Employee matching 401k questions?
Employee matching 401k questions?
Hello, I just turned 21 and got a part time job. The company I am working for is offering a 401k that they will match for the first 3% contributed, 50% on the next 2%. My question is...would this be worth my wild? im new to this whole retirement thing so any advice would be great thank you.
Answers:
Ghost of Zeuz: it's free money to you. it's always, always, always worth it.
2011-01-23 21:34:57
2011-01-23 21:34:57
Chosen Answer
another nickname: First of all, and not to be a jerk, but the phrase is "worth my while," not "wild." But yes, it is absolutely worth your while. Think of just the "match" part for a moment. If they are going to "match" your contributions, that is the same as them giving you a raise. You don't contribute, they don't give you the money. Sure, you can't touch it, but so what. It's in your account, and it will be compounding interest for the next forty-plus years, tax free, so you WANT that money. (They probably will talk about "vesting," and that's valid. They will say "we'll match you, but you have to stay here for a couple/few years to "earn" that match. So fine. Stick around. Don't leave until you're "vested." You'll get the money, and you'll get a good resume builder, by having some longevity in your work history.) Second - if you were to "lose" five percent of your current check, before you ever saw it, would you really miss it? Five dollars for every one hundred you make? And remember this too - it's five dollars per hundred BEFORE taxes are taken out - so in reality the reduction in your take home check will be more like $3.50 per hundred dollars. Not even the cost of one cup of Starcraps coffee. Finally, when you're 65, do you want to be eating cat food on Wonder Bread? If not, starting NOW to put away money for then is just about the smartest thing you can do. An additional point - should you leave this job some day, and you probably will, do NOT take a lump sum distribution of your 401k and spend it. That's just insane. You'll pay back taxes on it, plus a penalty, and you'll lose the chance to avoid that cat food sandwich. Roll it over into an IRA at Schwab, and leave it ALONE...
2011-01-23 21:41:30
another nickname: First of all, and not to be a jerk, but the phrase is "worth my while," not "wild." But yes, it is absolutely worth your while. Think of just the "match" part for a moment. If they are going to "match" your contributions, that is the same as them giving you a raise. You don't contribute, they don't give you the money. Sure, you can't touch it, but so what. It's in your account, and it will be compounding interest for the next forty-plus years, tax free, so you WANT that money. (They probably will talk about "vesting," and that's valid. They will say "we'll match you, but you have to stay here for a couple/few years to "earn" that match. So fine. Stick around. Don't leave until you're "vested." You'll get the money, and you'll get a good resume builder, by having some longevity in your work history.) Second - if you were to "lose" five percent of your current check, before you ever saw it, would you really miss it? Five dollars for every one hundred you make? And remember this too - it's five dollars per hundred BEFORE taxes are taken out - so in reality the reduction in your take home check will be more like $3.50 per hundred dollars. Not even the cost of one cup of Starcraps coffee. Finally, when you're 65, do you want to be eating cat food on Wonder Bread? If not, starting NOW to put away money for then is just about the smartest thing you can do. An additional point - should you leave this job some day, and you probably will, do NOT take a lump sum distribution of your 401k and spend it. That's just insane. You'll pay back taxes on it, plus a penalty, and you'll lose the chance to avoid that cat food sandwich. Roll it over into an IRA at Schwab, and leave it ALONE...
2011-01-23 21:41:30
Woof: Yes, it is definitely worth it.
2011-01-24 05:23:35
2011-01-24 05:23:35
Jim Z: It is an offer you can't refuse. If your parents told you that for every dollar you earned, they would give you a dollar, would you take it? Absolutely...This is basically what your company is offering you. The only catch is, it goes into your retirement account, it is yours and only yours, but you can't touch it till you are 59 years old. You would be foolish not to take it. The next best part is all the money is tax free, it is wages you don't have to pay taxes on, and the companies contributions are tax free also.
2011-01-24 05:32:31
2011-01-24 05:32:31
muncie birder: It is free money. Take it. But be careful what you invest in. Don't pick aggressive investment for more than 15% of your portfolio.
2011-01-24 08:11:23
2011-01-24 08:11:23
clayjar_azn: They are giving you free money if you invest in your 401(k). SO of course it is worth it.You just can't touch it until you are of retired age.
So invest at least 5% of your pretaxed salary into your 401(k) to take full advantage of their match. At your age, I would invest 10% since you have no mortgage or kids to worry about.
Now is the time to invest toward your retirement. Diversify your portfolio and you can afford some risk at your age. But still have some less risky funds in their as well.
2011-01-24 12:38:46
2011-01-24 12:38:46