401K/Retirement Plan for a 25-year old | TigerDroppings.com
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Srbtiger06
USA Fan
Buga Nation
Member since Apr 2006
22677 posts
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401K/Retirement Plan for a 25-year old

Where the hell do I start? I started a new job a few months ago and I'm about to be eligible for retirement benefits. I've read over the package they gave me for a few weeks and I'm absolutely lost still.

Cliff Notes:
1) Previously I worked at a (very) small local business that did not, but I saved a fair amount.
2) They match 100% of my salary up to 6% that I contribute.
3) There is a profit-sharing plan as well but I don't qualify until next year.
4) The whole package is through JP Morgan.
5) There are a ton of different "package options" that I haven't quite figured out.

I plan on putting in 6% my first year and seeing how it goes. If I'm coming in with a solid amount of cushion in my budget every month, I plan to increase my contribution.

What specifics should I be looking at within these packages though? There is one package that is called "SmartRetirement 2040 Select" that says it is for people looking to retire around 2040. Is it a bad idea to put some money into options like that? I can select multiple packages and divide them up...what should those percentages be like?

I'M LOST AS HELL


mach316
LSU Fan
Jonesboro, AR
Member since Jul 2012
1786 posts

re: 401K/Retirement Plan for a 25-year old
Its great that you are worrying about this at age 25 because who knows what your generation will be needing to retire after all the shite that is being dumped on yall these days. IMO get your savings built up first. I'm talking money that can support you for up to 6 months just in case you loose your job or get injured and cant work. Once your safety net is in place, put all you can into your retirement account. I also suggest that you open and online trading account and use some money (not all) on trading yourself. I started doing this years ago and it will open your eyes on how things work in the market. Remember, nobody will look after your money like you will. Good luck!!


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jimbeam
USA Fan
University of LSU
Member since Oct 2011
36360 posts

re: 401K/Retirement Plan for a 25-year old
Savings
match 401k
max roth
max 401k
taxable accounts

is what I've read. i'm a little younger than you.

That plan is probably similar to the Vanguard Target date funds (i'd bet). Basically a buy and forget about it total fund.

From what I've been told, at our age, it's not so much WHAT you are buying, as long as you are buying as much as possible.



weagle99
Delaware Fan
Member since Nov 2011
15126 posts

re: 401K/Retirement Plan for a 25-year old
quote:

max roth


What kind of rates are most IRAs offering these days? I checked with one institution earlier and they seemed very low.


jimbeam
USA Fan
University of LSU
Member since Oct 2011
36360 posts

re: 401K/Retirement Plan for a 25-year old
Que?

You can do different things in a roth.


weagle99
Delaware Fan
Member since Nov 2011
15126 posts

re: 401K/Retirement Plan for a 25-year old
quote:

You can do different things in a roth.



Okay. Still learning here.


jimbeam
USA Fan
University of LSU
Member since Oct 2011
36360 posts

re: 401K/Retirement Plan for a 25-year old
Roth is only a vehicle. You invest like you would any other way (or you can anyway). It just takes advantage of tax free withdrawals on earnings.

Also, Bogleheads is a great place to learn


rpg37
LSU Fan
Walls, MS
Member since Sep 2008
16659 posts

re: 401K/Retirement Plan for a 25-year old
I am 26 and met with a Wells Fargo agent yesterday to discuss exaclty what plan was best. As a teacher, I had been making monthly contributions to a limited 457b plan, but we decided to go into a Roth IRA plan.

Like one poster mentioned, good job on making this a focus already. My agent said I am the youngest client he has and that the majority of people wait until mid-30s to start. Even though I personally don't make six-figures a year, we can get a big advantage just by using time as our ally!!


wegotdatwood
Member since Aug 2009
17094 posts

re: 401K/Retirement Plan for a 25-year old
quote:

It just takes advantage of tax free withdrawals on earnings.



With a roth, do I pay tax on dividends that are reinvested?


jimbeam
USA Fan
University of LSU
Member since Oct 2011
36360 posts

re: 401K/Retirement Plan for a 25-year old
Look up the Rule of 72 if you haven't.

Just consider that with the all time average rates of return, your money will double in 7 years. starting early is huge.


jimbeam
USA Fan
University of LSU
Member since Oct 2011
36360 posts

re: 401K/Retirement Plan for a 25-year old
I do not believe so.


eng08
LSU Fan
Member since Jan 2013
2548 posts

re: 401K/Retirement Plan for a 25-year old
No taxes on dividends/ gains inside the Roth.


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kage
Auburn Fan
ATL
Member since Feb 2010
3730 posts

re: 401K/Retirement Plan for a 25-year old
quote:

starting early is huge.


Truer words were never spoken. Put in as much as you can. Not only will your taxes be lower(depending on what you do), but starting early is huge - if you don't know about compound interest, look it up. If you can do more than 6%, do more, obviously whatever you're comfortable with. But if you've got a 6% match, that's fantastic. And reinvest dividends, imo. That's free money you're getting right now.

But starting early is the best thing you can do. I work for a Coke and didn't start my 401k until about 2 years after I started(25) and my dad would give me shite weekly about not starting it earlier. I always kind of blew him off, but now that I'm 33, I know exactly why he was all over me about it.
This post was edited on 6/20 at 9:38 pm


trident
Tennessee Fan
Member since Jul 2007
3504 posts

re: 401K/Retirement Plan for a 25-year old
quote:

SmartRetirement 2040 Select"


This is a good plan but DO NOT put all your money in this fund because every year the contributions will change away from the stock market and into bond type funds. Max about 15-25% IMO

Put it in the market and let it roll. You have time to lose and gain it back before retirement


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Srbtiger06
USA Fan
Buga Nation
Member since Apr 2006
22677 posts
Online

re: 401K/Retirement Plan for a 25-year old
quote:

If you can do more than 6%, do more, obviously whatever you're comfortable with. But if you've got a 6% match, that's fantastic. And reinvest dividends, imo. That's free money you're getting right now.


I plan on doing more than 6% once I get my feet under me. I want to throw more into savings first though. I'm also about to be moving and my expenses will be rising a little so I want to make sure I will have enough to cover my basics.

quote:

I always kind of blew him off, but now that I'm 33, I know exactly why he was all over me about it.


My boss and I discussed this and he was showing me the difference in starting now vs. next year or the next. The numbers were RIDICULOUS.


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