Question about where to put money!

[Shelly888]

I'm not sure what to do!! I am currently employed, and although late in the game, started a 401K plan. Currently I have 6% of my salary being saved. My employer does not match at all. Well, that isn't completely true, it's worded that they 'can' or 'can not' depending on their economic status. Of course they made billions last year, and didn't match. I am fully vested, but that does not really mean anything if they don't match right?!

I guess I am wondering if it makes most financial sense to keep putting in 6%? SHould I put in more? Should I put in less? If I put in less, where should I put the rest? Thanks for any insight.

 

[timmac]

I'm not sure what to do!! I am currently employed, and although late in the game, started a 401K plan. Currently I have 6% of my salary being saved. My employer does not match at all. Well, that isn't completely true, it's worded that they 'can' or 'can not' depending on their economic status. Of course they made billions last year, and didn't match. I am fully vested, but that does not really mean anything if they don't match right?!

I guess I am wondering if it makes most financial sense to keep putting in 6%? SHould I put in more? Should I put in less? If I put in less, where should I put the rest? Thanks for any insight.

This is a very complicated question, and depends on a lot of factors. Can you "afford" to have more taken from your check without causing financial issues on a day to day basis? Are you putting aside any money from each paycheck towards a typical savings account, outside of your 401k? How old are you? How much retirement savings do you already have?

I don't necessarily expect you to answer all these questions in an open forum, but they're what you need to be thinking about. If possible, I'd say more into your 401k is usually a decent way to go, though, given no other details.

 

[ilovemk76]

I'm not sure what to do!! I am currently employed, and although late in the game, started a 401K plan. Currently I have 6% of my salary being saved. My employer does not match at all. Well, that isn't completely true, it's worded that they 'can' or 'can not' depending on their economic status. Of course they made billions last year, and didn't match. I am fully vested, but that does not really mean anything if they don't match right?!

I guess I am wondering if it makes most financial sense to keep putting in 6%? SHould I put in more? Should I put in less? If I put in less, where should I put the rest? Thanks for any insight.

The easy answer is that 6% will not be enough to fund your own retirement. Depending on your age right now that number is 10% for a 20 year old, about 15% for a 30 year old, around 20% for a 40 year old and 30% or more for a 50 year old.

 

[RitaE]

Your children are fairly young - what age are you that you consider this "late in the game?"

I suspect more is the answer and I'd check into seeing if you or your husband qualify to contribute to some sort of Roth IRA.

 

[punkin]

The easy answer is that 6% will not be enough to fund your own retirement. Depending on your age right now that number is 10% for a 20 year old, about 15% for a 30 year old, around 20% for a 40 year old and 30% or more for a 50 year old.

I read an article recently (OK, I skimmed it only) about a study that found if you put in 16.6% of your salary, you will have enough to retire on regardless of market fluctuations.

 

[Shelly888]

I am 37, DH is 36. I cringe and cry knowing even if I had put 3% away thought he years it would have been better than nothing! We could have afforded it, but we were really tight as it was, neither of us made good money, and my family especially is very materialistic. It was hard to live side by side with them seeing all of their stuff. Of course I get it now.

I am in a position to put more away. It is all so daunting, education funds for kids, vacation funds, etc.

We have 2 homes, one is rented and covers everything. The other we occupy. We have a very nice chunk for living expenses should something happen. I also know that one or all of us could be gone tomorrow, so while I do want to plan for tomorrow, I also want to have some fun today.

Not sure if that is enough to help you help me?

 

[KennesawNemo]

We talked to a financial advisor at DH's work place earlier this year. His suggestions for using 'extra money' are:

1.Establish an emergency fun, 6 month of income.
2.If you have consumer debt, pay it off first.
3. Contribute 15% of your total income to retirement, employer match does not count. I don't agree with the red part though.
4.Saving for college.
5.Pay extra principal for your mortegage.
6.Invest in stock, property and etc.

 

[Karenj2]

Well, here's my personal example. I'm 38, and have been putting money into my 401k since I started (at 23), with a 1.5 year break when I was unemployed. I've been putting 10% away that whole time. When I worked at my one company (from 1997-2004) they matched 100% up to 10%. In my new company, they used to match, but don't now.

There are calculators to help you figure out how much you should be putting in - here's one: http://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx

IMHO, you should be putting in more. As long as you won't struggle right now, it's always better to save for the future. The way this country is going right now, I don't plan on depending on SS to even be available when I retire. If it is, great - that'll be my fun money.

 

[punkin]

We talked to a financial advisor at DH's work place earlier this year. His suggestions for using 'extra money' are:

1.Establish an emergency fun, 6 month of income.
2.If you have consumer debt, pay it off first.
3. Contribute 15% of your total income to retirement, employer match does not count. I don't agree with the red part though.
4.Saving for college.
5.Pay extra principal for your mortegage.
6.Invest in stock, property and etc.

This is pretty good, but I would change the 6 months of income in #1 to 12 months of EXPENSES. I would switch #1 with #2. There is no reason to pay double digit interest while earning 1%. I agree employer match should count.

 

[Jeff_G]

We talked to a financial advisor at DH's work place earlier this year. His suggestions for using 'extra money' are:

1.Establish an emergency fun, 6 month of income.
2.If you have consumer debt, pay it off first.
3. Contribute 15% of your total income to retirement, employer match does not count. I don't agree with the red part though.
4.Saving for college.
5.Pay extra principal for your mortegage.
6.Invest in stock, property and etc.

I would do this a little different,

1. Get $1,000 for a baby emergency fund
2. Pay off ALL debt except the mortgage
3. Fully fund your emergency fund with 6 months of expenses
4. Save for retirement upto 15%
5. Save for Kids college
6. Pay off the house
7. Invest


You should save for retirement before paying off the mortgage because of compounding interest over time and you need an income even with a paid off house when you retire.

As to the OP original question if the employer is not going to match, then I would need to take a hard long look at their 401K, would you be better off with an IRA ie can you get a better investment elsewhere. If you can afford to pay the taxes now I would look into a Roth IRA, which you fund with after tax dollars and the earning and tax free when you retire. Look for investment you understand! Do not invest in anything you don’t understand and I would look to mutual funds vs a single stock. Mutual funds are a grouping of several hundred stocks and are safer than a single stock. If one company does poorly it doesn’t wipe out all your savings. Invest for the long term 20 to 30 years out, the market will go down, that is when stocks are on sale over the long term it should make you money. Watch out for fees, there is some research showing that many mutual funds do not out perform their targeted index so you might just be better off in an index fund ie S&P500 or Dow Joes. But again you need to research all of this and fully understand what the risks are before you give any of your money to anyone. Don’t put money in something because your advisor or brother n laws third cousin’s friend says it’s a good deal…