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What is a reasonable % of my salary for 401k

Posted on 1/2/17 at 9:50 am
Posted by indytiger
baton rouge/indy
Member since Oct 2004
9823 posts
Posted on 1/2/17 at 9:50 am
Young single guy. No debt. 1 for 1 matching up to 7%.

Also, what other saving tips do you have for someone in my shoes starting my career?
Posted by lsumatt
Austin
Member since Feb 2005
12812 posts
Posted on 1/2/17 at 9:51 am to
Anything less than 7% is unreasonable.
Posted by tlsu15
Capital of Texas
Member since Aug 2011
10007 posts
Posted on 1/2/17 at 9:51 am to
Go for the 7%. It's an automatic 7% return on your investment, you won't find those odds anywhere else.

ETA: It's a 100% return on investment. I had a brain fart.
This post was edited on 1/3/17 at 11:56 am
Posted by iluvredboxx
Lafayette
Member since Mar 2012
899 posts
Posted on 1/2/17 at 9:52 am to
7%, take advantage of the "free money" match. If you don't, you will regret it later.
Posted by Costanza
Member since May 2011
3148 posts
Posted on 1/2/17 at 10:02 am to
Definitely do the 7%, then set up auto payments to a Roth. You can contribute $5,500 a year, and the tax benefits on your growth are amazing. After you've done the 7% and 5,500 a year, if you still have excess money, ratchet up your 401k to get to the annual contribution cap. I'm assuming with this advice you have no debt and an emergency fund.
Posted by indytiger
baton rouge/indy
Member since Oct 2004
9823 posts
Posted on 1/2/17 at 11:07 am to
Thanks folks, I was planning to do the 7%, but wasn't sure if I should put more in.

Also, my company has a pension too if that makes any difference.
Posted by Bow08tie
Louisiana
Member since Oct 2011
4220 posts
Posted on 1/2/17 at 11:18 am to
Minimum 15%
Posted by Jag_Warrior
Virginia
Member since May 2015
4079 posts
Posted on 1/2/17 at 11:45 am to
1 for 1 up to 7% and a pension?!

Start going to church and be thankful.

If that's a regular (non Roth) 401k, then throw as much as you can into a Roth IRA and you should be well balanced (tax wise) and set for life.
Posted by gpburdell
ATL
Member since Jun 2015
1419 posts
Posted on 1/2/17 at 1:28 pm to
General guideline

1) 401k to get full company match
2) Max Roth IRA
3) If 401k has low cost funds, max 401k
4) Max HSA if available
5) Taxable accounts

You should have an emergency fund that can cover 3-6 months of living expenses. If you don't, this should become #2 on the list.

Some people prefer the Roth 401k over traditional, but I'd rather get the tax deduction now. Who knows what tax rates/laws will be in 30 years.

If you can save 20% of your gross (including company match) then you should be on good track. Though just as important is what you actually do with your savings.

This post was edited on 1/5/17 at 4:16 pm
Posted by jimbeam
University of LSU
Member since Oct 2011
75703 posts
Posted on 1/2/17 at 1:39 pm to
This post needs to be required reading before posting on the Money board

Although HSA and 401k max could be flipped
This post was edited on 1/2/17 at 1:52 pm
Posted by lynxcat
Member since Jan 2008
24121 posts
Posted on 1/2/17 at 1:41 pm to
7%.

Free money at 100% match is an awesome plan.
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 1/2/17 at 1:43 pm to
quote:

1) 401k to get full company match
2) Max Roth
3) If 401k has low cost funds, max 401k


Someone explain this to me.
Posted by Mr. Elvert
Dallas
Member since Oct 2012
14974 posts
Posted on 1/2/17 at 1:46 pm to
7% is great as most places i think is 4%. Interesting that they do pensions as well. I thought 99.9% of companies had frozen/eliminated them
Posted by lynxcat
Member since Jan 2008
24121 posts
Posted on 1/2/17 at 1:46 pm to
I would flip HSA max and 401k max. Everyone has medical expenses and using pre tax money makes sense. 401k contributions are locked up for a long time.
Posted by geauxbears08
Houston, TX
Member since Jun 2011
223 posts
Posted on 1/2/17 at 1:51 pm to
Definitely agree. Plus HSA contributions are exempt from FICA. This is huge especially if you don't hit the SS cap.
Posted by lynxcat
Member since Jan 2008
24121 posts
Posted on 1/2/17 at 1:57 pm to
1) 401k match is free, risk free earnings. Always want to get the full amount offered by the employer.

2) Roth IRA allows up to $5500 of after tax to be contributed each year (unless you hit income phase out). This money can be withdrawn at retirement with earnings being tax free.

3) 401k contributions are pre-tax so they reduce taxable income and save for retirement. Some of these plans have high expense ratios which eat your returns so it can be better to use ETFs with lower expense ratios (generally, maxing makes sense because of the tax benefits).
Posted by GREENHEAD22
Member since Nov 2009
19580 posts
Posted on 1/2/17 at 2:16 pm to
Can I get a brief run down of a HSA?
Posted by Lee Chatelain
I love the OT!
Member since Oct 2008
11325 posts
Posted on 1/2/17 at 2:32 pm to
quote:

Young single guy. No debt. 1 for 1 matching up to 7%.


All that you can afford put in.
Posted by barry
Location, Location, Location
Member since Aug 2006
50337 posts
Posted on 1/2/17 at 2:50 pm to
quote:

2) Roth IRA allows up to $5500 of after tax to be contributed each year (unless you hit income phase out). This money can be withdrawn at retirement with earnings being tax free.



So is this ultimately nets you more money than

quote:

3) 401k contributions are pre-tax so they reduce taxable income and save for retirement. Some of these plans have high expense ratios which eat your returns so it can be better to use ETFs with lower expense ratios (generally, maxing makes sense because of the tax benefits).



I'm guessing it has a lot to do with your tax rate when you withdraw. I'd guess I'd need to do the models but my intuition just doesn't let me think that maxing our your 401k tax free and having it grow beats a Roth.

FWIW i have a straight index fund ETF for my 401k.
Posted by geauxbears08
Houston, TX
Member since Jun 2011
223 posts
Posted on 1/2/17 at 2:53 pm to
It's similar to an FSA but the money doesn't have to be used every year. Just like an FSA, HSA contributions are exempt from income taxes and also are exempt from SS and Medicare taxes - a combined 7.65% rate. The money is typically held in a sweep or cash fund until a minimum level is reached (mine is $2000). Anything above this minimum can be invested.

$3400 is the max contribution for 2017 for a single person. Family contribution limit is probably double. Mine is contributed via paycheck through my employer.

You do have to be enrolled in a high-deductible health insurance plan. There are specific limits and such to determine which plans qualify but I'm on my phone so I can't link anything (or don't know how). Google HSA qualifications and you should find a lot of info.

If you're young and healthy and don't expect major medical events (baby or whatever) this is a perfect way to store up some money that can be used for any medical purposes at any time in your life. Someone is going to have to change my diaper eventually and I suppose I'll have to pay them for the service.
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