Should I participate in 401K?
Question:
I finally got my first job after graduating college. It will be around 30K/ yearly. The 401K offer is this: the company offers a 401K plan and a discretionary match of 25% of the first 6% of contributions that I contribute to the plan. You will be given a choice of investment vehicles.
Can someone translate all this Greek to me i dont understand.
Answer:
It means you put in 6% of your salary. It's voluntary, but if you're smart you will do it.
so if you make $30k, you'll contribute $1,800 per year (pre-tax), or about $150 per month. They will immediately contribute another $37.50 to your account giving you an immediate 25% return on your investment. That's a great return.
$150 sounds like a lot of money per month when you're only making $30k, and it is, but when you are 40 and you have a couple hundred thousand dollars in a retirement fund, you will be glad you did it.
Do yourself another favor, NEVER consider taking cash out of a 401k when you change employers. Always transfer it to another IRA. Worry about that when the time comes.
Absolutely. The company is giving you free money. Put in the 6%. Invest in several different investments. Don't put all of your money in 1 investment.
Yes, you should. A 401(k) allows you to save for retirement by putting aside a portion of your check before taxes are taken out.
When you retire, you'll be in a lower tax bracket (due to not having any income) so you'll pay less tax.
Any financial advisor will tell you to enroll in a 401(k) as early as possible in life - the earlier you enroll, the more you'll make.
Your company's plan works like this - if you put in between 1% and 6% of your gross paycheck, the company will put in 25 cents for every dollar that you contribute. If you put in 10% of gross pay, they will do that 25% match on the first 6% of your contributions only. The other 4% is still being saved in the plan, it's just not getting that 25 cents on the dollar.
You get to choose how your contributions (and anything you get from the company) is invested. Most plans provide a variety of investment vehicles - stocks, bonds, stock in
the company you work for, and so on. A lot of plans also have an "automatic balancing" function based on your age and risk tolerance to spread your funds among appropriate investments.
Happy saving!
401k's are retirement accounts for individuals that companies sponsor. I would highly recommend them from day 1, as it's never too late to save for retirement. Also, your cost of living adjustment due to the decrease of take home pay will not be as high.
Another benefit is that the deductions are taken from Pre-Tax dollars.
Now many employers will match employee contributions up to a certain percentage.
In your case, for the first 6% of your income that you contribute, they will match 25% of that 6%. So, if you earned $100/year and contributed $6, your employer would contribute into your account $1.50.
Most employers will allow deductions up to around 15-25% of your income.
I hope that helped.
ok I'll give it a shot and I'm a women so I'll go easy.
YES!Do get into a 401k
you tell them the amount you want taken out of your check every payday
It can be any amount $5,$10,$50 etc.
You can stop or start or change the amount anytime
They match 25% of that amount every time up to 6%
This money is invested for you into stock
these are the"investment vehicles" they are talking about
You can just let them do your picking or pick your own stock out of their choices
my thought is let them pick untill you know more on this subject
This becomes your savings for retirement, it is tax free like an IRA
It is also looks good on your credit after awhile
you, after an allotted time can borrow from this if needed, but its really your future nest egg.
start now and wow will you appreciate it later!
hope this is the answer you wanted!
If they are doing a match, yes invest. It's free money towards your retirement. Start off with 6% so you get the maximum match, but you don't fee that much taken from your paycheck. When you get used to that slowly up it to 13%.
The first responder there did a good job explaining.
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