[quote]tedro wrote:
mazevedo wrote:
I just started my “real” job at 29 yrs old and my 401k starts this pay period and I’m putting in 15% of my 60k starting salary. I’m only putting this much in because a) it’s a late start at 29 and b) I can afford to do it for now…I don’t know how long I will be able to put this much aside, so better take advantage early on.
Are you receiving a company match on your 401k?
You may want to consider putting less into the 401k and opening up an IRA. The IRA will give you more investment options and if you go with a Roth the taxes are treated differently, allowing you to hedge against taxes in retirement. Basically with a Roth you pay regular income taxes, but contributions grow tax free and withdrawals are tax free. With your 401k and a traditional IRA contributions are not taxed, but withdrawals in retirement will be. Most people will come out ahead with the Roth.
Without knowing more about your situation I can’t give too much advice, but I would bet you would be best off contributing up to the company match for your 401k (probably 4-6%) and then maxing out a Roth IRA. You can put $4000 in for 2007 (you have until tax day, April 15th, to make contributions for '07) and will be able to invest $5000 in 2008. If you still have money left over to invest after receiving your full company match and maxing out the IRA, you could either put more into the 401k or put money into a taxable account to help save for an early retirement.
For your IRA, I would recommend looking at Vanguard and T. Rowe Price, both are reputable companies with good investment options and very low expenses. I have a simple target retirement fund with Vanguard. This takes care of diversification and the risk of the portfolio is always geared toward my expected retirement with respect to my age. The expense ratio is only .21%, you will not find a lower one in the industry.
I have no relations with these two companies, I’m just giving you a recommendation. [/quote]
Damn, thanks for the advice I really appreciate it.
My compnay does not “match” but this is what we have:
The 401K is completely on my own. I need to go to the T. Rowe Price website and diversify the account myself, which is something I don’t know shit about just yet. But for now it automatically goes into a very “safe” investment until I go in there myself and manipulate it.
My company’s version of “matching” is that they do profit sharing. My offer letter states that the company shares roughly 1/3 of profits from operations and each employee is to receive up to 15% of their gross yearly income (if profits allow) but at the very least, there is a 3% “safe harbor” company contribution (whatever the hell that means).
The company has acheived the maximum contributions in all but one year that the plan has been in place…which sounds damn good to me. There are a ton of guys who have been with the company for 20+ years and I’ve never heard even one person bitch about the company’s retirement plan so it sounds pertty solid. If there was anything bad about it, I’m sure people (especially the older ones) would be bitching about it.
As far as a Roth, that was my idea a few months ago. I was debating it until I could find out more positive information about it. From what you say it sounds pretty solid. In a few months I may reduce my 401k contribution and start putting into a Roth IRA.
Thanks again for the advice! Any others are welcome to chime in. We could all learn a little about saving for retirement…it seems to be highly underrated by many people.