Post by notsocreepylurker on May 29, 2015 9:07:55 GMT -5
What should I invest in with my 401K? I am almost 40, single, just a kitty, currently contributing 18%, company matches 75% up to 6% I believe. Should I move things around?
They're in the prospectus but you can google it as well. Google is usually quicker if you know the fund's stock symbol.
ETA: There are a lot of funds and ETFs with similar or even the same name so they're kind of hard to research if you don't know the exact one you're talking about.
Do you see the "smart retirement" funds with various years after them? Those are target retirement funds. So pick the year that you are going to retire and move everything from your Goldman Sachs Governnment Fund to a target fund. By the look of it, that government fund is just a money market account with very little growth.
They're in the prospectus but you can google it as well. Google is usually quicker if you know the fund's stock symbol.
ETA: There are a lot of funds and ETFs with similar or even the same name so they're kind of hard to research if you don't know the exact one you're talking about.
I should say that doing this will give you a general idea but might not tell you exactly what you're paying since IIRC plan providers often negotiate fees. Ask HR who you need to talk to to get the relevant info regarding the funds you have available to you.
Yeah the beauty of those target date funds is that they're already perfectly diversified for you. If you split your money, say half in a target date fund and half in other things, you're sort of negating the baked in balance of what the target fund is all about. You're diluting it, so to speak. If you don't want undue risk, and you don't want to do all the research and active management yourself, then I'd go with a target date fund.
Yeah the beauty of those target date funds is that they're already perfectly diversified for you. If you split your money, say half in a target date fund and half in other things, you're sort of negating the baked in balance of what the target fund is all about. You're diluting it, so to speak. If you don't want undue risk, and you don't want to do all the research and active management yourself, then I'd go with a target date fund.
It makes me so nervous to put 100% of my money into one target date fund, though.
Maybe I'm just crazy, but my Roth IRA is split between the 2045 and the 2050 fund. I figure I will retire in 2047 or 2048 anyway so I split it.
If I wasn't splitting it between two funds, i still wouldn't put 100% of my money into one fund. I know that goes against the advice/material but I can't shake that nervousness.
Yeah the beauty of those target date funds is that they're already perfectly diversified for you. If you split your money, say half in a target date fund and half in other things, you're sort of negating the baked in balance of what the target fund is all about. You're diluting it, so to speak. If you don't want undue risk, and you don't want to do all the research and active management yourself, then I'd go with a target date fund.
It makes me so nervous to put 100% of my money into one target date fund, though.
Maybe I'm just crazy, but my Roth IRA is split between the 2045 and the 2050 fund. I figure I will retire in 2047 or 2048 anyway so I split it.
If I wasn't splitting it between two funds, i still wouldn't put 100% of my money into one fund. I know that goes against the advice/material but I can't shake that nervousness.
You and me both. Plus I can't shake my love for a good dividend fund. At least some guarenteed returns multiple times annually? Yes please.
For Vanguard, the target date retirement funds are good. If you want to be a little more risky/aggressive, invest in a fund at a later date. Like right now, you're target retirement date is 2040, but if you put money in 2045, the mix will be more stocks right now, which can get you a bigger return, but is also riskier.
The Vanguard Total Stock Market Index Fund is the second fund I would invest in, which is a really large mix of stocks, so it has the potential for good returns, but because it's so well mixed and so large (TONS of people invest in this), the chances of a few badly performing stocks tanking it are virtually non-existent. (Of course, the whole stock market can go down, but it always goes back up...)
Also, is the whole 18% JUST in your 401k? Is that just your investment or do you have a company match? If you have a match, are you including that in your 18% calculation? If possible, diversify with a Roth IRA. It's post tax income and it grows tax free and withdrawals are tax free, so you won't have to pay taxes on Roth IRA income when you are retired, unlike 401k income (which is pre-tax and grows tax-free, but you have to pay income tax on it when you withdraw it). If you don't have a Roth IRA, scale back your 401k contributions and start putting money into one on a monthly basis. You can contribute $5500/year. From what you've said, that's about 9% of your yearly income, so the other 9% can still be put in a 401k. Just make sure, if you're getting a match, that you invest enough in your 401k to get the full match.
Oh, and Roth IRAs are really easy to set up through Vanguard.
It makes me so nervous to put 100% of my money into one target date fund, though.
Maybe I'm just crazy, but my Roth IRA is split between the 2045 and the 2050 fund. I figure I will retire in 2047 or 2048 anyway so I split it.
If I wasn't splitting it between two funds, i still wouldn't put 100% of my money into one fund. I know that goes against the advice/material but I can't shake that nervousness.
You and me both. Plus I can't shake my love for a good dividend fund. At least some guarenteed returns multiple times annually? Yes please.
Yeah, I get that. I'd understand the fear more if it were Joe's Retirement Shack Target Fund, inception 2014, or something, and the "fund" were invested in a total of 3 stocks. But those funds are comprised of lots and lots of different things, so it's not like my guy from the other thread who put all his 401k money into one individual company stock.
Thanks everyone. I moved some money to the 2040 fund since I will be 65 then.
Please be sure you have $0 left in that money market fund!!!
ETA: You shouldn't be 100% in stocks, but you can diversify by putting some stuff in a bond fund. Personally I would have just dumped all $57K from that money market into the target fund.
Thanks everyone. I moved some money to the 2040 fund since I will be 65 then.
Please be sure you have $0 left in that money market fund!!!
ETA: You shouldn't be 100% in stocks, but you can diversify by putting some stuff in a bond fund. Personally I would have just dumped all $57K from that money market into the target fund.
That is what I did - moved the 57K to the 2040 fund and changed the 75% going to the govt fund to the 2040 instead. So right now I am 75% to the 2040 account and 5% to 2 Aggressive Growth and 3 Growth funds.
Although now it sounds like I should lower my 401K and start a Roth IRA. But I am worried this would make me owe taxes at the end of the year because the 401K is pre-tax and Roth is after tax right? I do live paycheck to paycheck pretty much right now.
My company matches I believe it is 75% up to 6%. So my last paycheck, I put $432.53 in and my company put $100.92 in.
If you can afford to do a Roth IRA, I would definitely recommend it. The thinking is that it's better to be taxed now while tax rates are so low, than to be taxed at retirement when they're probably (most likely) be much higher. However you should always contribute to your 401k first so you get the full match. Do they match 75% of your contribution up to a total of 6% of your salary, or do they match 75% of what you contribute up to you contributing 6%? The difference would be in the first scenario you would need to contribute 8% to get the full match, and in the 2nd you would need to contribute 6% to get the full match.
Ok so I can do a Roth 401K with my company - so I should do 9% there?
If you're worried about paying more in taxes now the Roth 401k seems like a much better way to go. It's funded with after tax dollars but unlike a Roth IRA it's done through your payroll department so the end result is (*I think* I don't have an employer sponsored retirement plan so someone please correct me on this if I am wrong) less money going into your account on the front end because payroll takes the taxes out of your contribution. Because of this, contributing to one shouldn't Whereas if you were to turn around and put money into a Roth IRA you'd be on the hook to pay whatever the tax is on your contribution.
So if you want tax free growth without having to worry about finding more money to pay taxes on your contributions now I would think that the Roth 401k would be the way to go.
Can you get your employer match into the Roth 401k instead of the traditional?
I believe this is against the rules. I think all employer matches must go into traditional. I know neither DH nor I have that option, and I looked it up a while back, and I think that's what I remember. I think it would have to count as income then with all sorts of extra taxes (SS, Medicare, income), so I would guess that's why?
That's kind of what I thought and am wondering how it works logistically if you have one. Does the employer match go into a different account? Do you just have to keep track of what gains can be attributed to the employer contribution?
I believe this is against the rules. I think all employer matches must go into traditional. I know neither DH nor I have that option, and I looked it up a while back, and I think that's what I remember. I think it would have to count as income then with all sorts of extra taxes (SS, Medicare, income), so I would guess that's why?
That's kind of what I thought and am wondering how it works logistically if you have one. Does the employer match go into a different account? Do you just have to keep track of what gains can be attributed to the employer contribution?
When I log into my account it has four line items, employee traditional, employee roth, auto contribution, and matching. The traditional, auto contribution, and matching are all included in the traditional balance. At retirement I plan to roll the Roth 401k account into a Roth so that it isn't subject to required minimum distributions at 70 1/2. It should then be relatively easy to figure out the tax only on the traditional, or IRA if it was rolled over.
Roth isn't best for everyone anyway and deciding which is best is more of a guessing game than anything else. Several people on MM are pretty anti-Roth (I'm not one of them, I just try to diversify my tax risk like everything else).
I definitely understand this, which TBH is the reason I'm not all that familiar with the workings of Roth type accounts. We're in minimizing earning mode at the moment so even though H has the option of a Roth 401k we'd prefer to just take it as a deduction now and pay taxes on it later when we will most likely be in a lower tax bracket/can control what bracket we're in. I'm kicking around the idea of converting my IRA to. Roth IRA just to give us more options down the road but am finding it difficult to pull the trigger.
If you do a Rorh, you just put less money in to account for taxes.
Like if you put in $300 a month pre-tax, try $250 or $225 per month in the Roth. It should work out fine.
And if you are really living month to month, I might reduce retirement and put 3% of your after tax income in a savings account that directly transfers on pay day.
Post by notsocreepylurker on May 29, 2015 13:38:38 GMT -5
Thanks everyone. Part of the paycheck-to-paycheck is a spending problem that I need to work on. I'll play around on the IRS site to see how much I can change to the Roth and not owe more than $300 in taxes in April (I try to get back less than $300 or owe up to $300). I don't have a mortgage, kids or student loans so I don't get those deductions (I rent an apartment).