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I'm 25 years old. My Gross income is $70,000. My monthly expense is $1000. I don't have any other expenses.
I invest 5% in standard 401k and 1% in Roth IRA. Company matches 50% on 6% eligible pay on standard 401k.
I save around 3000 per month.
Do you think I should be contributing more to my 401k?? If soo, How much do you think I should contribute?
Is there any other way I should be investing the money that I save every month??
Last edited by NorthJerseyNJ; 12-08-2016 at 02:31 PM..
What are you holding in your 401k and Roth IRA? It's hard to give recommendations without knowing precisely what you are currently investing in.
Also, how much cash (or cash equivalent, such as CDs) saving do you already have? If your cash savings are adequate, it may be time to save less and invest more.
I have enough money in my savings.. I don't have a lot in my 401k.
How much do you think I should contribute???
Max out your Roth IRA first (for 2017 that's a total of $5,500), if you are not already doing so; since in a real pinch the contributions (but NOT any gains) can be withdrawn without penalty, it can serve to supplement your emergency fund. And it's good to go into retirement with as much money as possible in an account that does not require mandatory yearly withdrawals, as it gives you more flexibility.
After that I'd put as much as you can afford into your 401k (assuming your investment choices there are decent). If possible, max it out (that would be $18,000 for 2017).
Also, are you saving anything toward a house down payment, or a replacement car for when your current one gives out? Having a specific account set aside specifically to save for such long-term goals is a good idea.
Quote:
Any other ways I can invest??
You've told us you're putting money into a Roth IRA and a 401k, but that's not telling us much, as those are tax shelters, not investments. For all we know, you have the money in those sitting in a money market account earning nothing. What SPECIFICALLY are you buying when you put your money into your Roth IRA and 401k? If you don't know, figuring that out should be your first order of business!
In general, I'd recommend investing in the following: a low-cost indexed US stock mutual fund that either follows the broad market or the S&P 500, a small cap low cost indexed mutual fund, a foreign stock indexed mutual fund, some real estate (either rental properties, or an REIT fund if like me you have no desire to be a landlord), and perhaps 10% of your money into either individual bonds (concentrating mostly on Treasuries and municipal bonds) or a bond fund.
If you have enough savings, I would just invest as much as you can afford in both your Roth IRA and 401k
You should absolutely (!) maximize your free money (Company match) and contribute the max amount to your Roth IRA ($5500 a year) ... if there is more, put it into the 401k with no company match.
So $4200 into 401k gets you a $6300 contribution
$5500 into Roth IRA
You're young.. Maxing a Roth IRA is a great idea so is getting the most out of company match. You should consider long term real estate investing. Do 6 months of research and decide if its something you'd be interested in. Lets say you get 5 properties over the next 3 years. They'd all be paid off by the time you're 58 and you'll have 5 property giving you full rents with no mortgage. Pretty much guaranteed money for the rest of your retirement.. something to consider.
With the time value of money, putting away as much as you can now will net out a far better return down the road vs waiting and putting away more then.
If you invested $5000/year for 10 years and then never put anything away after that, you would have more money at retirement than you would if you waited 10 years and then put that same $5000 away for 20+ years.
Open up a brokerage account. You are in the accumulation phase. Max out 401k. Max out Roth IRA. If you have enough in savings put everything else in a brokerage. You don't have to buy anything right now if you don't want to, but what you need is money in the accounts.
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I was once age 25 and had money (savings) to burn, so... max out company contributions, and get into WEALTH building (hint: that is NOT wage income)
Real Estate, Businesses, collectables, investments... Pick your favorite and dive in!
Your job / savings will never (or very, very, SLOWLY) get you to 'critical mass'. (capability to 'self-support' ).
Families, marriage, parents, bad decisions, insurance (or lack), health... all can torpedo your plans.
Keep busy, be a strategic investor and saver.
(I bought my first home at age 19, but it was essential, as I was caregiver for a disabled parent (till I was age 50)) 'critical mass / retired at age 49 (cuz I was tired!) 30+ properties brought evidence that I owed my wealth to Real Estate, and not my wage income (hourly worker, no spousal / extra earnings).
Company Stock helped fuel my Real Estate investments, and establish a 'family foundation' in my 30's (gifting into perpetuity).
YMMV, find what you enjoy, are good at, and can make money managing.
1. Keep enough emergency cash to cover 6 months living expenses, a new car down payment, etc.
2. Boost your 401k contributions to 10%.
3. Save up for a down payment on a house. If you do not plan on buying a house, then start a new investment account and put your excess cash into the markets.
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