Advice on 401k and employer match

Stephanie2167 · March 2016

When I started at my company 11 years ago I was advised by a friend to put in a good percentage into my 401k early on so I never "miss" it. I was 21. I started at 15% and have never changed it. My employer matches 75% on the first 8%. I'm super proud of where I'm at with my 401k but am wondering if I'm being too aggressive. Advice?

als1982 · March 2016

Are you also contributing to a ROTH?

hoffse · March 2016

No, you aren't being too aggressive, though you might want to shift some of it to a Roth IRA instead.

If you are already maxing out IRAs too, then I would just leave it alone and let it do its thing. Starting at 15% in your early 20's (and just staying there) should set you up for a very comfortable retirement.

formerlyGDaisy09 · March 2016

15% invested in retirement is a benchmark around here, including any vested matching. if you're only contributing to your 401K so if you include the 6% (75% of 8%) that you're getting from your employer (assuming that's vested) you're actually contributing 21% and could afford to reduce your contribution.

Congrats on early investing! we're trying to work up to 15% (currently at 11%, but that's counting a 3% vested match that I'm losing in July...so we'll be down to about 9% of our total income then, but we'll increase other contributions to make-up for it).

Stephanie2167 · March 2016

We are not yet. I know it is something we need to start looking into doing. But with 3 kids (two in full time daycare and one in before and after school care) we currently don't have any "extra" to contribute to a Roth. Is that something we can look at starting once the twins are in Kindergarten (2019) and we are no longer paying $21k a year for childcare?

als1982 said:

Are you also contributing to a ROTH?

als1982 · March 2016

Stephanie2167 said:

We are not yet. I know it is something we need to start looking into doing. But with 3 kids (two in full time daycare and one in before and after school care) we currently don't have any "extra" to contribute to a Roth. Is that something we can look at starting once the twins are in Kindergarten (2019) and we are no longer paying $21k a year for childcare?

als1982 said:

Are you also contributing to a ROTH?

If what you're doing now is the max that you can afford, then personally I would contribute only the amount necessary to get the 401K match and then redirect the rest to a ROTH. Or, you could see if your employer offers a ROTH 401K option.

Personally, retirement contributions are top priority for us, so we're maxing out every account available. Compounding interest and future flexibity are our motivators!

als1982 · March 2016

formerlyGDaisy09 said:

15% invested in retirement is a benchmark around here, including any vested matching. if you're only contributing to your 401K so if you include the 6% (75% of 8%) that you're getting from your employer (assuming that's vested) you're actually contributing 21% and could afford to reduce your contribution.

Congrats on early investing! we're trying to work up to 15% (currently at 11%, but that's counting a 3% vested match that I'm losing in July...so we'll be down to about 9% of our total income then, but we'll increase other contributions to make-up for it).

Really? I've always understood the 15% standard to exclude any employer match.

formerlyGDaisy09 · March 2016

als1982 said:

formerlyGDaisy09 said:

15% invested in retirement is a benchmark around here, including any vested matching. if you're only contributing to your 401K so if you include the 6% (75% of 8%) that you're getting from your employer (assuming that's vested) you're actually contributing 21% and could afford to reduce your contribution.

Congrats on early investing! we're trying to work up to 15% (currently at 11%, but that's counting a 3% vested match that I'm losing in July...so we'll be down to about 9% of our total income then, but we'll increase other contributions to make-up for it).

Really? I've always understood the 15% standard to exclude any employer match.

I *think* it's ok to include only if it's vested.

brij2006 · March 2016

als1982 said:

Stephanie2167 said:

We are not yet. I know it is something we need to start looking into doing. But with 3 kids (two in full time daycare and one in before and after school care) we currently don't have any "extra" to contribute to a Roth. Is that something we can look at starting once the twins are in Kindergarten (2019) and we are no longer paying $21k a year for childcare?

als1982 said:

Are you also contributing to a ROTH?

If what you're doing now is the max that you can afford, then personally I would contribute only the amount necessary to get the 401K match and then redirect the rest to a ROTH. Or, you could see if your employer offers a ROTH 401K option.

Personally, retirement contributions are top priority for us, so we're maxing out every account available. Compounding interest and future flexibity are our motivators!

This is what I would do.

Also, big kuddos to you and the person who told you to start at 15% from the start. So many 20 year olds don't even worry about retirement, but if you start off by doing the 15% then you don't even notice it.

hoffse · March 2016

als1982 said:

Stephanie2167 said:

We are not yet. I know it is something we need to start looking into doing. But with 3 kids (two in full time daycare and one in before and after school care) we currently don't have any "extra" to contribute to a Roth. Is that something we can look at starting once the twins are in Kindergarten (2019) and we are no longer paying $21k a year for childcare?

als1982 said:

Are you also contributing to a ROTH?

If what you're doing now is the max that you can afford, then personally I would contribute only the amount necessary to get the 401K match and then redirect the rest to a ROTH. Or, you could see if your employer offers a ROTH 401K option.

Personally, retirement contributions are top priority for us, so we're maxing out every account available. Compounding interest and future flexibity are our motivators!

I agree with all of this. Contribute to your 401(k) up to 8% since that's what you need for the match (and that's free money). Then redirect the rest of it to a Roth IRA or Roth 401(k) if your employer offers one.

As for how much to contribute, I don't see a reason to change your plan since you guys can afford to do 15% outright, excluding employer matches. Having more money in retirement just gives you guys more options about what your retirement looks like. You might want to travel, or increase charitable giving, or spoil your grandkids, or save it for a really nice nursing home/retirement community. The more money you save, the more flexible your options are.

I think that step 1 is making sure you have enough to not be a burden on your kids and then step 2 is planning for the lifestyle you guys want. I don't know about you, but I want my standard of living in retirement to increase, rather than stay static.

Advice on 401k and employer match

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