Just thought I'd share a success story with you all.I joined a company 2.5 years ago and was able to start 401k contributions after 6 mo. So as of today I have been contributing and earning for exactly 2 years. I am not a 6 figure earner but I invest the full 17% my company allows every year. Since I have 20+ years to go to retirement I am a bit of a risk taker. I have chosen only small cap and mid cap funds for my 401k investments. Luckily my company matches the first 6%, and I did get a bonus earlier this year that helped to the tune of a couple thousand. Here is what you can do too....As of today, after 2 years I have over $40,000 saved !!!! Amazing that I could save and grow my money that much in only 2 years. I estimate that I contributed a little more than half of this.My suggestions to all, suck it up and live on the cheap until you can max out your 401K. Then as you start earning more $, you can increase your lifestyle. It feels good knowing I am making progress.Now to find some cash for a Roth IRA....
Now to find some cash for a Roth IRA....The advice is often to max out a Roth IRA before contributing post-match money to your 401K. This is at least in part so that you can have pre-tax and some post-tax earnings, so that you're placing bets on both scenarios regardless of how your specfic situations works out.So, if you can't find IRA money, reducing your 401K contributions a bit to put it in a Roth isn't a bad idea. Afterall, you're still investing it, just elsewhere.
Delta181I agree with you, however it is just too easy for me to set the 401k on autopilot at 17% and not have to worry about it. At this time I am finding it rare to have $3000 available for a Roth all at once, and I dont want the hassle of contributing $100 here, $300 there etc. Plus I want to reduce my taxable income as much as possible.I agree the correct strategy is do 401k to the max of employer contributions first, usually 6%, then fully fund Roth, then finish topping off the 401k but for me I need to keep it as simple as possible. I will hope to come into come cash with a bonus or something before April 15, 06....or the wife gets a good job and we get the $ there. I feel one of these scenerios will happen.Thanks for your thoughts, I was just trying to inspire those who may be on the fence trying do decide if it is a good idea to fund the 401k. Obviously it is working for me.As you can see I'm allll for it.Cheers,skoman
Hi SkomanI'm in the RE business so we dont' have a 401k but i would suggest, in case you didn't know to try to open an account with the minimum 500-1000k (I have mind with Vanguard in the VTSMX fund and maxed it out for the year). Then, and that's what is great I find is you still have until April 15 2006 to contribute for 2005.
Hey Skoman,I was in the same place as you about 7 years ago. I finally plunged into a Roth IRA, but was eaten alive by small balance fee this and commission that. For those of you looking to place a small amount in an IRA just to get started, I would recommend looking to your bank or credit union. For instance, mine will take as small as $25 a month and pay 4% interest, but no fees as long as it is a regular automatic contribution. Then once the balance is something worthy of a brokerage or mutual fund account, move the balance out. But in the mean time, the money can build slowly and steadily over time.I am a big fan of investing early and often, and a favorite quote is 'time in the market, not timing the market', but you have to start someplace. Congratulations on starting early.
You can also setup monthly contributions to a ROTH IRA. As others have indicated, the fees associated with a small IRA can be steep. The administrator for your 401K may offer employee perks on retail accounts or householding in the 401K balance to avoid minimum balance fees. Debra
I appreciate all your repliesI already have an Ameritrade Trad and Roth IRAs and I will fund them (mine and wifes) before Apr 06. However I was just pointing out that for me the reduction in current taxes and simplicity of maxing the 401k works best for me and was my first priority.We just moved though, wifes not working yet in new city and I just dont have ANY spare cash. Most free cash is going to pay off 15k credit card at 0% interest.Smartest OTHER thing I did was tranfer my old 401k into a Traditional IRA. Then over a couple years when I was not working a high paying job, I rolled over 20-30k per year from Trad to Roth at a low tax rate.Now I have over 100k in Roth Status plus some left in the Trad IRA plus my new 401k. I am feeling pretty good about my long term future. I say this not to brag, only to inspire others to the possiblity of a successful, No financial stress, retirement.I wish you all the best of luck. And I truly thank you for all your replys.skoman
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