How Much Should I be putting in my 401K?

Page 2 - Seeking answers? Join the AnandTech community: where nearly half-a-million members share solutions and discuss the latest tech.
Dec 26, 2007
11,783
2
76
My company matches up to 5% from $.50/per dollar I contribute to $1.50/per dollar based on the company's performance for the year. This year was $1.42/per dollar I put in. After that I am currently working on knocking out my debt (cars, student loans, etc). From there I will be putting it into a 403b/Roth IRA and also putting money into a high yield savings (for liquidity purposes).

edit: I am 21 and currently have about $5k in my 401k.
 

TallBill

Lifer
Apr 29, 2001
46,044
62
91
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into. What happens to my money once I leave my current job?
B) I want to retire much earlier then 59½. A 401k and IRA both seem pointless if I'm going to want to access my money earlier.
 
Nov 7, 2000
16,404
3
81
Originally posted by: TallBill
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into. What happens to my money once I leave my current job?
B) I want to retire much earlier then 59½. A 401k and IRA both seem pointless if I'm going to want to access my money earlier.
A) you can roll it over into a self-managed IRA
B) don't put all your retirement savings in a 401k? have some to spend until you reach that age, then start taking your distributions
 

ponyo

Lifer
Feb 14, 2002
19,689
2,811
126
Originally posted by: TallBill
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into. What happens to my money once I leave my current job?
B) I want to retire much earlier then 59½. A 401k and IRA both seem pointless if I'm going to want to access my money earlier.

a) you can rollover your 401k from work to a traditional IRA.
b) no one said 401k and IRA should be your only retirement money. You should also have plenty regular investments if you plan on retiring early. People don't retire early if they don't have plenty of funds available.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,730
670
126
Originally posted by: TallBill
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into. What happens to my money once I leave my current job?
B) I want to retire much earlier then 59½. A 401k and IRA both seem pointless if I'm going to want to access my money earlier.

You can roll over a 401k to a traditional IRA somewhere like Vanguard.

With a Roth IRA instead you could put in 15K over 3 years (20K if you have $5+K earned income for each of 2007-2010), then you have to leave in the growth until 591/2 (with some exceptions) but you can still take out the original 20K at any time tax-free and penalty-free.
 

TallBill

Lifer
Apr 29, 2001
46,044
62
91
Oh trust me I'll have plenty to spend by then plus a federal pension. Thanks for the responses though. How painful is the rollover process, simply paperwork and then you have a new account with a new company?
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
Originally posted by: TallBill
Oh trust me I'll have plenty to spend by then plus a federal pension. Thanks for the responses though. How painful is the rollover process, simply paperwork and then you have a new account with a new company?

You'll want to prepare for worst case scenario anyway - it's unlikely but someone like Obama or Clinton might cut your pension.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,730
670
126
How painful is the rollover process, simply paperwork and then you have a new account with a new company?

You just fill out a form with the brokerage to open the account, get your ex-employer to either wire the money or cut a check to the brokerage (not to you!), and decide what fund(s) to put the money into. Note that this is a traditional IRA not a Roth, so you can't take out the money until 59 1/2.

Vanguard.com has some info on this, I recommend them for their low expense stock index mutual funds, but other people like Fidelity and T Rowe Price.

If you want to trade individual stocks in your IRA (a bad idea in my opinion), you can open it at a regular brokerage like Scottrade instead of with a mutual fund company.
 

Pliablemoose

Lifer
Oct 11, 1999
25,195
0
56
The maximum is 15K per year (your contribution)

I agree that you should put in the minimum for the company matching, flush out your Roth, then try to get the whole $15K into your 401K, I had my withholding up to 50% for a couple of months to get the max last year.

 

IronWing

No Lifer
Jul 20, 2001
68,851
26,635
136
Originally posted by: TallBill
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into.

Yes, they do. The Thrift Savings Plan can accept rollovers from traditional IRAs. The TSP is one of the lowest overhead fund families available so it is something to look into.
 

IronWing

No Lifer
Jul 20, 2001
68,851
26,635
136
Right now, I'm putting 17% into my 401k with a company match of 5%. 17% hurts. I am debt free other than a low rate mortgage. If it wasn't for overtime, I couldn't afford it.
 

maddogchen

Diamond Member
Feb 17, 2004
8,905
2
76
Originally posted by: ironwing
Right now, I'm putting 17% into my 401k with a company match of 5%. 17% hurts. I am debt free other than a low rate mortgage. If it wasn't for overtime, I couldn't afford it.

Did you save enough for an emergency fund though?
 

IronWing

No Lifer
Jul 20, 2001
68,851
26,635
136
Originally posted by: maddogchen
Originally posted by: ironwing
Right now, I'm putting 17% into my 401k with a company match of 5%. 17% hurts. I am debt free other than a low rate mortgage. If it wasn't for overtime, I couldn't afford it.

Did you save enough for an emergency fund though?

Yep, built that up too. I have a separate account for housing expenses that I pay a set amount into every month. It covers mortgage, insurance, taxes, and repairs (sort of a personal escrow account). That account generally holds ~6 months worth of mortgage payments.

The general savings account never drops below what is needed for a few months.
 

alkemyst

No Lifer
Feb 13, 2001
83,967
19
81
Originally posted by: Drako
Put in the maximum you can afford.

after you are paying off other debt as well.

Money put away early compounds much more and is the smart thing, but if you are paying out 15%+ for credit cards then it's best to pay them off first.

Outside of that putting as much as you can afford is what you should do and make sure you are in a decent fund.
 

IronWing

No Lifer
Jul 20, 2001
68,851
26,635
136
Once I got to a salary level I could live off w/o too much worry I diverted all raises to the 401k so with each raise the percentage of gross going to retirement went up. My take home pay has been flat for the last five years. With resurgent inflation I won't be able to sustain this strategy much longer as the purchasing power of my take home pay has declined.
 
Sep 29, 2004
18,665
67
91
Depends on ALOT.

Most advise the conservative route. Then again, alot of people I know that have retired early regret putting anything in a Roth or 401K. That's money they can't have for many years. They do laugh a bit though, seeing how they will get a slight raise at 62.

The people I am referring to retired early at 50 or so. The thing is, if you dump money in a 401K or Roth-IRA, the chances or early retirement are lesser.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,730
670
126
Originally posted by: IHateMyJob2004
Then again, alot of people I know that have retired early regret putting anything in a Roth or 401K. That's money they can't have for many years. They do laugh a bit though, seeing how they will get a slight raise at 62.

The people I am referring to retired early at 50 or so. The thing is, if you dump money in a 401K or Roth-IRA, the chances or early retirement are lesser.

Hasn't anyone told them that they can take all of their original contributions back out of the Roth IRA, tax-free and with no penalties?

It's only the growth in the Roth that is usually locked away until 59 1/2.
 

sciencewhiz

Diamond Member
Jun 30, 2000
5,885
8
81
Originally posted by: DaveSimmons
Originally posted by: IHateMyJob2004
Then again, alot of people I know that have retired early regret putting anything in a Roth or 401K. That's money they can't have for many years. They do laugh a bit though, seeing how they will get a slight raise at 62.

The people I am referring to retired early at 50 or so. The thing is, if you dump money in a 401K or Roth-IRA, the chances or early retirement are lesser.

Hasn't anyone told them that they can take all of their original contributions back out of the Roth IRA, tax-free and with no penalties?

It's only the growth in the Roth that is usually locked away until 59 1/2.

The original contributions won't get you very far. If you start saving at 25, for 30 years at the max amount, and plan to withdraw 50K in today's dollars, you would have only saved enough for 3 years.

Better then nothing, but not enough for you to retire at 50. The growth would be several times that amount.
 

TallBill

Lifer
Apr 29, 2001
46,044
62
91
Originally posted by: ironwing
Originally posted by: TallBill
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into.

Yes, they do. The Thrift Savings Plan can accept rollovers from traditional IRAs. The TSP is one of the lowest overhead fund families available so it is something to look into.

Hmm, so would I have to roll over the 401k to an IRA, and then decide to move it to the TSP?

Because with TSP I have all sorts of options to get the money out. You can get a monthly percentage or dollar amount check as soon as you retire. I just closed out my TSP after seperating from my enlistment and got a 100% EFT.

Edit - Looks like they might take a 401k too. Gonna email to find out.
 

IronWing

No Lifer
Jul 20, 2001
68,851
26,635
136
Originally posted by: TallBill
Originally posted by: ironwing
Originally posted by: TallBill
Should I bother with my company 401k with these 2 conditions..

A) In 3 years I'll be rejoining the Army and plan on retiring with them. They don't have a 401k that I could transfer funds into.

Yes, they do. The Thrift Savings Plan can accept rollovers from traditional IRAs. The TSP is one of the lowest overhead fund families available so it is something to look into.

Hmm, so would I have to roll over the 401k to an IRA, and then decide to move it to the TSP?

Because with TSP I have all sorts of options to get the money out. You can get a monthly percentage or dollar amount check as soon as you retire. I just closed out my TSP after seperating from my enlistment and got a 100% EFT.

Edit - Looks like they might take a 401k too. Gonna email to find out.

Yes, they do. Sorry about the vague response above. As long as it is not a Roth.