Should I be investing more at my age for retirement?

[Triforceofcourage]

I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

 

[radioouman]

Alright... Figure out when you want to retire. Then figure out how much you'll need to live (yearly). Then multiply that by 10 times, since you'll likely have your retirement savings converted to an annuity at 10% when you retire, and you'll live off the interest of 10% per year.
Then use that value as the future value, and calculate the monthly amount that you'll need to put away in order to achieve the total value, and of course include an average interest rate of say 10% or 11% or whatever you feel like you can earn with your investment options.

Excel has some nice financial functions to help you.

 

[Minjin]

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Depends on how much you make and how much you care about your future. Personally, I'm a fan of maxing out 401k contributions (assuming you also contribute your full Roth every year as well).

 

[DaveJ]

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Save as much as you can, as early as you can. Compound interest really pays off.

If you want your retirement investments to outlast you, a general rule of thumb is to withdraw no more than 4% of the total amount per year. So for an annual income of $40K in retirement you'd need $1 million in funds. Hopefully you'd be spending less than that, assuming no house payments and reduced expenses. Sounds like a lot of money, but you've got time on your side if you start investing early.

Dave

 

[alrocky]

Assuming you can afford to, then yes, you should be investing more. A rule of thumb or starting point is that you should be able to invest at least 10% of your income toward retirement.

You can toss $15,500 into your 401(k) this year, $4,000 into your year 2006 IRA and another $4,000 in your year 2007 IRA.

 

[Zenmervolt]

Originally posted by: Minjin

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Depends on how much you make and how much you care about your future. Personally, I'm a fan of maxing out 401k contributions (assuming you also contribute your full Roth every year as well).

You do realise that the maximum 401k contribution is 99% of your pre-tax wages, right? Most of us cannot afford to put that much of our income into savings.

If you mean max out your company's matching plan, then I'm with you 100%.

ZV

 

[her209]

Originally posted by: Zenmervolt

Originally posted by: Minjin

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Depends on how much you make and how much you care about your future. Personally, I'm a fan of maxing out 401k contributions (assuming you also contribute your full Roth every year as well).

You do realise that the maximum 401k contribution is 99% of your pre-tax wages, right? Most of us cannot afford to put that much of our income into savings.

If you mean max out your company's matching plan, then I'm with you 100%.

ZV

I don't think that true. Can anyone else confirm?

 

[mugs]

Originally posted by: her209

Originally posted by: Zenmervolt

Originally posted by: Minjin

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Depends on how much you make and how much you care about your future. Personally, I'm a fan of maxing out 401k contributions (assuming you also contribute your full Roth every year as well).

You do realise that the maximum 401k contribution is 99% of your pre-tax wages, right? Most of us cannot afford to put that much of our income into savings.

If you mean max out your company's matching plan, then I'm with you 100%.

ZV

I don't think that true. Can anyone else confirm?

The most I can put in my 401k is 20%. But I realize that could just be my company's policy.

 

[flyfish]

http://wps.fidelity.com/401k/pfp/rp/conlimit.htm

 

[thomsbrain]

Originally posted by: Zenmervolt

Originally posted by: Minjin

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Depends on how much you make and how much you care about your future. Personally, I'm a fan of maxing out 401k contributions (assuming you also contribute your full Roth every year as well).

You do realise that the maximum 401k contribution is 99% of your pre-tax wages, right? Most of us cannot afford to put that much of our income into savings.

If you mean max out your company's matching plan, then I'm with you 100%.

ZV

edit: seems like $15,500 is the max for 2007.

 

[KahunaHube]

http://beginnersinvest.about.com/od/401k/a/aa122104a_4.htm

"401k Maximum Contribution Limits
2004: $13,000
2005: $14,000
2006: $15,000 "

 

[alrocky]

2007 401(k)

Elective deferrals (401(k) plans). For 2007, the limit on elective deferrals for participants in 401(k) plans and SARSEPs (excluding SIMPLE plans) is $15,500.

 

[huberm]

you should invest as much as possible, but don't forget to live and enjoy life too (ie don't stockpile your money so much you don't enjoy your life, because you might not live to retirement).

 

[Minjin]

If you're actually maxing out the contribution limit for 401k then you're in good shape. Most companies will limit your deferral to around 20% (my company is 18%, which I use all of). That means a pretax income of ~77k to max out the yearly contribution. The military is one of the exceptions. Their program isn't quite a 401k but its similar and they'll allow you to contribute every penny of your paycheck.

The order of retirement investing that we've talked about on FWF and I agree with is this:

1. Contribute to 401k up to limit of employer match (i.e. get all the free money you can)
2. Max out Roth IRA
3. Max out 401k

Obviously, it isn't a hard and fast rule and every situation is different...

 

[Zenmervolt]

Originally posted by: KahunaHube
http://beginnersinvest.about.com/od/401k/a/aa122104a_4.htm

"401k Maximum Contribution Limits
2004: $13,000
2005: $14,000
2006: $15,000 "

Interesting. My company's system allows us to allocate up to a 99% contribution rate. My fault. I'll stick to the car threads.

ZV

 

[regnez]

Originally posted by: DaveJ

Originally posted by: Triforceofcourage
I am currently 24 and investing $160 every two weeks into my companies 401k plan in an S&P 500 index fund.

Should I be investing more?

Save as much as you can, as early as you can. Compound interest really pays off.

If you want your retirement investments to outlast you, a general rule of thumb is to withdraw no more than 4% of the total amount per year. So for an annual income of $40K in retirement you'd need $1 million in funds. Hopefully you'd be spending less than that, assuming no house payments and reduced expenses. Sounds like a lot of money, but you've got time on your side if you start investing early.

Dave

Well said. :thumbsup:

 

[alrocky]

The earlier the better: or when $20,000 trumps $60,000

Investor One begins at age 25 and contributes $2,000 each year for ten years and then stops adding money to the account. Investor Two invests $2,000 each year for 30 years, starting at age 35. Assuming both earn an investment return of 8% per year after expenses, can you predict which investor will come out ahead?