401k and investments

Alright so im going to be starting my 401k at work in the next month or so and ive got some questions on what to do. 1st off im 21 years old so ill be doing medium/high risk investments.

I know i should prob start out with them managing my money just for the simple fact that im not sure what the hell im doing in the money market. but once i get a little money built up in my 401k i would like to manage my own money but like i said i have no clue how.

so pretty much any tips on what to do and how to do it would be greatly appreciated. And yes i know there is no way to predict the market but i know there has to be some tips and tricks that help people out

 

First thing is to flood it with as much money as you can afford to. When I was your age I was putting in 15% of my pay.

You going to contribute before or after tax?

 

i plan on doing a roth because i figure this is the least amount of money im going to be making in my life and taxes are only going to increase, so might as well pay my taxes now.

i havent done the math yet but im sure i could afford 8%

 

Kudos to even considering this. Too many people in this country and your age don't even think about it. I have been maxing it out every year for the past 5+ years. It's tough but I'll be damned if I let the thieving govt take a single penny more than they should.

 

Yea I tend to agree, but I'm no financial adviser so who knows if I'm right (not me LOL).

I have over a decade's worth in two accounts that have no taxes taken out and just started a new 401k at work where I'm being pre-taxed.

The beginning is the worst but after your used to the lower take-home pay it's not that bad if you budget properly. Last year I wasn't eligible at my new work so when I enrolled and dropped 15% of my after tax pay into it....it stung for a few months.

 

yeah i figure the earlier i start the better chance i have at being able to retire by the time im 80...

 

yeah im a little scared of that because ive had my hours cut at the shop the past 2 weeks so im hoping the hours come back back before my 401k hits my checks.

Do you manage your own 401k or does the investment company take care of it for you?

 

Investment company that my company hired. I'm far to stupied to do it myself + I have 4 accounts.

I never rolled any of them over into the same accounts. I like keeping them separate and think of it as a easy way to keep them diversified.

Make sure you have yourself an emergency fund with 3-6 months worth of salary before filling up your 401k. I did not do so and a few years ago I got fired for the first time in my life and I should of been much more prepared. What good is 250k in the bank you can't touch for another 40 years without getting severely fined when shit hits the fan?

 

for my age ive got a good bit of money in the bank right now and i try to live pay check to pay check by not pulling any money out of savings to pay for things. I have no debt but im still living with my parents because i moved back home after i finished school and then found a job 5 min from my parents house, so its kinda hard to justify moving right now.

 

Not a bad idea!!I lived at home until I was 25 and was able to save up for my first home.My wife and I are now 41 and 40 and have everything we own paid off.Be smart with your money and don't buy frivolous junk and you will be amazed how quick you can become debt free.My wife and I are very aggressive with our 401k plans putting 20 and 25% which greatly reduces our taxable income.Keep in mind a traditional 401k is not taxed until u pull it out but I figure our incomes will be lower when we retire...

 

I have a brokerage account, (2) 529 plans for my kids and 2 Roth IRA's.

I use USAA for my Roth IRA's. No preference really, I just have all of my money with them. Basically, with them, you pick your risk tolerance and they give you some funds to choose from.

What I did because I am pretty knowledge about about stocks and the markets was I went on their site and looked at ALL of their funds and pick a conservative one and a target fund. The target fund moves from risky to conservative over time. I am 28, wife is 26 so we have time to makeup any losses due to market correction or economic down turns.

Like people have said above, you are young and pour money into that thing. More money in now, more time to make money off your money. Less money now, less time to make money. You have 49-ish years to correct any losses you may incure.

 

Forgot about this. GREAT POINT! Get this established first.

 

This is a tough one in this day and age, with the government pissing away trillions of $'s it won't be long before they will try to co-op retirement plans. review the funds that will be offered to you, (ie., the top ten or so holdings within the funds) you may find there is not much difference between them, just may be "weighted" a little different. Don't get hung up watching the business channels, they have no clue. Tons of financial websites out there, many are BS, but eventually you'll find some that may be in sync with what you understand. it can be overwhelming, but just stick with it.

probably a good move with the Roth, you are correct about the taxes.

good luck

 

yeah i like the idea of reducing your taxable income but i would rather look at my 401k balance and know that its all mine (in 50 years) and i dont have to pay taxes on it. and holy shit i wish i could afford to put even 15% in.

I want to pour as much in as i can afford but i also get pretty scared when i dont put any of my pay check into savings

shoot i wish my company matched. They choose at the end of each year if they want to and how much, and from what i was told is they match 2 of the last 8 years and it was only for a few percent, but still better than nothing. and im the same way with my savings, if i cant pay for it out of checking i dont buy it and when i get paid i put a big chunk of my check right into savings that way im not tempted to spend it

 

There are people i heard on the radio that said we are in for another major correction in the stock market.

 

Sounds like you're off to a great start! First and foremost, if your employer offers any kind of contribution match then you should try your best to max what your employer contributes. Free $$$ opportunities are rare. Everything else is completely up for debate as everyone has their own idea of "the right way to invest." Read and try to access varied points of views so you can make your own opinion. And a few times per year, re-evaluate the decisions you made cause as you learn you may find an even better opportunity. That said...

Completely agree that if you're in any of the bottom three tax brackets then going post-tax is a great vehicle to take a smaller tax hit now. Medium/high risk is good if you have the stomach for it, but I try to keep 10% or so in bonds/muni's. It's dull and safe but keeps your portfolio balanced.

If you're going to be managing yourself and starting with small monthly contributions, I always like indexed ETF's as they provide easy diversification w/out the fees of a mutual fund since they follow an index rather than actively managed. Some ETF's to look at: SDY, SPY, DWX. As your savings increase you may also want to look at opening a Cash Management Account. Savings accounts pay next-to-nothing in terms of interest so I take excess savings and invest here for a better rate of return while still remaining liquid.

 

i didnt understand half of that... haha but i want to move my savings to another higher intrest account but i want to build it up a little more before i move money out of it.

 

For retirement purposes I say good! Gets me more for my money. Having the market drop now means you can buy more shares for your dollar. The market will come back up so as long as you have 10+ years before you retire I consider a correction a good thing. Course for those retiring within 10 years it wouldnt be good.


As for the op...see what funds you can invest in. Look at expense ratios as well. You want low expense ratios. Frontline did a good piece about why it matters.

I have a 401k and Roth strictly for retirement. Then a general fund that I invest the same way in. The 401k and Roth I just went with a retirement 2045 (401k) and
2055 (Roth...its secondary retirement account). Nice and easy way to keep a good ratio of stocks vs bond's. My other account I do a three fund balance. Total stock market, total international stocks, and bonds. I then just balance it so they all stay around the split of stock vs bond I want

 

Yea and?

I hear voices in my head telling me to save save save and they outweigh your radio voices