[druthb00]

The company I'm working for offers up to a 5% match on base salary after you've worked there for 1 year. I'm allowed to opt-into the plan after 1 month, but without the match. My first thought was to not bother until the match is offered, since our next goal is saving for a house and we want the money to be as liquid as possible (it's currently going into a savings account earning 1.25% APY + 10% of interest earned each quarter.) I looked into IRAs not long ago and if I remember correctly, each person can draw $8,000 penalty free for a first-time house. The 401k plans aren't like that (from what I know about them, which isn't much LOL)

So....would it be smarter to:

1: Continue to save our money the way we are

2: Start contributing to the 401k plan

3: Start an IRA and begin making contributions to it

4: Something entirely different?


I'll obviously be doing a bit more research before going ahead with either the IRA or 401k, but I'm really just wondering if contributing to the 401k before the match is offered makes any sense when looking at our short-term goal. After that goal is reached, funding retirement accounts will be next on the table.


TIA

 

[Greebo]

This assumes you are otherwise debt free.

I would continue as you are. Save up that downpayment super fast, but your house, THEN start retirement savings, as you plan.

There's only one time you should ever think of taking money out of a retirement account once you've put it in - and that's to avert financial disaster such as foreclosure or bankruptcy. That tax preferred vehicle should not be treated as a convenience piggy bank. And NEVER EVER EVER take out a 401k loan - they sound great until you lose your job and have to pay it all back in 6 months OR pay taxes AND penalties on the "loan".

As for the 401k/IRA option - with a 5% match on the table by the time you buy a house (or shortly thereafter) you definitely want to use the 401k first - for the first 5% you contribute.

Your IRA option for post-tax income is a Roth IRA - and that's your next step - you can put up to $5,000 a year in a Roth IRA, so after you contribute up to the match at work, next you'll put up to $5k into the Roth. That may take you all the way to 15%. If not, up the 401k until you are putting 15% towards retirement in total.

 

[druthb00]

I was hoping you'd be able to give me a clear-cut answer Thanks, Greebo.

I do have one question, though:

*Snip*
There's only one time you should ever think of taking money out of a retirement account once you've put it in - and that's to avert financial disaster such as foreclosure or bankruptcy. That tax preferred vehicle should not be treated as a convenience piggy bank.

If there is no penalty for drawing money out of the Roth IRA for a home purchase, and the money was taxed before you put it in, why is it a bad idea to use it? The only reason I ask, is because I assume the Roth IRA would earn more interest than my savings account

 

[mndtrp]

Compounding. If you take that money out of your account, you won't be able to gain as quickly as if that money was still there. While it's true that you will pay yourself back, instead of a bank, you're missing out big time in the long run.

 

[druthb00]

Compounding. If you take that money out of your account, you won't be able to gain as quickly as if that money was still there. While it's true that you will pay yourself back, instead of a bank, you're missing out big time in the long run.

Ahah. Ok, I'll skip doing that. Thanks

 

[Greebo]

Absolutely compounding - and at your age - 23 - compounding is a HUGE HUGE HUGE benefit for you. If we assume... well with Social Security falling apart lets assume 50 years till you can retire ...

Assume you open an IRA/Roth/401k whatever and you invest in funds that over the long haul have well established track records of annualized returns > 10% (before anyone replies there aren't any - don't - I'll embarrass you with my list). Put that $8,000 in NOW at 10% gains, and NOTHING ELSE, and here's what you'll have by year:

<table border="0" cellpadding="0" cellspacing="0" width="159"><col style="width: 48pt;" width="64"> <col style="width: 71pt;" width="95"> <tbody><tr style="height: 15pt;" height="20"> <td style="height: 15pt; width: 48pt;" align="right" height="20" width="64">1</td> <td class="xl63" style="width: 71pt;" align="right" width="95">$8,837.70 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">2</td> <td class="xl63" align="right">$9,763.13 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">3</td> <td class="xl63" align="right">$10,785.45 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">4</td> <td class="xl63" align="right">$11,914.83 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">5</td> <td class="xl63" align="right">$13,162.47 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">6</td> <td class="xl63" align="right">$14,540.75 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">7</td> <td class="xl63" align="right">$16,063.36 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">8</td> <td class="xl63" align="right">$17,745.41 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">9</td> <td class="xl63" align="right">$19,603.58 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">10</td> <td class="xl63" align="right">$21,656.33 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">11</td> <td class="xl63" align="right">$23,924.03 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">12</td> <td class="xl63" align="right">$26,429.19 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">13</td> <td class="xl63" align="right">$29,196.67 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">14</td> <td class="xl63" align="right">$32,253.95 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">15</td> <td class="xl63" align="right">$35,631.36 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">16</td> <td class="xl63" align="right">$39,362.43 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">17</td> <td class="xl63" align="right">$43,484.19 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">18</td> <td class="xl63" align="right">$48,037.55 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">19</td> <td class="xl63" align="right">$53,067.71 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">20</td> <td class="xl63" align="right">$58,624.59 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">21</td> <td class="xl63" align="right">$64,763.35 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">22</td> <td class="xl63" align="right">$71,544.92 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">23</td> <td class="xl63" align="right">$79,036.61 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">24</td> <td class="xl63" align="right">$87,312.77 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">25</td> <td class="xl63" align="right">$96,455.56 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">26</td> <td class="xl63" align="right">$106,555.72 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">27</td> <td class="xl63" align="right">$117,713.49 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">28</td> <td class="xl63" align="right">$130,039.63 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">29</td> <td class="xl63" align="right">$143,656.48 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">30</td> <td class="xl63" align="right">$158,699.19 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">31</td> <td class="xl63" align="right">$175,317.07 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">32</td> <td class="xl63" align="right">$193,675.06 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">33</td> <td class="xl63" align="right">$213,955.37 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">34</td> <td class="xl63" align="right">$236,359.30 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">35</td> <td class="xl63" align="right">$261,109.20 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">36</td> <td class="xl63" align="right">$288,450.75 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">37</td> <td class="xl63" align="right">$318,655.31 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">38</td> <td class="xl63" align="right">$352,022.69 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">39</td> <td class="xl63" align="right">$388,884.06 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">40</td> <td class="xl63" align="right">$429,605.31 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">41</td> <td class="xl63" align="right">$474,590.59 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">42</td> <td class="xl63" align="right">$524,286.43 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">43</td> <td class="xl63" align="right">$579,186.07 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">44</td> <td class="xl63" align="right">$639,834.42 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">45</td> <td class="xl63" align="right">$706,833.45 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">46</td> <td class="xl63" align="right">$780,848.15 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">47</td> <td class="xl63" align="right">$862,613.15 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">48</td> <td class="xl63" align="right">$952,940.02 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">49</td> <td class="xl63" align="right">$1,052,725.29 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">50</td> <td class="xl63" align="right">$1,162,959.39 </td> </tr> </tbody></table>
Look at how in the last 2 years the gains are over $100,000 a year - but if you took that 8k out early on, you'ld miss out on over $200,000 in gains for retirement!

 

[Guest]

I would also wonder what time frame are you looking at for the down payment? Is it something you think you can save in a year or 2? If you are looking farther out, like not buying a house for another 5 years or so, I would put more into retirement so that you're not *starting* to save for retirement 5 years later.

FWIW, I started a ROTH when I was 22. And yes, I did pull some money out tax free for a house. But when I was 22, I didn't know when I was going to get married, have kids, buy a house, etc - so it made more sense to keep shoveling it into a retirement fund. I didn't get married until 25 and buy a house until 30.

 

[druthb00]

We're *hoping* a couple of years. Realistically, there's no reason it shouldn't be absolutely do-able barring any catastrophes... Now that I've got a decent job with excellent benefits, and BF is working overtime constantly...2 years should be attainable. So, 25 is when I'd start putting money into a retirement account. So long as we keep our standard of living close to what it is now, and keep our future house payment+taxes+insur. at what we pay for rent currently; almost (or 2/3 at worst) my entire income will be available to put towards retirement accounts each year...again, barring catastrophes which I'm sure will pop up from time to time...LOL.

Btw, Greebo....not funny with the 50 years remark...not funny at all I don't have complete loss of faith that some amount of SS will be there when I retire, but I'll be damned if I am going to rely on it being there that's for sure.

 

[Greebo]

Hey 50 years isn't really a joke - retirement age is 67 now.

But lets imagine something else. We're talking about $8,000 in 2 years. So that's $4,000 in one year, or $333 a month.

Well lets get you to 25, you save up your $8k you buy a house, etc... You start a little later on the retirement, sure - but instead of starting with 8k and nothing else you you start on retirement and you put $333/month away every month for the REST of your working career.

Well - the earliest you can draw income from a retirement account without penalties is 57 and a half... so how's this look?

<table border="0" cellpadding="0" cellspacing="0" width="159"><col style="width: 48pt;" width="64"> <col style="width: 71pt;" width="95"> <tbody><tr style="height: 15pt;" height="20"> <td style="height: 15pt; width: 48pt;" align="right" height="20" width="64">26</td> <td class="xl65" style="width: 71pt;" align="right" width="95">$4,184.33 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">27</td> <td class="xl65" align="right">$8,806.82 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">28</td> <td class="xl65" align="right">$13,913.35 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">29</td> <td class="xl65" align="right">$19,554.59 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">30</td> <td class="xl65" align="right">$25,786.55 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">31</td> <td class="xl65" align="right">$32,671.07 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">32</td> <td class="xl65" align="right">$40,276.49 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">33</td> <td class="xl65" align="right">$48,678.30 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">34</td> <td class="xl65" align="right">$57,959.89 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">35</td> <td class="xl65" align="right">$68,213.38 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">36</td> <td class="xl65" align="right">$79,540.54 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">37</td> <td class="xl65" align="right">$92,053.81 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">38</td> <td class="xl65" align="right">$105,877.38 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">39</td> <td class="xl65" align="right">$121,148.46 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">40</td> <td class="xl65" align="right">$138,018.63 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">41</td> <td class="xl65" align="right">$156,655.31 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">42</td> <td class="xl65" align="right">$177,243.51 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">43</td> <td class="xl65" align="right">$199,987.55 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">44</td> <td class="xl65" align="right">$225,113.20 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">45</td> <td class="xl65" align="right">$252,869.82 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">46</td> <td class="xl65" align="right">$283,532.93 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">47</td> <td class="xl65" align="right">$317,406.87 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">48</td> <td class="xl65" align="right">$354,827.85 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">49</td> <td class="xl65" align="right">$396,167.30 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">50</td> <td class="xl65" align="right">$441,835.52 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">51</td> <td class="xl65" align="right">$492,285.81 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">52</td> <td class="xl65" align="right">$548,018.90 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">53</td> <td class="xl65" align="right">$609,587.98 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">54</td> <td class="xl65" align="right">$677,604.14 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">55</td> <td class="xl65" align="right">$752,742.48 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">56</td> <td class="xl65" align="right">$835,748.79 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">57</td> <td class="xl65" align="right">$927,446.94 </td> </tr> </tbody></table>
Not bad at 57 huh?

Oh - wait - wanna retire with a million in the bank?
<table border="0" cellpadding="0" cellspacing="0" width="159"><col width="64"><col width="95"><tr height="20"> <td style="height: 15pt; width: 48pt;" align="right" height="20" width="64">58</td> <td class="xl65" style="width: 71pt;" align="right" width="95">$1,028,747.09 </td> </tr></table>
Or how about waiting until you can draw Social Security by today's measure? (age 67)

<table border="0" cellpadding="0" cellspacing="0" width="159"><col style="width: 48pt;" width="64"> <col style="width: 71pt;" width="95"> <tbody><tr style="height: 15pt;" height="20"> <td style="height: 15pt; width: 48pt;" align="right" height="20" width="64">59</td> <td class="xl65" style="width: 71pt;" align="right" width="95">$1,140,654.69 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">60</td> <td class="xl65" align="right">$1,264,280.47 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">61</td> <td class="xl65" align="right">$1,400,851.49 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">62</td> <td class="xl65" align="right">$1,551,723.28 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">63</td> <td class="xl65" align="right">$1,718,393.32 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">64</td> <td class="xl65" align="right">$1,902,515.89 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">65</td> <td class="xl65" align="right">$2,105,918.50 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">66</td> <td class="xl65" align="right">$2,330,620.02 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">67</td> <td class="xl65" align="right">$2,578,850.73 </td> </tr> </tbody></table>
Or in 50 years - just to rub my nose in it
<table border="0" cellpadding="0" cellspacing="0" width="159"><col style="width: 48pt;" width="64"> <col style="width: 71pt;" width="95"> <tbody><tr style="height: 15pt;" height="20"> <td style="height: 15pt; width: 48pt;" align="right" height="20" width="64">68</td> <td class="xl65" style="width: 71pt;" align="right" width="95">$2,853,074.43 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">69</td> <td class="xl65" align="right">$3,156,012.94 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">70</td> <td class="xl65" align="right">$3,490,673.07 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">71</td> <td class="xl65" align="right">$3,860,376.49 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">72</td> <td class="xl65" align="right">$4,268,792.69 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">73</td> <td class="xl65" align="right">$4,719,975.40 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">74</td> <td class="xl65" align="right">$5,218,402.83 </td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt;" align="right" height="20">75</td> <td class="xl65" align="right">$5,769,022.14 </td> </tr> </tbody></table>
$333/month and you could be a multi millionaire.

Seriously you have got such a great position to start from at your age - right now I hate you a little.

 

[mndtrp]

If it was me, and in a way it was, I would start retirement savings as early as possible, even if it means you buy your house 6 months later than planned. Again, the benefits at retirement far outweigh the seemingly trivial amount you are putting away in the beginning.

I suppose it depends on how important getting that house truly is to you.

 

[druthb00]

LOL you guys are the best. Seriously (no sarcasm, I promise.) I've got some pretty ambitious goals when it comes to retirement. That $4,000/year you showed me, I'd really like to be contributing at about double that, if at all possible....but I also hope to be able to retire sooner than my 70's. Who knows...but, the point is I'm planning to start very soon

Mndtrp; that's where I'm a little bit unsure.... I know having a house is very important to BF, and it's pretty important to me, too. We'll be able to save a lot of money on care repairs once we have a place to do them in. It's amazing how much money we would have saved this year had we been able to garage this car rather than pay a mechanic. It nearly made BF sick, literally. But, of course, factor in the money you spend on appliances, roof repairs, higher electric/utility bills, etc....and I think we'll be lucky if we come out even. Regardless, I think we'll both be happier in a house rather than an apartment. Even though we're looking at 2-ish years until having enough to go ahead with the house idea, I may consider starting to contribute to the 401k once the match kicks in... probably not up to the full 5%, but it's still something I'm going to reconsider in a year. They do match dollar for dollar, so it really looks appealing on the surface.

I'll be seeking everyone's consult on that matter in about 11 months

 

[Greebo]

Since you will be debt free and have a fully funded EF in place, I see no downside to putting 5% gross towards your 401k and then saving up for a house. After all - that's an instant 100% gain on your money - hard to give up.

And I don't know what your income is - but if for instance you make 50k, then 5% is $2,500 a year, but the match makes it $5,000 a year, which gives you a great kick start towards that early retirement.

 

[druthb00]

Kinda what I have been thinking, too..... if it weren't for the match I wouldn't bother, but especially since it's dollar-for-dollar, it seems silly to pass up.

 

[mndtrp]

I agree with Greebo, it would be insane to leave money sitting on the table. At the very least, put in up to the match.

 

[wjcalderon]

well established track records of annualized returns > 10% (before anyone replies there aren't any - don't - I'll embarrass you with my list).

Embarrass us - share your list!!!

 

[Greebo]

I just rolled my 401k over into an IRA and selected the following funds for it:
American Century Investments Growth Fund Class Investor TWCGX Inception 06/91 12.56%

CRM Small Cap Value Fund Class Investor CRMSX Inception 09/95 11.58%

Janus Overseas Fund Class T JAOSX Inception 05/94 13.11%

Neuberger Berman Genesis Fund Class Investor NBGNX Inception 09/88 12.65%

The youngest is 16 years old and it has the lowest overall average rate of return over 16 years.

Now BEAR IN MIND - the last 10 years haven't been kind to funds in general - and yet 3 of the 4 above have 10 year ROI's that are still over 9% and the other has still got a 10 year ROI in the positive (barely).

There *are* good funds out there - if you look for them - but of course, your 401k may not have the selection that an IRA offers.

Please note, this is not investing advice, all investment carries risk, and if you do what Greebo does and lose your shirt, more the fool you. consult your professional adviser before investing, Greebo isn't him.

 

[druthb00]

Well I suppose I should have waited to pose my original question until AFTER orientation (which was this past Friday... lol)

The 5% after a year isn't a match, simply a company contribution. Whether I put any of my own money in or not is irrelevant. So, based on what you recommended before, Greebo, I would assume that my new plan is to let them toss 5% at the 401k, and then I would put enough into a Roth IRA until I'm at a full 15%, correct?

This does make it easier on me now, though, since I was going to bite the bullet and put money into the 401k once the "match" kicked in, just because it would be silly to turn my nose up at free money. Now we can continue to focus on saving for a down payment (a very large downpayment ) and the 401k can be funded by someone else :lol:

 

[Greebo]

Well I suppose I should have waited to pose my original question until AFTER orientation (which was this past Friday... lol)

The 5% after a year isn't a match, simply a company contribution. Whether I put any of my own money in or not is irrelevant. So, based on what you recommended before, Greebo, I would assume that my new plan is to let them toss 5% at the 401k, and then I would put enough into a Roth IRA until I'm at a full 15%, correct?

Then I wouldn't count the 5% they give you as anything but a bonus - so starting at 0, Roth first, then 401k.

ROTH limits are $5,000 a year or $6,000 if you're 50+. So if you make more than $40,000 a year, 15% will be more than you can put into your Roth. For argument lets say your gross income is $50,000. 15% of that is $7,500 a year. If you're under 50, you put $5,000 of after tax $ in the Roth which is 10% of your gross income, so then you put 5% more in the 401k. If you're 50+ it's $6k to the Roth which is 12% so 3% to the 401k.

And you get 5% more on top like the cherry on the whip cream.