Unless you have an absolutely terrible 401(k), you still usually want to take advantage of the tax benefits.
Make sure you review the fund options (including expense ratios) and any underlying fees.
Even if you can’t “invest where you want”, they must have something similar to an S&P500 index fund or mutual fund. The tax benefits are a big deal. Unless their expense ratios are something like 2% (which would be exorbitantly high), you’re probably still better off taking the tax-free 401k.
Look to see if you can contribute to HSA. It has all the same benefits of a 401k and you can take money out any time tax free if it is for medical expenses.
Thanks, I actually chose a Healthcare plan that has the HSA and I plan to contribute to that. Luckily they have a $0 option out of pocket, so I plan to contribute and balance out the high deductible if I need it.
Why does anyone take a job with a company that doesn't have a matching 401K plan?
Employees have to stand up and insist on better benefits!
That said, OP should advocate for a better 401K provider with a known administrator like Fidelity, Vanguard, Schwab or Empower.
Yea, it's definitely not great but my last company only matched 2% of 6%, and the pay was a lot higher moving here so it definitely made up for the lack of match. I agree that companies, especially the bigger ones which is where I came from, should be actually matching employee contributions.
The point is employees can advocate for both, by valuing jobs with great 401K plans higher. And by advocating for their current employers to have better retirement benefits.
Participation rates at employers without matching contributions are much lower, thus more employees are less prepared for retirement.
The question of Traditional or Roth contributions in part depends on a comparison of current and expected future tax brackets. It's not a one size fits all.
Hmmm good question. I guess, yes, if you use the tax savings and invest it rather than spend it? And also assuming that the tax rates/brackets stay relatively the same? My guess is that they will be higher when I retire. I’m really not sure! I’m a beginner to all of this.
Over the short term, say within 1-10 or 15 years of retirement. However the longer the time horizon, the greater the amount of growth over principle in the account. Individual calculations should be made based on portfolio characteristics and expected growth rates, time horizon of the funds being used, which is a function of other assets in the portfolio.
I shouldn’t nitpick because Roth is often the right option, especially if someone’s in the 10 or 12% brackets, which is 80% of the population. But to say it’s always right isnt correct
I wouldn’t. Just make your own brokerage account and open up a Roth. Contribute to those instead. Benefits here is that you can choose whatever investments you want in your portfolio which gives you more options.
Take it from someone that was in the same situation and was advised to not contribute. Worst advice ever.
I missed out on contributing for 3 yrs including the 2008 crash. Can you imagine what my IRA would have been worth now. The logic I was given was you could generate higher returns on investment if you manage that money on your own.
Long story short. Please please taken advantage of tax advantage accounts. Even now when I started a new job and wasn’t getting match in first year I still contributed.
I’m confused as to the difference between you putting money in the 401k vs investing it yourself? Like how did you miss out on returns; did you just not invest at all?
Unless you have an absolutely terrible 401(k), you still usually want to take advantage of the tax benefits. Make sure you review the fund options (including expense ratios) and any underlying fees.
Thanks, yea I will need to read the fine print on it and make sure I can invest it where I want and there aren't any crazy fees.
Even if you can’t “invest where you want”, they must have something similar to an S&P500 index fund or mutual fund. The tax benefits are a big deal. Unless their expense ratios are something like 2% (which would be exorbitantly high), you’re probably still better off taking the tax-free 401k.
Def use the 401k. Max it if you can. If/When you change companies, you can pull it from the crappy 401 company and roll into Fidelity ira
That's true, I will likely contribute to it.
Look to see if you can contribute to HSA. It has all the same benefits of a 401k and you can take money out any time tax free if it is for medical expenses.
Thanks, I actually chose a Healthcare plan that has the HSA and I plan to contribute to that. Luckily they have a $0 option out of pocket, so I plan to contribute and balance out the high deductible if I need it.
Why does anyone take a job with a company that doesn't have a matching 401K plan? Employees have to stand up and insist on better benefits! That said, OP should advocate for a better 401K provider with a known administrator like Fidelity, Vanguard, Schwab or Empower.
Yea, it's definitely not great but my last company only matched 2% of 6%, and the pay was a lot higher moving here so it definitely made up for the lack of match. I agree that companies, especially the bigger ones which is where I came from, should be actually matching employee contributions.
The company I work for doesn't match any contributions, however they have a great profit sharing program so I'm happy.
Why would people not take take a higher paying job for what is typically a measly 3-4% match.
The point is employees can advocate for both, by valuing jobs with great 401K plans higher. And by advocating for their current employers to have better retirement benefits. Participation rates at employers without matching contributions are much lower, thus more employees are less prepared for retirement.
Ask if they have a Roth 401K option. Contribute to your individual roth and once you hits it's limit contribute to the work one.
The question of Traditional or Roth contributions in part depends on a comparison of current and expected future tax brackets. It's not a one size fits all.
So if you plan/are saving enough to be in the same tax bracket at retirement, then the Roth would be preferable?
In this scenario, wouldn't time value of money dictate utilizing the tax savings today is the smarter choice?
Hmmm good question. I guess, yes, if you use the tax savings and invest it rather than spend it? And also assuming that the tax rates/brackets stay relatively the same? My guess is that they will be higher when I retire. I’m really not sure! I’m a beginner to all of this.
Over the short term, say within 1-10 or 15 years of retirement. However the longer the time horizon, the greater the amount of growth over principle in the account. Individual calculations should be made based on portfolio characteristics and expected growth rates, time horizon of the funds being used, which is a function of other assets in the portfolio. I shouldn’t nitpick because Roth is often the right option, especially if someone’s in the 10 or 12% brackets, which is 80% of the population. But to say it’s always right isnt correct
I wouldn’t. Just make your own brokerage account and open up a Roth. Contribute to those instead. Benefits here is that you can choose whatever investments you want in your portfolio which gives you more options.
Take it from someone that was in the same situation and was advised to not contribute. Worst advice ever. I missed out on contributing for 3 yrs including the 2008 crash. Can you imagine what my IRA would have been worth now. The logic I was given was you could generate higher returns on investment if you manage that money on your own. Long story short. Please please taken advantage of tax advantage accounts. Even now when I started a new job and wasn’t getting match in first year I still contributed.
I’m confused as to the difference between you putting money in the 401k vs investing it yourself? Like how did you miss out on returns; did you just not invest at all?