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I am 28 years old and want to retire by 60 if possible. I make $50k annually and my new employer will vest 2% for the first year (will increase to 15% by my second year here). I have about $6k in my former employers 401k (not sure if I will rollover yet), another $6k in a IRA and $15k in personal savings.
I was thinking about investing 18% of my income for a total of 20% with my employer match. Does that seem like enough? How much would you invest?
When you vesting, do you really mean they will only give you 2% of your income allocated to your 401k after 1 year? Or do you mean they will match it? Assuming they are matching 2% at 100%, I would just put the 2% in and open up a Roth IRA. You have a very modest income at the moment and you will most certainly end up paying more taxes on that money down the road. By opening an IRA, you are taking the tax hit now so you don't have to later.
I would only contribute as much as my employer matches. How much do they match? After that, as Cheese said, max out an IRA, then if you can afford to invest more, start to consider other options.
The total amount of what your employer will vest (at least try for $5,000), and set up an IRA with money not invested in your 401K. If you get married in the future, invest 80% of whoever has the lower paycheck while not running up credit bills. In 20 years (if the government limits the messes they make in our lives) you should be sitting in a comfortable spot to adjust your saving and spending for your next 30 years.
I would only contribute as much as my employer matches. How much do they match? After that, as Cheese said, max out an IRA, then if you can afford to invest more, start to consider other options.
I'm assuming you mean a Roth-IRA? an IRA and a 401k are essentially the same thing as far as tax benefits go.
To OP, unless your investments make around 8-9% on average per year, it will be very difficult to retire by 60 with a 10k start and saving only 20% of your gross. Assuming 6% return on average on 20% of 50k you are looking at around 1 million at 60. To live 25 years off of 1 million (which is really probably closer to 700k in today's dollars) will be very tough. I am your age and by the time we retire I think 2 million will be the equivalent to 2002's 1 million.
I have 120k in retirement, investments, etc. and we put around 20k a year away and I still don't see me retiring until around 65.
I'm assuming you mean a Roth-IRA? an IRA and a 401k are essentially the same thing as far as tax benefits go.
To OP, unless your investments make around 8-9% on average per year, it will be very difficult to retire by 60 with a 10k start and saving only 20% of your gross. Assuming 6% return on average on 20% of 50k you are looking at around 1 million at 60. To live 25 years off of 1 million (which is really probably closer to 700k in today's dollars) will be very tough. I am your age and by the time we retire I think 2 million will be the equivalent to 2002's 1 million.
I have 120k in retirement, investments, etc. and we put around 20k a year away and I still don't see me retiring until around 65.
That is definitely what I meant. Thanks for clarifying for me.
More often than not you have more flexibility on where you can invest with an IRA over a 401k, so there are often benefits beyond just taxes.
I would only contribute as much as my employer matches. How much do they match? After that, as Cheese said, max out an IRA, then if you can afford to invest more, start to consider other options.
To clarify, they match only 2% now and will increase after I've worked here for a year.
When you vesting, do you really mean they will only give you 2% of your income allocated to your 401k after 1 year? Or do you mean they will match it? Assuming they are matching 2% at 100%, I would just put the 2% in and open up a Roth IRA. You have a very modest income at the moment and you will most certainly end up paying more taxes on that money down the road. By opening an IRA, you are taking the tax hit now so you don't have to later.
Sorry, they will match 2% of my investment for my first year here.
Quote:
Originally Posted by mizzourah2006
I'm assuming you mean a Roth-IRA? an IRA and a 401k are essentially the same thing as far as tax benefits go.
Yup, sorry again. I have a Roth IRA (I'm fairly new to the world of investments).
You have a good income and time on your side. You can easily retire by 60, but it has to be a real goal that you work towards and not just a 20% you set aside each month. Your primary focus should be cutting your expnenses and pocketing the savings towards retirement. If you can get to a 50% savings level, then in theory you can retire in less than 20 years since by that time you'll be making enough on interest to cover annual living expenses.
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