401k, how much do you put in % wise?

[Dice144]

When I started my current job I forgot to use the 401k plan for 3 months. As personal punishment I jumped it up to 27% (company allows up to 30%).

Then I wanted to have a life so dropped it down to 10% for last 2 years. Had a windfall this week so figured can spend the windfall and pump more into 401k.

Now at 18%. My friends and family think I am insane. Keep telling me to spend my money and enjoy life (they all live paycheck to paycheck). How much do you put in your 401k % wise?

 

[JMapleton]

The more the better. Living paycheck to paycheck will have you working until you're 80.

Save up, retire before your hair is gray.

Although I do not personally trust the stock market.

 

[Engineer]

My company is small and only offers a simple IRA (with high fees to boot at 3.5%). I still max it out ($11,000 per year) and throw a few thousand into regular IRA's.

 

[bbhaag]

I put in 5%. I would like to contribute more but my wife is unemployed and we have two children under the age of ten.

 

[dullard]

Put in too little and you live a life of a pauper for 20-40 years after you retire. That is, if you can ever retire. And if you don't retire, why put any into a 401k (beyond the company match of course)?

Put in too much and you waste your youth.

A general rule-of-thumb is that you need to have ~17% of your salary saved/invested each year. If you save 17% for 40 years, get raises that match inflation, get a historically average rate of return on your investments, and withdraw at the commonly recommended rate to have your retirement savings last then you'll retire with EXACTLY the same income as you had when you were working. That is the perfect balance to me. You have a smooth transition from work to retirement with no change in lifestyle needed. No wasted youth and no poverty in retirement.

Of course, that 17% will be dropped by other factors. If your company puts in 5%, then you only need to put in 12%. Also, in addition to a 5% company match if social security is around and pays 5%, then you only need to put in 7%. And that savings doesn't need to be only in the 401k. Emergency savings and house mortgage principal count as well, so you can drop the 401k contribution even further. But, note that emergency savings and housing usually don't return as much as stocks, so don't drop much below 7%.

Other factors also affect the amount. A large inheritance means you can invest less. A few years of not saving (lost a job, or over-spent at some point) means you need to invest more.

I'm also at 18% in my 401k right now but I change it frequently.

 

[Fritzo]

My company contributes 50% up to 10%, so I do the full 10%.

 

[Fritzo]

Put in too little and you live a life of a pauper for 20-40 years after you retire. That is, if you can ever retire. And if you don't retire, why put any into a 401k (beyond the company match of course)?

Put in too much and you waste your youth.

A general rule-of-thumb is that you need to have ~17% of your salary saved/invested each year. If you save 17% for 40 years, get raises that match inflation, get a historically average rate of return on your investments, and withdraw at the commonly recommended rate to have your retirement savings last then you'll retire with EXACTLY the same income as you had when you were working. That is the perfect balance to me. You have a smooth transition from work to retirement with no change in lifestyle needed. No wasted youth and no poverty in retirement.

Of course, that 17% will be dropped by other factors. If your company puts in 5%, then you only need to put in 12%. Also, in addition to a 5% company match if social security is around and pays 5%, then you only need to put in 7%. And that savings doesn't need to be only in the 401k. Emergency savings and house mortgage principal count as well, so you can drop the 401k contribution even further. But, note that emergency savings and housing usually don't return as much as stocks, so don't drop much below 7%.

Other factors also affect the amount. A large inheritance means you can invest less. A few years of not saving (lost a job, or over-spent at some point) means you need to invest more.

I'm at 18% in my 401k right now but I change it frequently.

Of course, if you get Social Security on top of that, that'll make your Porsche payment

 

[tfinch2]

10% 401k. I put another 10% in ESPP.

 

[Engineer]

Of course, if you get Social Security on top of that, that'll make your Porsche payment

and my company pension (800+ per month) will pay for the gas!

Forgot to mention above that the company, by law, contributes 3% for a total of 14% to my Simple IRA.

Regardless, I feel like I'm running terribly behind. I guess the last 5 years have really played with my head, especially since I rode the wave all the way down (lost over 60% on paper at one point) and all the way back up. I'm with jmapleton above....I'm starting to wonder how much I trust a market that is manipulated by high speed trading and can cut you to the bone in the blink of an eye (I know...I have a $3,000 write off for the next 15 years (19 total)).

 

[Leros]

I put 10% of my income into my 401k, plus my employer's measly 3% match for a total of 13%.

I'm also putting 10% of my income into a standard savings account. Once I build that savings account up to the point where I can live off it for 6 months, I'll put that 10% into my 401k or some other investment.

 

[RPD]

The legal max.

 

[Dirigible]

I contribute the maximum. So it's $16.5k or $17k or whatever a year.

But I was in school with zero savings until I was about thirty. Late start.

 

[dullard]

Regardless, I feel like I'm running terribly behind. I guess the last 5 years have really played with my head, especially since I rode the wave all the way down (lost over 60% on paper at one point) and all the way back up.

From your numbers, it doesn't seem like you are much behind. Assuming you've been doing it for a while and will keep doing it.

The stock market dip is the best thing that happened to people who are consistantly putting money into their 401k. 63 months ago, the S&P500 was the same value as it is right now. Imagine two scenarios: one where it stayed flat for the 5.25 years, and one when the stock market dipped exactly as it dipped. Suppose you put $1000 a month into an S&P matching fund.

Case 1, flat market: After 63 months, you'd have $63000 (minus fund fees).

Case 2, dipped market: after 63 months, you'd have $77,220 (minus fund fees).

That is a 22.6% gain simply from the dip in the market. Don't think of dips or flash crashes as bad. Think of them as investment opportunities. They are only bad in retirement, and only then if you withdraw at the bottom. Instead, withdraw in retirement more than you need at the highs and ride out the bottoms.

 

[Engineer]

I know what you're saying dullard and I've read it before, but the psychological effect of watching your savings fall, especially a tremendous amount in a short while, is very tough.

As for being behind, I guess it's all in one's perspective. Compared to the general population, I feel like I'm miles ahead. Compared to people who call in on the Suze Orman show, I feel like a pauper, lol. Getting burned severely in the market a few years ago doesn't help, as I said above.

As long as I'm moving forward, staying out of debt and managing to still save while paying for college for my two kids (which has already started) without touching savings, I should be good to go. At this point, I can't wait to retire......although I have a long time to go. Work really sucks at times.

 

[postmortemIA]

another bragging thread. since majority is poor, they put 0%. "But you must put _% otherwise you'll be poor when you retire" says hypocrite. Well they are poor now. Try to walk in their shoes and put 10% of nothing left.

I put 6%.

 

[dullard]

another bragging thread. since majority is poor, they put 0%. "But you must put _% otherwise you'll be poor when you retire" says hypocrite. Well they are poor now. Try to walk in their shoes and put 10% of nothing left.

I put 6%.

I disagree. A bragging thread is a thread where people put in 10% or less BECAUSE they cap out at $17,000 and have an income so high that they can't contribute more.

Also, look into the savers credit. The government puts in $1000 for the poor, $2000 for a family. None of your own money needed.

In other words, (A) do nothing and have $0 in your 401k or (B) let the government put in $2000, let the company match that $2000, and have $4000 in your 401k. Which would I choose if I were poor? That $4000 would be 27.6% of a full time minimum wage job. No money out of pocket at all and you well exceeded the percent I gave. Of course, you have to qualify and actually have a job with a 401k.

http://money.usnews.com/money/blogs/planning-to-retire/2011/12/20/how-to-get-the-savers-credit

 

[Brovane]

I cannot put in more than 6% because I am over the limit for a high compensated employee so I put in 6% a year. Luckily my company has a Pension plan on top of the 401k so between the Pension and 401k I should come out ok for retirement. I could put in above 6% but then it would go into some type of deferred compensation plan not a 401k.

 

[oiprocs]

I don't have one and I'm 26. After reading this thread, I think I'm much behind. But I don't want to start until my student loans are paid off. $50k to go.

 

[Michael]

I would cap out at much less than 10%, and I do. I police my department and make sure everyone is putting in at least 1%. The minimum I really suggest is the max that your company matches (get the most free money possible), but 1% is a start. No one really misses 1% and if you increase it by 1% a year eventually your savings rate is OK.

The other advice (more advanced) is to watch what the different funds are doing and rebalance. If your company offers low cost index funds, they can give you a lot more return as low fees can really help your return. So if you are putting in a smaller % of your salary, at least make sure that you are not wasting a lot on fund fees.

Michael

Ps - now a bragging thread, I guess

 

[Jeff7]

The company matches 50% of the contributions I make, on up to 4% of my yearly wages. That 401k plan's investment options come with anywhere from 1.4 - 1.9% expense ratios, which aren't terrible, but it's certainly not great.

I'm planning on starting up an IRA sometime soon though, and throw some money at that as well. I'm liking the idea of index funds as an investment - very low expenses there. And what better way to diversify: Buy everything.


I'll have to calculate sometime to see that it all works out: 401k with the 50% match that's contributing to expensive investments, or forfeit the 50% match and dump all of it into the low-cost index fund investments. Every bit that the fees sap away is money that's not compounding, or rather, it's not compounding in my account, it's compounding in the 401k company's account.
(I'm no investing or finance expert though...I've just got a few books on the subject that I'm reading through now. :\)

 

[Demo24]

I think I put in 5%, and I get matched. Can't really afford to do anymore at this salary. Need to take a look at what I'm paying into though.

 

[edro]

12%
Company does 50% up to 6%, so my total is 15%.

 

[chimaxi83]

I'm only putting in 6% right now, and my company matches 80% of that. I have to do more research into my options because my some of my coworkers talk about different stuff they do, and I don't really understand lol

 

[Karsten]

I would put in whatever my company matches. Beyond that I feel you are better off paying for your own home. Think about it. You always have to pay to live someplace. Currently it is a buyers market, with many places VERY cheap. Consider a foreclosure even if you have some renovations to do. To sweeten the pot interest rates are at a historic low.
Considering all that spend the money beyond company match and pay your place off in 10 years and then you have the freedom to do whatever well pleases you.

 

[ch33zw1z]

6%, my company give 100% up to 6%.