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But my money is still lower after taxes right due to the 401K contribution?
Not necessarily. You need to look at your tax implications. If you manage your deductions correctly, including your pre-tax contributions to a retirement account, you could drop into a lower tax bracket that could cause your net pay to increase. Or, it might stay the same or go lower, there are a lot of variables that depend on your particular situation.
Besides, if you don't want to depend on SS and end up scrimping and eating cat food when you get too old to work, you need to make some sacrifices *now*. Even if your net *is* lowered a bit, you can make it up by either finding ways to tighten your budget, or by doing something to make more money*** (or both).
Drop out of the mind-set of instant gratification, put amortization and compound interest to work in *your* favor, especially if your employer is offering a match- that's 'free' money (actually, it's part of your benefits package, and if you don't take it you're leaving it on the table to increase your employer's wealth, like walking away from an all-you-can-eat buffet and complaining that you are still hungry).
***(Some people have gotten this silly idea that they should be able to have everything they want just by working only 40 hours a week (or less in some cases). Life doesn't work that way, never has and never should. When I was younger, I was known to work 80 to 120 hours a week at times, working two or more jobs and taking overtime if possible.)
You should look into getting the book The Automatic Millionaire. One of the important concepts it has in there, is that it explains how to decide how you want to retire to determine what percentage of your current income needs to be invested in retirement. The best thing to do, is set the goal by having it done automatically and then learn to live on what is left over, doing that first before simply saying it can't be done and never saving a good portion for retirement.
Also good reads:
"The Millionaire Next Door"
and
"The Bank Book: How To Revoke Your Bank's License To Steal"
No, some people really are this dense. I work in the retirement investment field. Some employees think that a payroll deduction that goes into their own savings account (with a company match!) represents the employer trying to hurt them.
*Employers are required by law* to try to get employees to contribute to any 401(k) or savings plan that the employer happens to offer. (They are not required to offer a plan, but if they do, they have a responsibility to try to get everyone to participate.)
The money is not taxed until you take it out when you are age 59-1/2 or older, then it is taxed.
The Healthcare organization that I work for places 6% automatically into a 403B retirement account unless you opt out. They match it with 5% so for the 6% of my income that is coming out of my gross pay, tax free I will add, I am getting 11% invested into my 403B account. On top of that I am currently putting in an additional 6% for a total of 12% of my gross income into my account. My wife does the same. One of the reasons I jumped up to 12% was because we were told that each year our amount would increase until we were at the 10% amount.
My employer is not doing this out of the goodness of their heart or because they want to take money away from us. They are not trying to harm us in anyway. The reason for the switch to a "forced" retirement plan is that the Government is encouraging it. Why wouldn't they? Social Security is going broke. I prefer to use personal responsibility when it comes to these kind of things. For example next year we will increase our contribution to 14%. Our plan is to get to 20%.
Here is the thing. Does it matter how much you make? If you are making $10 an hour or $100 an hour and you put in 10% you are only putting in 10% of what you make. I would also say that it is easier for the lower income person to do it than the higher income person. The higher income person is being taxed to death. The lower income person hardly pays any tax. In addition the higher income person might hit a road block as their are limits to what you can invest. If you are younger than 50 I think and you are making $100 an hour or $208,000 a year you would be limited to less than 9% for a 401K or 403B. Someone may want to check those numbers but I think it is set at $18,500 limit for most workers.
the minimum amount required and set it up so all your raises go right to your 401k or in my case 403b. It's all pre tax and grows quickly....you'd be a fool and then some not to sign up.
I agree with Kim. Start with 1%. If you are paid that low, you won't even notice it.
Not necessarily. You need to look at your tax implications. If you manage your deductions correctly, including your pre-tax contributions to a retirement account, you could drop into a lower tax bracket that could cause your net pay to increase. Or, it might stay the same or go lower, there are a lot of variables that depend on your particular situation.
Besides, if you don't want to depend on SS and end up scrimping and eating cat food when you get too old to work, you need to make some sacrifices *now*. Even if your net *is* lowered a bit, you can make it up by either finding ways to tighten your budget, or by doing something to make more money*** (or both).
Drop out of the mind-set of instant gratification, put amortization and compound interest to work in *your* favor, especially if your employer is offering a match- that's 'free' money (actually, it's part of your benefits package, and if you don't take it you're leaving it on the table to increase your employer's wealth, like walking away from an all-you-can-eat buffet and complaining that you are still hungry).
***(Some people have gotten this silly idea that they should be able to have everything they want just by working only 40 hours a week (or less in some cases). Life doesn't work that way, never has and never should. When I was younger, I was known to work 80 to 120 hours a week at times, working two or more jobs and taking overtime if possible.)
Quit ordering pizza and eating out every Friday and there's your $25.
They also said u have to be here 5 years to roll it over to another job
Wonder why
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