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Thread: 401k Help

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    #1

    401k Help

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    Okay, so I am eligible for a 401k at my current employer. I have zero clue as to how it works, how much out of each pay check I should put in it, do I want a 401k or a Roth 401k, I really do not understand any of it.

    Can someone break it down for me?

    I really like working for my current company and though I will not be at the same hotel (planning on leaving in a year and a half or so) I hope to stay with Marriott until retirement age.

    A little about our finances and what we earn: My paychecks are anywhere between 300-500+ weekly. I really wouldn't be comfortable putting any more than 15% away to start. Is that way too little or too much? Would I be committed to that amount if I find whatever I decide to be too much?

    As far as what we made last year: Collectively we made just over 50k that was taxable. 23 of that was from my income. We lived very comfortably last year and not much is changing for the current year. No babies will be happening in 2014 either. I do expect my income to go up from last year because I am making slightly more money per hour and consistently get more hours.

    Any advice or insight is totally welcome. I think DH has a TSP that he puts very little into and is set to a very low risk level. I really have no clue what that account looks like. Aside from that and our regular savings through Navy Federal, we have nothing set aside for our future.

    ETA- DH's income will go up because he picked up E5 last cycle but hasn't gotten paid for it yet.
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    #2
    Does your company have any matching for your contributions at all? If they do I would recommend contributing at the maximum level they match ... it's basically like free money. It's good that you say you're planning on staying with this company a while, because sometimes it can take a few years for you to be fully vested. It might make sense to invest more, but I would want to contribute at least as much as they'll match.

    There are max limits you can contribute to 401(k)s too, so keep that in mind when you're deciding how much to put away. If you want to contribute more than the max, might look into starting an IRA. A lot of people have both a 401(k) and an IRA.
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    #3
    Quote Originally Posted by Tojai View Post
    Does your company have any matching for your contributions at all? If they do I would recommend contributing at the maximum level they match ... it's basically like free money. It's good that you say you're planning on staying with this company a while, because sometimes it can take a few years for you to be fully vested. It might make sense to invest more, but I would want to contribute at least as much as they'll match.

    There are max limits you can contribute to 401(k)s too, so keep that in mind when you're deciding how much to put away. If you want to contribute more than the max, might look into starting an IRA. A lot of people have both a 401(k) and an IRA.
    Yikes. I had no clue they would match what I put in. I just looked on our company website and it does say the have a company match program. I can't seem to find out what the max is though....
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    #4
    Quote Originally Posted by Abbynormal View Post
    Yikes. I had no clue they would match what I put in. I just looked on our company website and it does say the have a company match program. I can't seem to find out what the max is though....
    I agree with Tojai's advice. Most employers match between 5-10%, I think. The difference between regular and Roth is that the the Roth you pay tax on it now but not when you take it out at retirement. Since you have a while before retirement, it's usually the better choice, IMO.
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    Quote Originally Posted by rocket_lizz View Post
    I agree with Tojai's advice. Most employers match between 5-10%, I think. The difference between regular and Roth is that the the Roth you pay tax on it now but not when you take it out at retirement. Since you have a while before retirement, it's usually the better choice, IMO.
    Wait, I'm confused. Roth is better because you pay tax first or regular 401k's are better because you pay tax after (in your opinion, of course)

    Also, I just found the information about the match. I am not eligible because I have not worked for Marriott for a full year yet. I will meet that requirement in September....
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    #6
    Do they not match at all for the first year, or they do but you're not fully vested?
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    #7
    Quote Originally Posted by Abbynormal View Post
    Wait, I'm confused. Roth is better because you pay tax first or regular 401k's are better because you pay tax after (in your opinion, of course)

    Also, I just found the information about the match. I am not eligible because I have not worked for Marriott for a full year yet. I will meet that requirement in September....
    The 401K is either regular or Roth. IRAs (personal retirement accounts not associated with employers) also come in regular and Roth.

    With ANY Roth account, you pay tax on the $$ you put in right now, but you do not have to pay tax on the increased amount you remove when you retire.

    For example, if you put 1000$ in a Roth now, you'd pay (guesstimate!) 15% tax, so you're only putting in 850$ really. But in 40 years at 5%, that 850$ would be 6,250~$, which you wouldn't have to pay tax on when you pull it out of the account to use for retirement.
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    #8
    Here's what is says under Who's Eligible.
    Retirement Savings Plan
    You're eligible to contribute to the plan after you complete 3 months of service.

    Before you can begin contributing, you must meet the eligibility requirement and enroll in the plan.

    You're eligible to receive company contributions after you complete one year of service and reach age 21, and if you're employed at the end of the year or meet death, disability or retirement requirements upon termination.
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    #9
    Quote Originally Posted by rocket_lizz View Post
    The 401K is either regular or Roth. IRAs (personal retirement accounts not associated with employers) also come in regular and Roth.

    With ANY Roth account, you pay tax on the $$ you put in right now, but you do not have to pay tax on the increased amount you remove when you retire.

    For example, if you put 1000$ in a Roth now, you'd pay (guesstimate!) 15% tax, so you're only putting in 850$ really. But in 40 years at 5%, that 850$ would be 6,250~$, which you wouldn't have to pay tax on when you pull it out of the account to use for retirement.
    Okay, that makes sense.
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    #10
    Quote Originally Posted by Abbynormal View Post
    Here's what is says under Who's Eligible.
    Ok so you can contribute now if you want. But your employer won't begin matching until September.
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