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Started By
Message
Boys, I need some help.
Posted on 7/22/24 at 2:54 pm
Posted on 7/22/24 at 2:54 pm
I recently accepted a position with a rather large company whose benefits are really damn great, as well as almost a 40% pay raise for myself. What I currently have is 10% of salary going into my 401k at a 3% match. My new company offers a 100% at 5% match. Here are my other options.
• General Employees Stock Purchase Plan (GESPP): You can contribute 3-10% of your eligible compensation to purchase stock with a 15% discount from its current market value. ($100 stock currently, down 27% from 5 year high)
• 401(k) Plan (VIP): Applies matching contributions on a before tax basis to every dollar you contribute up to the first 5% of your eligible pay from each payroll (on before-tax and/or Roth contributions).
• After-Tax Savings Account: You may choose to contribute 2-9% of your pay to this account each pay period on an after-tax basis.
• Retirement Income Account (RIA): This is a non-elective, automatic
contribution. We contribute a percentage of your eligible pay each payroll.
I will automatically raise my percentage from 10% to 15% which is something I always do when receiving a raise. How would you all invest with these other options? 5% into 401k, max the After-Tax Savings (ROTH?) and then buy stock? Thank you all for the help, just want to make the best decision.
• General Employees Stock Purchase Plan (GESPP): You can contribute 3-10% of your eligible compensation to purchase stock with a 15% discount from its current market value. ($100 stock currently, down 27% from 5 year high)
• 401(k) Plan (VIP): Applies matching contributions on a before tax basis to every dollar you contribute up to the first 5% of your eligible pay from each payroll (on before-tax and/or Roth contributions).
• After-Tax Savings Account: You may choose to contribute 2-9% of your pay to this account each pay period on an after-tax basis.
• Retirement Income Account (RIA): This is a non-elective, automatic
contribution. We contribute a percentage of your eligible pay each payroll.
I will automatically raise my percentage from 10% to 15% which is something I always do when receiving a raise. How would you all invest with these other options? 5% into 401k, max the After-Tax Savings (ROTH?) and then buy stock? Thank you all for the help, just want to make the best decision.
6
Posted on 7/22/24 at 3:32 pm to BadatBourre
No one can give you meaningful advice without much more context such as;
- Current income tax vs future tax rate at retirement (marginal vs effective rate of withdrawals)
- Other current investments
- Outlook of company stock growth
- Risk tolerance
- Do you need/want to have liquidity for near/mid term needs besides retirement
I would get the match first but traditional might be better than Roth if your income is already in 20%+ bracket and you already have other Roth investments.
The stock purchase is more risky but gives you the 15% discount (minus income tax). Do you believe in growth of the company? Is it worth risk and passing up tax advantaged growth in 401k?
I would also suggest trying to max tax advantaged accounts and GESPP rather than setting a 15% goal. You're likely a bit behind anyway if you've only been putting 10% away. 40% is a big pay jump if you dont max investments now, your spending will expand and you'll never catch up.
- Current income tax vs future tax rate at retirement (marginal vs effective rate of withdrawals)
- Other current investments
- Outlook of company stock growth
- Risk tolerance
- Do you need/want to have liquidity for near/mid term needs besides retirement
I would get the match first but traditional might be better than Roth if your income is already in 20%+ bracket and you already have other Roth investments.
The stock purchase is more risky but gives you the 15% discount (minus income tax). Do you believe in growth of the company? Is it worth risk and passing up tax advantaged growth in 401k?
I would also suggest trying to max tax advantaged accounts and GESPP rather than setting a 15% goal. You're likely a bit behind anyway if you've only been putting 10% away. 40% is a big pay jump if you dont max investments now, your spending will expand and you'll never catch up.
Posted on 7/22/24 at 3:43 pm to TorchtheFlyingTiger
- Current income tax vs future tax rate at retirement (marginal vs effective rate of withdrawals) Honestly, I don't know. My wife and I are kid free and will unfortunately have to stay that way. Mid 30's, and I damn sure don't want to work until I'm 65. The only bills we have is our house note and day to day expenses. We vacation a lot.
- Other current investments A simple Fidelity Roth with about 20k in it. Rolled a 401k into it years ago. My current 401k is at 45k. I went 3 years without a 401k right at the start of my 30s. I need to catch up and I'm aware.
- Outlook of company stock growth. Let's just say it's a massive company that isn't going anywhere, but who was recently affected by 2 large lawsuits.
- Risk tolerance. I'm 35. I've seen Desert Storm, Monica Lewinsky, 9/11, war on terror, Columbia Explosion, Covid, 3 collapses of oil including once in the negatives, the Biden administration and now an attempt on a former president. What's life without risks?
- Do you need/want to have liquidity for near/mid term needs besides retirement. I have 50k liquid currently. Yes, it's too much, but I've also been laid off twice. Think we are good on the liquid side.
- Other current investments A simple Fidelity Roth with about 20k in it. Rolled a 401k into it years ago. My current 401k is at 45k. I went 3 years without a 401k right at the start of my 30s. I need to catch up and I'm aware.
- Outlook of company stock growth. Let's just say it's a massive company that isn't going anywhere, but who was recently affected by 2 large lawsuits.
- Risk tolerance. I'm 35. I've seen Desert Storm, Monica Lewinsky, 9/11, war on terror, Columbia Explosion, Covid, 3 collapses of oil including once in the negatives, the Biden administration and now an attempt on a former president. What's life without risks?
- Do you need/want to have liquidity for near/mid term needs besides retirement. I have 50k liquid currently. Yes, it's too much, but I've also been laid off twice. Think we are good on the liquid side.
Posted on 7/22/24 at 5:28 pm to BadatBourre
Ya'll hirin?
Posted on 7/22/24 at 7:45 pm to BadatBourre
I’d max out the company stock and 401k. Hard to turn down free money. You can do Roth after that.
Posted on 7/22/24 at 7:55 pm to Drizzt
Meh...My company matches 100% up to 8% in the 401k program.
Posted on 7/23/24 at 7:08 am to BadatBourre
quote:
• After-Tax Savings Account: You may choose to contribute 2-9% of your pay to this account each pay period on an after-tax basis.
Get a little more info here. If your plan has in-plan conversions, I would try to max this out as well. If they don't, I would pass on after tax contributions in a 401k due to the negative tax treatment. In plan conversions let you do a mega backdoor roth to convert all of that to a roth after you have already maxed out your limit (people view the limit as 23,500, but there is also an overall contribution limit of at least 69,000).
Posted on 7/23/24 at 8:47 am to BadatBourre
My standard reply to questions like this is:
1. Take full advantage of all the "free money" your employer is willing to give you. Max the 401k up to the employer match. Full participation in the ESPP. If you don't trust the stock, sell it after six months. It's a short term capital gain, but so what. You'd get a 10-15% minimum return each 6 months. Maybe ~25% annualized. Can't beat that. If it's a stock you can trust (Use this site to evaluate) keep it. I used to buy and sell our stock like that for years until I realized I was losing money in an era where the stock was below $20 (now $560). Learned our company's stock was considered one of the top S&P Growth stocks. Lesson learned.
2. Have a cash reserve for contingencies. Some say up to 6 month's expenses.
3. Use your hard-earned money to enjoy life while you have your health, be it travel or a toy you wanted. Life is really too short.
You'd get a million "where to put my money" responses here if you have excess to invest.
1. Take full advantage of all the "free money" your employer is willing to give you. Max the 401k up to the employer match. Full participation in the ESPP. If you don't trust the stock, sell it after six months. It's a short term capital gain, but so what. You'd get a 10-15% minimum return each 6 months. Maybe ~25% annualized. Can't beat that. If it's a stock you can trust (Use this site to evaluate) keep it. I used to buy and sell our stock like that for years until I realized I was losing money in an era where the stock was below $20 (now $560). Learned our company's stock was considered one of the top S&P Growth stocks. Lesson learned.
2. Have a cash reserve for contingencies. Some say up to 6 month's expenses.
3. Use your hard-earned money to enjoy life while you have your health, be it travel or a toy you wanted. Life is really too short.
You'd get a million "where to put my money" responses here if you have excess to invest.
Posted on 7/23/24 at 9:55 am to Drizzt
These were my thoughts as well. Just wanted to get a 2nd opinion.
Posted on 7/23/24 at 10:05 am to BadatBourre
Financial Order of Operations by the Money Guy. Look it up. It will answer most of your questions on what to do.
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