withdraw the money.

Roth IRAs are setup with money that has already been taxed, so you don't pay taxes on Roth IRA earnings when you withdraw. If you rollover from a 401(k) or traditional IRA into a Roth IRA, you have to pay taxes first (it's basically treated as a withdraw, not a rollover).

I'm chatting with a fidelity advisor right now, he said i can do a rollover IRA but like you also said a Roth IRA would be penalized

 

[Minjin]

Order of investing rule of thumb:

1. Contribute to 401k up to maximum that they match
2. Contribute to Roth IRA until its maxed (4k this year unless you are in the upper age bracket)
3. Contribute to 401k until its maxed
4. Look into taxable investments...

Mark

 

[Mayfriday0529]

Originally posted by: Minjin
Order of investing rule of thumb:

1. Contribute to 401k up to maximum that they match
2. Contribute to Roth IRA until its maxed (4k this year unless you are in the upper age bracket)
3. Contribute to 401k until its maxed
4. Look into taxable investments...

Mark

I wish i could do that. But at a 26,000 a year not possible