Right now regular savings accounts are "earning" a negative real return.

A 401(k) invested in something like the S&P500 is going to earn an average annual 12% or so.

Do you want to end up like Southhoof (see his post above) or the 72-year old guy he referenced?

My employer doesn't match but I put in 15% so my next ex wife can get half of something.
For gd I would suggest at least 8.7%

As much as you can afford up to the max.  A little early in life can beat a shit ton later in life.

Unless your family has a history of early death then it's a crap shoot...

Had a friend recently at work that everyone used to laugh at for is fiscal habits.  He got cancer and died at 63, guess the jokes on them...

Seen people save save save, then drop dead.  It's your call.

Live like a poorman so when your old and broken and feel like shit you can continue to live like a poorman.

We all die.

But planning not to live is just dumb.

if you really want to live on social security or work for the rest of your life...by all means...

I would rather drop dead with a good savings account that can be pushed down to my children/grandchildren/wife...

Than die a poor man with nothing.

I can't put money in my 401K and buy ammo and mags!

Good luck.  His plan absolutely works if you stick to it.

I was pretty fortunate and didn't have a whole lot of debt when I found his plan.  I read his book and his investment advice was very simple to understand.  She brought along about 70k in Student Loan debt, which we knocked out in about 2yrs, and honestly probably could have gotten it a little faster had we really gotten aggressive.  The only debt we have now is our mortgage on a home we bought a few years ago.  As long as nothing major comes up, we should be able to pay this off in about 6yrs.

I've figured if we both work until we're 58, and are fortunate enough to not suffer any catastrophic health problems, unemployment, etc.... we should have at least 6-7mil for retirement.

Minimum at your age: 13% of salary if growing about 5%/year.



Adjust numbers by age, 401k growth rate, and expected withdrawal/retirement age and/or single, married/single , is spouse an asset or liability at retirement?, will house be paid off? other debts/assets?



Lots of variables bud.

first post thing.

So...are you paying penalties on your withdrawals since you are under 59 1/2 years of age or do you have other savings to float you until then?

Compound interest. You need to be getting as much in there as possible, as soon as possible. You can pull back a little, if you really need to, after the snowball starts rolling. For now, no reason not to max out.

Posted Via AR15.Com Mobile

You can also use a Roth IRA to fuck the IRS by passing it along to your grandchildren-$200K could allow a 5 year old to take in almost a million in tax free income by the time he or she reaches 65 while still having another million in principal.



http://www.bankers-anonymous.com/blog/the-magical-roth-ira/

This is a rough distribution model that you can follow:
Income:

1.  <   60% for living expenses (overhead, house, car etc.)
2. >= 10% for paying yourself (this is your expendable cash, play money, brokerage account investments, entertainment, toys etc.)
3. ~ 10% Tithe (if you're a Church goer. if not, throw this into investments)
4. 15-20% for retirement





Retirement planning:
include inflation (e.g. 3%)
plan withdrawing at a rate of 4% per year max.  (i.e. more than 4% and you may run out of money before you die.) This link may be helpful


Books to read (a selection and not all):
The 4 pillars of Investing - Berstein
All about Asset Allocation - Ferri
The Bogleheads Guide to Investing - Larimore
The Richest Man in Babylon - Clason
The Millionaire Next Door - Dr. Stanely
The Millionaire's Mind - Dr. Stanley

No employer match? Hell no.  Do IRA's.  Way too many restrictions on a 401k

This

Before I retired I was putting in the company match.

At that time, the company I worked for matched 100% up to 8% of my salary so I put in 8% for an effective 16%.

I could have put in more over the match, but I was spending it on fun stuff.....

No penalties as there are no withdraws.



Dear wife will be working until next June when she retires at age 56.2. We are living off of the sale of assets acquired over the years. Sold some wooded property, an extra vehicle and have a nicely padded "savings" account along with a small pile of company stock I bought through ESOP over the years.  



Essentially, we have 5 sources of "income" to the monthly budget.  That will increase to 7 sources as we age and begin to collect SS.





FWIW, there are alternatives to the 59.5 "barrier".  Look into a 72T withdraw.



 

I do 15% and max out my Roth.  I like the tax advantages of the Roth better.

Damn!

I'm 35 she's 29. Well I suppose we'd be around 3'ish. Once we pay down the debt we'll be able to put more away. Actually max out our IRA's for once and increase our 401k contributions. But first things first. Debt.

Hell, I worked my first ever extra shift yesterday, an extra $550...

That's far too optimistic for planning purposes.  There have been plenty of 30 year periods where this was not the case and you never know which one you are going to hit in your life time.  Not everyone gets to start their career on January 1st, 1980.  After that you have to consider the impact of inflation.

I think reasonable argument can be made for anywhere between 4%-7% after inflation.  I use 4% for my planning purposes.  If I can't make it work on 4%, then my plan isn't robust enough.

If the 12% was true, I'd be retiring with $20,204,900 at the age of 65 and have $384,166,931 to leave to me heirs when I die at the age of 90 simply by maxing my 401k from here on out.  I'm not holding my breath.  

I agree with everything else you said.

Meh..... Short of asking a finicial adviser, I say as much can as you can comfortably spare each paycheck. Then PRAY the system doesn't crash and you lose any of it.

Am I better off putting any extra money into paying off my house vs/ putting it in a 401K?

Max it out if you can.

It depends on your mortgage's interest rate.  Most likely, you're better off investing in the market/401k.

well depends on total mortgage, interest rate, total in 401k and average return on investments.

The answer to that is that no one knows.

What we can tell you is that putting money into an investment in gambling.  It may work out quite well for you, or it may be a terrible decision.  I don't gamble when I owe money.

Max out your company match for sure

As much as you can afford

The math gets pretty easy when your mortgage interest is under 4% and your 401k earns around 8%-you're also in a better place financial having $100K in a 401k and a $100K mortgage balance vs. a paid off house and nothing in a 401k if you should become unemployed.



 

Since they don't do any matching (by the way, their contribution is pretty low!) you are in no obligation to put a lot in. There is little benefit to you.
If I were you, I'd put 5-6% in the 401k a self-directed IRA
and 5% of your post-tax income in a self-directed ROTH IRA
Like the ARFCOM motto, get both.



Someone didn't read the OP. There is no company match in this situation.

Always max out the match the company gives. It's free money.

Shoot for saving about 15% of your salary for retirement. Put it in different sectors of funds and make regular contributions.

My company matches 100% up to 6%.

It depends on the interest rate on the debt and weather or not you're comfortable with the payments. If you have a mortgage at 3-4% which is also deductible, why pay it off early? Same with a car loan at 1.5?

If you are harboring heavy student debt at 7% or CC debt to the tune of 15% or 20%, then yes, go ahead and pay it off first after taking the employer match.

Average market returns are 7%-10% depending on which statistics you use. You're giving up a few percent a year in gains by focusing on low interest debt instead of investing for retirement. Plus you can not make up contributions you didn't max out. So if you only put 5K in one year, you can't go back and put in another 13K the next. Shoveling cash in early will greatly help the compounding effect vs. just getting the match because you wanted to pay of your car 3 years early

Whatever amount yields you the max allowed for the year by the IRS.  Then start an IRA and max that out as well.  Start with a Roth IRA if you can, then a traditional.  Following that, create a brokerage account with the firm of your choice and invest into that.  

You'll live up to your income, but if you start doing this now, you'll never see it and won't use it as income.  It will be more difficult to create these accounts later if you have to cut back elsewhere.

I put in 15%.

For the time being put as much as you can afford.  Been reading and hearing about 401's going away in the near future, but save what you can.

Many factors to consider and I think only you can answer them.

1)  What is your money earning in a 401k compared to what your debt is costing you in a mortgage?  Now that the S&P 500 stands at a P/E of around 20 (earnings yield of 1/20 = 5%) the argument to invest vs. pay down that made so much sense 5 years ago no longer has as much weight.  There isn't nearly as much headroom for big double digit gains as there was 5 years ago.  

2)  Is your debt fixed and for how long?  The longer it's fixed, the less uncertainty you have regarding future obligations and the more confidence you should have to carry it and focus on savings and retirement.  If you have an ARM then you may want to look to relieve some uncertainty by paying it down or refinancing when the opportunity is right.

3)  What percent of your total picture is your equity in your house?  If you have a paid off house but no savings or retirement, then you essentially have all your eggs in one basket and should consider diversifying.  If you have a ton set aside in savings and retirement and zero equity in your home, then you can make the argument to lean towards paying down debt.  If you are starting fresh and have zero home equity and zero savings/retirement, then balance the two and work on both simultaneously.

To further clarify #3, consider this example.  In 2008, a guy with a paid off house but no savings who had an emergency that only 5-6 digits could solve was fucked.  It's not like banks were letting people tap their home equity during the credit crunch whereas a guy with cash, stocks, and bonds could liquidate (even at a loss) whatever they needed.  

In 2008, if you lost your job, you still needed to eat and you still needed to pay property taxes.  A paid off house might reduce your monthly nut but when you've got a problem like having NO income, you'll still need something to live on.  This is why balance matters.  It's great to wipe your debt slate clean but you still need liquidity regardless of your debt situation to cover unforeseen circumstances.

As much as you can.

You don't want to be a greeter at Walmart

This right here.

I max mine out, but it's only a part of my overall retirement strategy.  I'm late 30's, married with no kids (which is what helps the most).  My wife and I live pretty simply (own 4Runners that are over 10 years old and only go out to eat maybe 4-5 times per year).  Then again, we both have company cars and very good income which helps us sock away a lot of money.

Get a retirement advisor.  You want to be able to retire at something like 105-110% of your income.

It seems like a low stress job for an older person.

What are the chances that in the next 20 years the govt is going to change how they handle 401k's?  Is there any actual risk that they can take/tax it before you cash it in??

Check out the financial section and read the stickies as well as what is available for a history, it only has a few pages of history compared to general discussion having 30 pages or so.



If you were a team member you could check the team section for some current ongoing discussion about the money makeover guy, but search here and over the net and you will see a lot of discussions for free.



One thing you need to decide is how you want to tie your money up.



Taking money pretax out of your check and putting it in the 401k puts more money into the 401k and since you are young this can give you more money to invest.  But later on in life you will be taxed as you withdraw that money.  I am feeling concerned about what future taxes might be like but I do tend to wind up paranoid about stuff like this.  The general concept is once retired you will withdraw money and be taxed at a lower bracket than your current income.



If you invest your money in something after tax, you have less to invest cause uncle sam got his cut but it is yours to remove if you need to remove.  I would expect that you pay taxes on gains in this sort of thing, but your initial money should be fine to withdraw.  Read up on it, it is your money and you need to understand it.  I looked into everything when younger and try like heck to forget what accounts are out there as long as they get funded by my paychecks.  I don't want to think of needing to withdraw or this or that.  Me messing with stuff and 2nd and 3rd guessing myself does not always end well.



My 401k at work offers a fair bit of choices for investing, some do not offer many choices.  So that is something else to consider.  You can set up a 401k elsewhere if they offer more choices that make you happier.  If your 401k invests you in company stock only, I would take the stock and put all other 401k money into a different 401k cause you don't want to have much invested in one thing.



In the financial section I mentioned earlier they talk about some books, there are a lot of ways to save money and make your money grow but overall you need to put the time and effort in and let it grow.  Most who consider it a hobby do well.



I skimmed the thread so I did not see if you have any debt or not, get rid of debt and try to keep rid of it.



Yeah a house payment might be at a low interest rate and you can probably write some of it off, but it can limit your flexibility.



If the house was paid for, you could put that payment money into investments.  Oppurtunity cost and all that and no it is not the best choice for all.  I prefer flexibility but I just rent so I don't even have a payment on a house.  Nor do I really have upkeep on the house.



I know lots of folks don't like everything about ramsey but he has some basic stuff I like.



Emergency fund.

Get rid of things that have you paying others to borrow their money.  And try to keep it that way.  The current and past housing situation is something to study.

Put money away for later.



For the above there are different ways to go about it and it tends to be what folks argue about.  But if you are doing the above, who cares if you think he has the best way or it needs tweaked.



No one method will work for everyone.



I would do a few things like put some extra in the company 401k just cause my 401k at work has lots of choices.

I would set up something after tax in case I needed access to money, I consider this the emergency fund for the emergency fund.

Yeah I would have an emergency fund that might not be earning much money but it could repair the car or house or appliances if needed.

Heck, some people need an emergency fund just to cover their health care deductible these days.



The more you pay in now and allow it to work and grow the better off you will be.  So to some extent some sacrifices for a few years now can really make a different later because that extra money has more time to grow.



But make this a hobby.  Do lots of reading.  You should be able to find lots of reading for free but when you see the same books recomended over and over you might want to check amazon for used copies or a library if you actually have one near you to play in.  I like to read so I keep myself from buying books as much as possible since it gets out of hand when you have to move a ton, literally a ton, of books and reading material.  Always thinning out and not everything is offered on the kindle but if it is cheap and available for kindle I tend to unload the hard copies.



In your reading you will learn about financial advisors.  Talk to lots of different folks.  I manage my stuff myself but I have some time spent talking to finanacial advisors and have used em in the past when it made more sense.  As a teenager I could tag along with my dad and ask questions and what not, so see what options you have.



I am careful of just paying someone for what they say they can return vs. someone who works for a percentage, both can have issues.



Oh, in your searches you should find some awesome posts from some very smart and helpful people in here.  I have learned a ton in various oddball threads because it went off on a tangent and someone spent time writing a huge post.



The above is mostly pieces of them.

In total I'm putting in 12% of my gross income each month into two investment accounts roughly 6% in each.  One is long term the other is for emergencies/whatever.

0

Do wealthy people use 401k's and IRA's?


Build real wealth. Invest in yourself, build a business, buy property and create cash flow from it. This requires creativity and work. Two things Americans are well suited for.  

I put 12% pre-tax into my 401k and my company matches $1000 at a minimum and then a profit share.  year before last they did 47% of what I put in for the year this past year was 35%. My company doesn't pay was well as some of the others in the industry but they are hands down the most generous with employee benifits.

After taxes I take 10% and transfer it to a money market account at my CU for my "rainy day fund" I use it for home improvements, vcations, toys, and emergencies. I could go a year if I lost my job without changing my spending habits.

ETA I need to open up an IRA as well. Maybe that's what I'll do with this years tax return.

Maxing out my 401k reduces my adjusted gross income and saves me about $6,000 a year in additional taxes. Maxing out the ROTH is also a great idea.

I wouldn't knock it but all the "comfortably retired" guys I've met are the happiest bunch on the planet.  

They all seem to have the "Today is greatest day of my life!" attitude.

As much as you can!

I do up to the match with my 401k, have a post-tax investment account and a typical savings account (I know, no Roth. ). Last time I ran the numbers I was somewhere around 22-24% of my income going into investments. I feel its probably not enough at this time, but I have other goals I am trying to reach at the moment.

You are actually correct:  I exaggerated.  The annual return of the stock market from 1928-2014 is 11.53%, not 12%.

In reality, you pick any number you'd like:  10%, 8%, whatever; the stock market's return will be greater than any savings account or fixed income return over the same period unless you cherry pick a period when interest rates go from 15% to 0% and know how to play the bond market.

I'll stick with the averages.

With respect to inflation, you are also correct, if you are talking inflation adjusted returns.  Your invested money doesn't know what inflation is so it does work exactly as you mentioned:  enjoy your $20M and I'm sure your heirs will enjoy their $384M...it just won't have the spending power that $20M has today.

I'm retired now, but I've had a 401K since 1984.

 
From 1984 till now (including the several crashes) my 401K has returned a little over 8%.