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Old 11-02-2018, 02:54 PM
Status: "Loving life, wife and job!" (set 13 days ago)
 
Location: USA
1,000 posts, read 388,231 times
Reputation: 2720

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Quote:
Originally Posted by ddm2k View Post
If you contribute 1%, they'll give 0.8%, plus an extra 3% of your base pay just because
If you contribute 2%, they'll give 1.6%, plus an extra 3% of your base pay just because
If you contribute 3%, they'll give 2.4%, plus an extra 3% of your base pay just because
If you contribute 4%, they'll give 3.2%, plus an extra 3% of your base pay just because
If you contribute 5%, they'll give 4.0%, plus an extra 3% of your base pay just because
That's a lot of "free money" or "instant return" on your contributions. I recognized that early in my career also and while I never came close to the max, I took a few risks and made up the difference. You can't count on having the same luck. Save as much as you can...even to the point of pain. This isn't a sprint - it's a marathon. For the first few years, it'll grow fairly slowly and then, one day, you'll check your account and be overjoyed at the total.
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Old 11-02-2018, 10:12 PM
 
6,975 posts, read 3,875,045 times
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The best investment you can make is OPM - "Other People's Money." Put 5% in the 401K and you're getting $2160 of other people money plus the $1620 they're going to give you anyway for a total of $3780 in free cash but there's a hook - you're going to pay interest on it when the day comes that you take it out.

Next, I'm in the Roth IRA camp that says take the other $5400 you're investing and put it in a Roth. Yep, you'll pay taxes on it now but you'll never pay taxes on whatever it grows into over the next forty or fifty years. With limitations you can also dip into that Roth IRA to pay for a first house or education purposes without penalties.
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Old 11-02-2018, 11:02 PM
 
Location: NYC
2,916 posts, read 1,591,544 times
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Fresh out of college?

Just put at least $2K/yr in a S&P500 or Whole Market index fund for the next 10 years, never withdraw any money from it for any reason no matter what. After that 10 years you can focus more on other financial priorities because even if you never put any money into your retirement account again, by the time you reach 66yo you will have $1 million or so in it.

The magic element here is time & it's effect on compounding profits. You'll make more $$ as you go on but you will never have that extra 10 years of compounding growth again. Most of us aren't smart enough to have started this early.

Your reality is that you will probably need $2 million or more in 45 years so stick with at least this contribution early on but add more when feasible. I'm also a fan of the Roth because the compounded profits will never be taxed plus I believe that the government may eliminate the Roth at some point in its effort to increase tax revenue so get in while it is still around.
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Old 11-03-2018, 12:42 AM
 
Location: PA
33 posts, read 8,500 times
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Quote:
Originally Posted by Petunia 100 View Post
How much you make is irrelevant; it's all about percentage saved/spent.

Yes, it takes about 4 decades of consistently salting away 15% to retire to the same standard of living you had while working.

Spend some time to choose a reasonable asset allocation plan for your invested money and keep costs as low as you can. Give your nest egg its best opportunity to grow for you.
From what I understand, if inflation hits the markets, the markets rise at an equal amount meaning you keep the value/wealth that you placed into the market. If a share cost 19 bucks now and by the time you retire inflation cause that share to go to 120. Well that share still holds the same value.

Donít be scared of corrections, devaluations or inflation bc the market moves naturally. Just keep up the saving for retirement!
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Old 11-03-2018, 04:54 AM
 
71,697 posts, read 71,801,099 times
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it depends how bad inflation is as to whether markets keep pace .in the 1970's and even 2000 they lost ground to inflation

red and pinks means they lost ground . these are inflation adjusted returns

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Old 11-03-2018, 09:09 AM
 
8,860 posts, read 5,141,353 times
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Quote:
Originally Posted by kokonutty View Post
With limitations you can also dip into that Roth IRA to pay for a first house or education purposes without penalties.

This applies to traditional IRAs. Roth IRA contributions (not growth) are available to you at any time for any reason , no tax or penalty.

Last edited by Petunia 100; 11-03-2018 at 09:36 AM.. Reason: Typo
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Old 11-03-2018, 09:30 AM
 
738 posts, read 535,371 times
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If you are young and expect your earnings to increase, Roth is a good way to go because you will be taxed at the lower income level when you make your contributions. Some people (me) are taxed at a high level in retirement due to the lifestyle they maintain in later years vs earlier (struggling) years. Better to be taxed when it goes it then when you take it out.
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Old 11-03-2018, 09:35 AM
 
8,860 posts, read 5,141,353 times
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Quote:
Originally Posted by Inquiringmind33 View Post
From what I understand, if inflation hits the markets, the markets rise at an equal amount meaning you keep the value/wealth that you placed into the market. If a share cost 19 bucks now and by the time you retire inflation cause that share to go to 120. Well that share still holds the same value.

Donít be scared of corrections, devaluations or inflation bc the market moves naturally. Just keep up the saving for retirement!
Did you intend to quote my post about one million turning into 500k over 36 years at 2% inflation. 333k at 3% inflation? I think you must have, because the post you did quote had nothing to do with inflation. Please correct me if this is not the case.

Indeed, no one should "be scared" of market movements. But you also should not kid yourself. If you are calculating the future value of $X per year, compounding at Y% for Z years, the answer to your math question is given in absolute dollars, not inflated dollars.

One million dollars was once a sum which made a person wealthy. Today, 40k per year (annual income 1 million provides using the 4% safe withdrawal rate) no longer makes a person wealthy. In another 36 years, 40k per year may be below the poverty line.
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Old 11-03-2018, 09:37 AM
 
Location: The Ozone Layer, apparently...
1,906 posts, read 676,218 times
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Perhaps my post would not be helpful. It's not exactly like what you are wanting to do, but here it is for what it may be worth.

When I first started my current job, at almost 40, was when I could invest in any employer based programs for the first time in my life. They had a couple. Well 3 if you take into account that I could opt out of SS for some reason. I didn't opt out of SS. I did immediately sign up for their Pension Plan.

Two years later I signed up for the 403b that they sponsored (tax deferred annuity). There was matching for the Pension Plan but not for the 403b. I started with 2%. It was all I could afford at that time, and I wouldn't have attempted it except for the built in income tax offset. Each time we got a raise, I increased the amount of my contribution. Hoping to retire within 1 to 3 years from now (several years before I can hope to start receiving SS) my contribution is now at 17%, and could rise to 20% or more depending on how things settle down to be for cost of living etc.

So, we have covered current payroll tax/income tax offsets (which you will not get with a 401K as you are paying the tax now. Paying the tax now is not a bad thing, but you might want to check out any tax deferred options your company may also offer if having an offset now would be of benefit to you.)

After my TDA got hit with one stock market crash, I rolled everything into its GIA (guaranteed interest [3% minimum] account), and although it doesn't earn very much, it didn't lose anything when the second crash came. After that crash, I chose new allotments in the high risk stocks of the portfolio while leaving the principal where it sat.

Current analysts are predicting a third crash anytime between now and 2020. This is not based on problems, but on the fact we have been in a Bull Market for quite a while now, and we have an election year coming up. Who wins can signal a crash. Now, my portfolio grew quite a bit this past year - practically doubled, and just to remain as conservative of an investor as I think I am, I rolled almost half of those earnings into my GIA, which now holds 63% of my TDA's value.

Since we had no crash yet, I left money on my varied stock - growth, value and blend investments, and still have 5% going into those risky investments, while 55% of my contributions are going directly to the GIA.

If I had been a high earner all along, I would have done the TDA - exactly as I have, but also done a Roth IRA to balance withdrawals when I do retire. Like, say I decide I need $800.00 a month when I retire. I monthy withdraw $400 from the TDA which I will have to pay tax on & the other $400 from the after-tax Roth IRA lowering my tax liability IN retirement. As it stands, I will pay tax on the whole $800 when I withdraw it.

As for your title question, I would put enough to maximize the employer's matching, provided I don't need that money to live on. Anything over that is up to you and what benefits you can glean from it.

Last edited by ComeCloser; 11-03-2018 at 10:02 AM..
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Old 11-03-2018, 11:10 AM
 
6,975 posts, read 3,875,045 times
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Quote:
Originally Posted by Petunia 100 View Post
This applies to traditional IRAs. Roth IRA contributions (not growth) are available to you at any time for any reason , no tax or penalty.
Not exactly. You can withdraw your contributions but any appreciation that you take out early will be taxed and penalized except for first house buying and education.
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