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| *Ostroff, Fair and Company>>>Investing |
401K Should I wait for company match? |
Hi, I just started working at a company that matches your 401K 100% up to 3% but only after a year of service. Ofcourse if I start now I know i'll have a little bit after a year but should I wait to get 'matched', will it make a significant difference? Many thanks everyone... A lot depends on the quality of your 401K. Some have a real nice array of investment options others 401K's stink. Assuming you have a reasonably good 401K I would invest 3% any way. This way you don't have to take action when you have one year of service and you don't have to decide to take a cut in take home pay to get the match. A lot of people say that if you don't see it you don't miss it. Your money comes out tax free and to save $100 per month might reduce your check by $65 per month. A Roth is good, however if your like me I have a tough time writing a check every month to save. Should you get into a Roth minimize your expenses. Most Roth's require some money to start ($500). I think it would be best to open a Roth IRA instead if you would like to save money for the first year. Next year you should definitely take advantage of the 3% the company will match. 401K's are taxed when you take money out, and Roth IRA's are taxed now with no tax later. It is better to take advantage of the Roth for now as long as you aren't in the highest tax bracket. Good luck. Regardless of the match, the sooner you start the more you will have. Start a Roth in addition to the 401k if you can. Get the matching contribution, it's hard to find any fault with free money. And, contrary to the advice of others, I think Roth IRAs are a really dumb idea -- once you pay the tax, that money is GONE (to the IRS) and you can't earn returns on money you don't have. You only pay tax when you take money out of a traditional IRA, and at that time you will be retired and very probably in a lower tax bracket than you are now. Investing pre-tax beats investing after-tax every time. start now...the savings in a 401k are before tax so you can invest 100$ there that only "costs" you 75$ if you're in the 25% tax bracket.... its best to start saving early and often.. you will see the difference ... though it will be better when the match starts. You should begin as early as possible to save for retirement. Don't worry so much about the matching. Any money you contribute is always yours. And besides, you will need to fund the brunt of your retirement. Download a free copy of my book and go straight to chapters 2 and 3. They will convince you of why you should start today. Click on my profile and read the info to get the website. You should start now, as long as you will have the option to buy something besides company stock. First, it will lower your taxable income since it comes from pre-tax money. Even if this doesn't help you, opening a 401k will put your savings on autopilot, so you can't avoid putting that check in your account every single month. You can always roll it into a traditional IRA when you switch jobs. If you go IRA, I prefer a Roth. You pay taxes on the money before it goes in, but it grows over time. If you are young, it will probably grow ALOT. So if you put money in a traditional IRA, you will pay more in taxes later. |
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