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How much to put in 401K?
Posted on 8/9/18 at 11:35 am
Posted on 8/9/18 at 11:35 am
I am starting a new job and getting ready to sign up for a 401K. I am 36 years old and financially comfortable. No debts whatsoever. Home, truck all payed for. For the past 12 years, I have worked in state government and have a nice amount built up in that retirement system that I'm going to leave alone and not touch. You have to put in 4% for the company to match. So that's the bottom. I was thinking maybe 5-8%? I have always been weary of the stock market. I appreciate any advice.
14
Posted on 8/9/18 at 11:38 am to Allthatfades
Easy, as much as you can afford.
Max it out at $18,500 if you can.
Max it out at $18,500 if you can.
Posted on 8/9/18 at 11:41 am to Allthatfades
Is there a limit to how much the company will match? Say 6% or something. I’d at least hit that limit, not just the lower limit to start the match. And obviously max it if you can
Posted on 8/9/18 at 11:41 am to Allthatfades
You should put in at least 4% and ideally as much as you can.
The usually suggestion is to invest in a target date retirement fund. Google for more about what those are, but the idea is to invest more aggressively at first but as you get closer to retirement it backs off the gas pedal. So the fund might start off 85% in stocks, 10% in bonds and 5% in cash equivalents, but when you retire it might be 15% stocks, 70% bonds and 15% cash equiv.
FWIW there is no such thing as a risk-free investment so diversification is your friend. Target date retirement funds are probably what most people need.
The usually suggestion is to invest in a target date retirement fund. Google for more about what those are, but the idea is to invest more aggressively at first but as you get closer to retirement it backs off the gas pedal. So the fund might start off 85% in stocks, 10% in bonds and 5% in cash equivalents, but when you retire it might be 15% stocks, 70% bonds and 15% cash equiv.
FWIW there is no such thing as a risk-free investment so diversification is your friend. Target date retirement funds are probably what most people need.
Posted on 8/9/18 at 11:50 am to Allthatfades
$18,500
Posted on 8/9/18 at 11:59 am to Allthatfades
If you can afford it, I would contribute the maximum of $18,500 every year.
Posted on 8/9/18 at 11:59 am to Allthatfades
What does the company match up to?? If it's 6%, do at least 6%. If you can or want to contribute more see if you company offers a roth as well. If not, look to get a roth outside of work with the added amount you want to contribute.
This post was edited on 8/9/18 at 3:50 pm
Posted on 8/9/18 at 12:41 pm to glaceau
quote:
Easy, as much as you can afford.
Max it out at $18,500 if you can.
Posted on 8/9/18 at 12:46 pm to Allthatfades
Enough to get max company match then fund Roth IRAs (you and spouse if married) then max 401k up to $18500.
Obviously this is generic and depends on expected tax bwrckets now/later. Either way it's nice to have pre/post tax options to have withdrawal options and minimize tax liability later.
Obviously this is generic and depends on expected tax bwrckets now/later. Either way it's nice to have pre/post tax options to have withdrawal options and minimize tax liability later.
Posted on 8/9/18 at 1:05 pm to Azazello
quote:
maximum of $18,500 every year
The max allowed is much less for highly compensated employees.
This post was edited on 8/9/18 at 1:07 pm
Posted on 8/9/18 at 1:05 pm to Allthatfades
Always put in enough to get 100% of the company match, at least.
Posted on 8/9/18 at 1:12 pm to Allthatfades
everyone is different but what I practice and preach is to put 15% of your gross paycheck into some form of retirement from the time you start your first job out of college. It isn't an absolute rule for everyone.
The only way to know what works is to make some choices:
1) What age do you want to retire?
2) How do you define retirement?
3) What will your standard of living be in retirement?
4) Do you want use up your retirement while you are living, do you want to pass on something to family or do you just want to live off the earnings/interest in retirement so the entire nest egg gets passed on?
Once you make those choices, the numbers should be fairly easy for you.
The only way to know what works is to make some choices:
1) What age do you want to retire?
2) How do you define retirement?
3) What will your standard of living be in retirement?
4) Do you want use up your retirement while you are living, do you want to pass on something to family or do you just want to live off the earnings/interest in retirement so the entire nest egg gets passed on?
Once you make those choices, the numbers should be fairly easy for you.
Posted on 8/9/18 at 3:20 pm to weagle99
quote:
The max allowed is much less for highly compensated employees.
The limit is the same for everyone at $18,500 (assuming you are under 50). You are getting dinged as a highly comped employee probably because you have a low participating rate among the rank and file and they are limiting your contribution to equalize the benefit of the plan.
Not sure what your match structure is, but you should talk to your employer about switching to a safe harbor plan. It eliminates the HCE testing so you won't be penalized.
I haven't been involved in 401k's for some time but we would almost always recommend the safe harbor route to avoid the discrimination testing like HCE. We would have clients that weren't making serious money but were HCE because they were in the top 20%.
Posted on 8/9/18 at 3:34 pm to BamaAlum02
I hate the HCE test with a passion. Why am I getting dinged because someone else didn't feel the need to contribute to the plan? 
Posted on 8/9/18 at 4:54 pm to Allthatfades
match the company match
max out a roth ira at 5,500/ year
then get back to your 401k
max out a roth ira at 5,500/ year
then get back to your 401k
Posted on 8/9/18 at 4:55 pm to foshizzle
quote:
I hate the HCE test with a passion. Why am I getting dinged because someone else didn't feel the need to contribute to the plan?
In plans where this happens its usually a small business. They should entertain a safe harbor plan because it's probably hurting the owners too.
Posted on 8/9/18 at 6:17 pm to Allthatfades
If you have no car payment or mortgage payment I'd put as much as you can
Don't know what your income is but I wouldn't put less than 15% in that situation
Don't know what your income is but I wouldn't put less than 15% in that situation
Posted on 8/9/18 at 6:20 pm to BamaAlum02
quote:
The limit is the same for everyone at $18,500 (assuming you are under 50). You are getting dinged as a highly comped employee probably because you have a low participating rate among the rank and file and they are limiting your contribution to equalize the benefit of the plan.
That happened with me in 2015
Got a partial refund of about 2K
Don't know if they've been encouraging more people to sign up but I put in over 15K in 2017 and haven't been dinged for it
Posted on 8/9/18 at 6:38 pm to BamaAlum02
Yes, I am limited to 8% pretax I think?
But I am transitioning over to all after tax 401k contributions with rollover into a Roth, so I guess the limit will affect me less and less until zero.
But I am transitioning over to all after tax 401k contributions with rollover into a Roth, so I guess the limit will affect me less and less until zero.
This post was edited on 8/9/18 at 6:57 pm
Posted on 8/9/18 at 6:43 pm to foshizzle
quote:
Why am I getting dinged because someone else didn't feel the need to contribute to the plan?
Exactly this. I was scrambling early in the year to adjust my strategy.
But I wanted to tax diversify so I am moving over to 100% after tax 401 into a Roth.
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