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I'm new to investing and have been learning quite a bit on this website. Right now, I am trying to start planning for my retirement (I'm 30 years old, I'm starting a LITTLE LATE). So, with that in mind, I'm trying to maximize my returns where I can.

I have not, as of yet, participated in a 401K. My employer will do a 2.5% match, but no more. Should I participate in my 401K? Or would I have better returns investing my money directly into the stock market? I've read that Index Funds are the best type, but will they yield more than directly investing myself?

Please help, I've already wasted enough time and I don't want to make a huge mistake now!

Thank you to all the knowledgeable Fools out there!
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I have not, as of yet, participated in a 401K. My employer will do a 2.5% match, but no more. Should I participate in my 401K?

Yes, you should absolutely participate in your 401K. It's very hard to beat the 100% return you get from the first 2.5% of your income that is matched. As to whether you should invest more, it depends on the 401K. My employer offers really crappy mutual funds with pretty high fees. I invest what it takes to get the match, and all of that goes into a bond fund, but no more. In general, it is best to have bonds and REITs in a tax protected account since they are income earning.

Volucris
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joym25...

I am getting lazy in my old age, so I'm going to direct you to a post I made a couple of days ago on the "Investing Beginners" Board instead of essentially re-writing it:

http://boards.fool.com/Message.asp?mid=21906747

I think that what I wrote in this post may answer several of your questions.

Regards,
Bill
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A little late is not too late. As was mentioned, contribute at least enough to gain the full company match, then set aside $153.84 per biweekly paycheck for a 2005 Roth IRA contribution (if you can swing it, a $3000 2004 contribution would be Foolish as well). Also, if you do not have an eFund valued at 3-6 months living expenses, you should.

30yrs old is not too late to get started. You still have 30-40 years before retirement and should be able to handle the risk of an equity allocation. I would suggest an allocation that puts 5-10% into high-yield income producting bond funds, 10-15% in international equities, 30% in large cap domestic equities, 30% in mid cap domestic equities, and 20% in small cap domestic equities.

If you want to grow your investment base as much as possible, focus on income over growth where your dividend gains help accumulate shares. Growth companies might be found in funds that look for those whose potential is undervalued by the market. Figure out what your 401k does best, and then use your RIRA to cover the spread of your chosen asset allocation.

Fuskie
Who encourages you to develop a strategy, put it in motion, and then ride the wave...
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Thanks to everyone for pointing me in the right direction!!

joym25

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I can't add much more than Bill has already described in his post but here's a couple of thoughts for you.

30? Starting late?!? Good grief are you kidding me?!? You've got a good 30 years of investing there! Plenty of time so don't get down!

Bill laid out the formula for you so I would follow that. Don't worry about the "huge mistake" factor. You're already taking care of that by asking the question.

I've read that Index Funds are the best type, but will they yield more than directly investing myself?

Not sure exactly what this means. You can certainly invest and Index Funds and you can do that yourself. I would definitely recommend this for someone who is starting out then as you get more experience you can explore other areas. The Vanguard Total Stock Market Index along with the Total Bond Market Index are two good places to start.

HTH.

Jesse
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"Should I participate in my 401K?"

Yes.

Just make sure its money you won't need for other expenses. Also, make sure you have an emergency fund first.

Jeff
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Right now, I am trying to start planning for my retirement (I'm 30 years old, I'm starting a LITTLE LATE).

I guess I'm a LOT LATE then. Started investing in about 2000, when I was 52. Soon figured out that I should start a 401(k). Unfortunately, we get no match.

Like you, I've learned a lot at the Fool :)
Just wish I didn't start buying at the height of the bubble :(

Always lived below my means though. Never owed anything on a credit card.

Anyway--you should definitely get on your 401(k) program--at least up to the match. One good thing about a 401(k) is that you are paying yourself first--the money comes right off the top, so it's an easy case of financial discipline. (I myself don't miss the money at all. It's gone before I see it.) Plus, you bring your current tax liability down. I think it's great.

Next I like the Roth IRA. The value can grow and you'll never pay tax on the growth. (At least, that's the way the rules are now. And I don't think they'll change them.) Plus, unlike with a traditional IRA, there's no minimum required distribution at age 70.5

--SirTas
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Thanks everyone for your help! After reading all the posts, I went ahead and got into my company's 401(k), but only up the the percentage that my employer will match. I'm now looking into doing a Roth IRA; I love the tax advantage! I hope the rules don't change anytime soon!

Thanks again for all your help!

--joym
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