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UPS Retirement Topics
enrolling in 401k
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<blockquote data-quote="Gabba" data-source="post: 3015726" data-attributes="member: 58591"><p>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.</p><p></p><p>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. </p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="Gabba, post: 3015726, member: 58591"] 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. [/QUOTE]
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