enrolling in 401k

Gabba

It's a vicious cycle
don't know what to pick, huh? you're so young so might as well go all in stocks. go 25% in each of s&p 500 equity index fund, s&p 400 midcap index fund, russell 2000 index fund, and international index fund. 401k vs roth 401k vs aftertax 401k? ok so you can contribute up to 35% combined of each paycheck to 401k and roth 401k. and that caps out at $18,000 a year. the after tax 401k you can do up to 5% and i can't remember what the yearly cap is but it's so high you can't hit it so it doesn't matter. what matters is that they have different tax advantages. plain 401k contributions reduce the tax you pay on your paycheck, but you pay tax on it later when you retire. roth you pay with money after taxes are deducted but once you retire all the money is yours and like the government can't even see it let alone tax it. so to get the max benefit one has to finesse which one they use when. as a rule of thumb when you're young and don't have kids or a mortgage, the plain 401k is more advantageous, but then when you have kids and are paying off a house loan, the roth is better. so if you're not going to do the math make about 1/3 of your contributions in the roth flavor and 2/3 in the regular flavor.

and how much should you contribute? well since you're not likely to have any other better investment options (especially if you have to ask) 35% or 18,000 (plus 5% to the after tax dealie) is the most right answer. short of that: as much as you can afford to. the more the better, especially when you're young because the contributions you make now will be the ones with the most time to grow. far better to contribute alot when you're young and taper off as you get to retirement than wait till retirement is near to make big contributions.

just as a reference point, my dad contributed the max to his 401k every year he worked and now that he's retired that's now over 2 million dollars. and that's on top of his social security benefits and my mom has her pension and her own 401k money.
 
don't know what to pick, huh? you're so young so might as well go all in stocks. go 25% in each of s&p 500 equity index fund, s&p 400 midcap index fund, russell 2000 index fund, and international index fund. 401k vs roth 401k vs aftertax 401k? ok so you can contribute up to 35% combined of each paycheck to 401k and roth 401k. and that caps out at $18,000 a year. the after tax 401k you can do up to 5% and i can't remember what the yearly cap is but it's so high you can't hit it so it doesn't matter. what matters is that they have different tax advantages. plain 401k contributions reduce the tax you pay on your paycheck, but you pay tax on it later when you retire. roth you pay with money after taxes are deducted but once you retire all the money is yours and like the government can't even see it let alone tax it. so to get the max benefit one has to finesse which one they use when. as a rule of thumb when you're young and don't have kids or a mortgage, the plain 401k is more advantageous, but then when you have kids and are paying off a house loan, the roth is better. so if you're not going to do the math make about 1/3 of your contributions in the roth flavor and 2/3 in the regular flavor.

and how much should you contribute? well since you're not likely to have any other better investment options (especially if you have to ask) 35% or 18,000 (plus 5% to the after tax dealie) is the most right answer. short of that: as much as you can afford to. the more the better, especially when you're young because the contributions you make now will be the ones with the most time to grow. far better to contribute alot when you're young and taper off as you get to retirement than wait till retirement is near to make big contributions.

just as a reference point, my dad contributed the max to his 401k every year he worked and now that he's retired that's now over 2 million dollars. and that's on top of his social security benefits and my mom has her pension and her own 401k money.
Just save
 

flatbread

Occasional Lurker
Just as a starting point, you could go "age in bonds." You're 22, so 78% stocks, 22% bonds. Vary that by 10% towards stocks if you wish (88/12). Check once or twice a year to rebalance to your age. Or just put it all in Bright Horizon to your expected retirement year and let it diversify among the funds for you.

But the others above saying that saving is more important are correct at least at your age. Get funds in there now. I started at age 22. I'm now 32. The funds I've put in since have about doubled. That will be an even bigger difference in the final balance down the road.

Book recommendation: The Bogleheads' Guide to Investing.
 

CoolStoryBro

Well-Known Member
the mutual funds in our teamster 401k are atrocious.

The bny mellon s&p 500 index fund has a 28 basis point custodial fee and 75 basis point transaction fee. Not great but ok. Our 401k sucks.

I quite like warren buffet's suggested allocation to normal people. 90% in s&p. 10% in bonds. However i would not hold those bonds in a crappy mutual fund in our crappy 401k plan. Personal accounts and ira's sre better in my opinion
 

CoolStoryBro

Well-Known Member
Th
S&P 500 has a .01%, I believe. The highest fee is .08%, I believe.

That number displayed in the 401k site is bogus. You have to dig deep into the prospectus to discover the 0.28% custodial fee (yearly). And 0.75% transaction fee (buy or sell). Our funds suck. Vanguard via IRA is way better
 

CoolStoryBro

Well-Known Member
I
Last time I checked ours were lower than vanguard across the board. Vanguard is an excellent choice for index funds in an IRA, no doubt about it, but it's not a better choice than our 401k.

Ours suck compared to Vanguard. The fee's displayed on the site are BS. You have to read the prospectus to discover the true fund fee's.

Remember, the 401k plan has fee's. Then the fund's themselves have additional fees.
 

flatbread

Occasional Lurker
Th


That number displayed in the 401k site is bogus. You have to dig deep into the prospectus to discover the 0.28% custodial fee (yearly). And 0.75% transaction fee (buy or sell). Our funds suck. Vanguard via IRA is way better

I'm reading the fact sheet for the S&P 500 fund. It says “Investment Fee 0.75 bps” and “Custody Fee 0.28 bps.” A single basis point is 0.01% Where are you seeing 0.75% and 0.28%?
 

1989

Well-Known Member
I'm reading the fact sheet for the S&P 500 fund. It says “Investment Fee 0.75 bps” and “Custody Fee 0.28 bps.” A single basis point is 0.01% Where are you seeing 0.75% and 0.28%?
When the Fed raised 25 bps. It's .25 or a quarter percent.
 

flatbread

Occasional Lurker
I use the Vanguard Divided growers and Divenend appreciation funds. They have both done very well.

I have my pre-UPS Roth IRA in Vanguard funds VTIAX, VTSAX, and VGSIX. Bond side is in traditional TSP (federal gov't version of 401(k)). No complaints.
 
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