Address Your Debt
The 401K Fix
Does Your Employer offer a 401K with a Match?
Yes 401K with a Match
Look at your fees. The median annual fees for all plans is 0.72% of assets. My wifes hospital charges 0.13% and my work charges 1.5% This is important as we will see below
Meet your company match
This is free money. If you company matches six percent than take six percent of your salary and invest it right away. If you are confused by the offerings simply choose a target date fund and let it be. After you read the books I suggest you can get more detailed, but for now just get started.
Yes 401K but no Match
OK, we need to evaluate the next step and take a look at your finances before we can figure out what to do here. But it isn’t that hard.
Do You Have a Roth IRA?
If you are meeting your 401k Match try to Max out Your Roth IRA
Open a simple Roth IRA with Vanguard. If you are just starting out open the STAR fund. Go to automatic investmetnts and maximize your investment for the year so that you are wihdrawing roughly $450 out of you account each year. This will max out your investment.
Without a Company Match Start Here
Open a simple Roth IRA with Vanguard. If you are just starting out open the STAR fund. Go to automatic investmetnts and maximize your investment for the year so that you are wihdrawing roughly $450 out of you account each year. This will max out your investment.
Do you Have Money Left to Invest?
Try to Max out your 401k
Any money you invest in your 401k unlike a traditional brokerage account will grow 100% tax free an incur no capital gains. Although these are taxed less (at 15%) you will be ablet to save a lot on your taxes every year the more you are able to tax shelter in this account.
Try to Max Out Your 401K
Any money you invest in your 401k unlike a traditional brokerage account will grow 100% tax free an incur no capital gains. Although these are taxed less (at 15%) you will be ablet to save a lot on your taxes every year the more you are able to tax shelter in this account.
Assess Your Goals Beyond Retirement
Home Buying?
Is it Better to rent or own in your area?
This is an easy calculation. Don’t buy a house if it is going to pull you under the water. But if it is fesable you should set aside money for your down payment here ase well. Here is a good calucalation to follow.
College Loan Debt
You have to look ate
bt
with 84 percent of Americans having at least 15,000 in debt this should be your main focus.
Questions and Answers
Q: How do I know whether my 401(k) is any good?
Your plan should offer a well-diversified mix of low-cost investment choices. An employer match is a plus because employees tend to save more when their company kicks in money.
Investment guidance and regular, personalized report cards to show you whether you’re on track are important parts of a great 401(k) plan.
And most importantly you need to look at the fees. This in my opinioin is the greatest indicator of how good a plan is.
Q: How do I choose the right investment mix?
Most often your empoyer will offer a virtual buffet of investment choices. It is completely overhealming for most. Although over the last few years this has been becoming much easier to manage.
mployees can choose from five professionally managed portfolios of low-cost index funds. They range from aggressive-growth funds heavily tilted toward stocks for the under-30 set to an income-heavy mix for employees near retirement. The plan clearly outlines each portfolio’s underlying investments, fees and projected rate of return. All employees have to do is select a portfolio and let the plan’s investment manager handle the rest.
Accept has nearly 50 employees now, and Banister, who also acts as human-resources manager, often lectures new hires about the importance of saving for their future. “If an employee does not want to participate in one of the portfolios, they have to give me a notarized waiver,” says Banister. So far, only one has opted out.
Q: How much of my salary should I be putting away?
Probably more than you’re socking away now. Most employees are saving 7% a year or less, and employers that offer matching contributions typically kick in 3% of pay. That simply isn’t enough. The old rule of thumb of saving 10% of your gross pay was designed in the days when more people had access to traditional pensions and employer-provided retirement savings. In this era of you’re-on-your-own retirement, you should aim to save about 15% of your gross salary, including any employer contribution. Workers are permitted to stash up to $16,500 in their retirement accounts in 2010; those 50 and older can squirrel away an extra $5,500 in catch-up contributions.
Hewitt Associates, a benefits consulting company, estimates that the average employee needs to save about 11 times annual earnings — on top of Social Security benefits — to maintain his or her standard of living in retirement. So if you earn $50,000 a year, you should strive to save $550,000 by the time you retire. Assuming you withdraw 4% a year, or $22,000, from your portfolio and you receive about $20,000 a year from Social Security, you would be able to replace the recommended 85% of your current income in retirement. (If you have a pension or other source of retirement income, such as a part-time job, or you expect to sell your house and live off the proceeds, you may not need to save as much.)
Hewitt projects that 80% of workers will fall far short of that goal unless they beef up their savings now or plan to work longer. “This is a wake-up call for employees,” says Rob Reiskytl, Hewitt’s leader of retirement-plan strategy and design. A separate study by the Employee Benefit Research Institute found that nearly half of current workers are at risk of running out of money during a lengthy retirement. “Retirement may be a long way off, but workers need to start saving or be prepared to dramatically reduce their overall spending in retirement,” Reiskytl warns.