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Retirement Planning Question 401K plan and Roth
Posted on 11/2/12 at 10:10 am
Posted on 11/2/12 at 10:10 am
Getting started on retirement planning. 30 or so years to go for retirement
is it a good idea to max out 401k and Roth?
we've vanguard- they have the 30 year retirement fund. should i put money in that?
any other suggestions on which funds to invest?
thanks a lot for you'll input
is it a good idea to max out 401k and Roth?
we've vanguard- they have the 30 year retirement fund. should i put money in that?
any other suggestions on which funds to invest?
thanks a lot for you'll input
3
Posted on 11/2/12 at 10:32 am to sunderlandsoccer
Yes max out 401(k) and Roth if you can. It is good to have a little of both due to the future uncertainty of tax rates.
If you can't save enough to max out both make sure you are getting all of the 401(k) match before you you put anything toward the Roth.
Vanguard has some good products. If you aren't going to keep up with your investment allocations then the 30 year fund is the best idea. I am not a huge fan of Target Date and Target Risk funds. Especially if they are operated as a fund of funds then they can be quite expensive.
They will also be overloaded on bonds in general. I am bearish on bonds in general right now with rising rates almost guaranteed in the future then bonds will lose value (you aren't getting any yield right now anyway, basically bonds are return free risk).
These Target products will have a non-dynamic asset allocation that shifts to less risk over time based on standard deviation (flawed process IMHO) so you will be locked into their pie chart for the given time frame.
For the Roth I would focus on buying dividend stocks that have a track record of raising their dividend for the last 20 years or so. There are some attractive yields in this space and in a 30 year time frame you could build a pretty strong consistent cash flow for retirement.
If you can't save enough to max out both make sure you are getting all of the 401(k) match before you you put anything toward the Roth.
Vanguard has some good products. If you aren't going to keep up with your investment allocations then the 30 year fund is the best idea. I am not a huge fan of Target Date and Target Risk funds. Especially if they are operated as a fund of funds then they can be quite expensive.
They will also be overloaded on bonds in general. I am bearish on bonds in general right now with rising rates almost guaranteed in the future then bonds will lose value (you aren't getting any yield right now anyway, basically bonds are return free risk).
These Target products will have a non-dynamic asset allocation that shifts to less risk over time based on standard deviation (flawed process IMHO) so you will be locked into their pie chart for the given time frame.
For the Roth I would focus on buying dividend stocks that have a track record of raising their dividend for the last 20 years or so. There are some attractive yields in this space and in a 30 year time frame you could build a pretty strong consistent cash flow for retirement.
Posted on 11/2/12 at 10:57 am to sunderlandsoccer
quote:Yes. I am in college and learning, and this is what I have learned so far
max out 401k and Roth?
Posted on 11/2/12 at 11:26 am to sunderlandsoccer
When you say max your 401(k) are you meaning actually maxing, or going to the match limit? Two very different things.
Posted on 11/2/12 at 11:37 am to GoCrazyAuburn
appreciate the feedback folks.
i think my company allows to max out the limit which is 15,000?? but only upto 6% of pay and company contributes 25% of what you put.
regarding funds- I know its difficult but any names you guys can throw around?
i think my company allows to max out the limit which is 15,000?? but only upto 6% of pay and company contributes 25% of what you put.
regarding funds- I know its difficult but any names you guys can throw around?
Posted on 11/2/12 at 11:44 am to sunderlandsoccer
So they match 25% of your contributions up to 6% of your income?
I would contribute up to that 6% so you get your "free money", but over that you are just loading up your tax burden during retirement (unless the deductions are that important right now).
As for the Roth, definitely do what you can while you can to help gain tax free retirement income.
I would contribute up to that 6% so you get your "free money", but over that you are just loading up your tax burden during retirement (unless the deductions are that important right now).
As for the Roth, definitely do what you can while you can to help gain tax free retirement income.
Posted on 11/2/12 at 11:59 am to GoCrazyAuburn
sorry may be i was not clear.
I can contribute from 1% to 60% of my eligible compensation on a before-tax basis, Roth 401(k) after-tax basis, or a combination of the two
Company for every $1 I contribute (up to 6% of my pay) will contribute $0.25 to my account
is this a good contribution by company. what strategy do you guys suggest
I can contribute from 1% to 60% of my eligible compensation on a before-tax basis, Roth 401(k) after-tax basis, or a combination of the two
Company for every $1 I contribute (up to 6% of my pay) will contribute $0.25 to my account
is this a good contribution by company. what strategy do you guys suggest
Posted on 11/2/12 at 3:48 pm to sunderlandsoccer
It's not very good, but its better than nothing. Basically, if you save 6%, they'll give you 1.5% of your salary. Some companies will include bonus, but most don't. I was disappointed when I switched companies and my match dropped to $1-$1 up to 6%.
It's still free money and you can look at it as a guaranteed 25% initial ROR.
It's still free money and you can look at it as a guaranteed 25% initial ROR.
Posted on 11/3/12 at 11:08 am to GoCrazyAuburn
You can fund a Roth beyond the income limits. Google Back-door Roth Ira contributions. Up to the individual if they want to use the method, but makes sense in my situation. You basically contribute to an IRA then convert to a Roth. Congress removed income limit on conversions a couple years ago.
Posted on 11/5/12 at 10:10 am to LSUKTR
If your Roth option is in the 401(k) then you are limited to the maximum of $17,000 (for 2012) combined in either the traditional(k) or the Roth 401(k).
You could do the Roth contributions out side the 401(k) for an additional kick if you could afford more than the $17,000.
You could do the Roth contributions out side the 401(k) for an additional kick if you could afford more than the $17,000.
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