Airencracken

I get a 401 (k) plan thru my work that I have yet to set up. I'm thinking of going with Magellen's Agressive fund, but I really have no Idea what I'm doing. But I know I should set up the 401 (k) so I'm going to try and do it soon. Any thoughts?

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ray

See if your company or the plan administrator has any information regarding retirement investing. I am now on my 3rd 401K plan (Putnam, Manulife, Vanguard) and before I ever enrolled, I was given materials, packets, websites to visit regarding my employer's 401K plan. There is usually quite a bit of information in there regarding the different options, investment strategies, and sometimes there was even an 800 number I could call to speak with a representative directly (that was with Manulife) so they could help me with my objectives.

Ask for all the plan materials first. Read through everything they give you, as it should explain the different funds they offer and the risk/strategy involved with each fund.

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penguin_hash

Very generally speaking, the closer you are to retirement, the less risk you want to take ... for example, all the retirees that got screwed the past three years.

I personally put everything into an indexed fund that matches the S&P500 because of the low maintenance cost. The provided literature is somewhat misleading as they give the fund's performance vs. a market index, but do NOT take into account the management cost. Unfortunately going this method guarantees you will never do better than the S&P500.

zippyjuan

Less than half of all funds will out-perform the S&P 500, so if you get a fund that tracks that index, you will achieve above-average returns. Like Penguin_hash says, you also need to look at how much the fund charges to manage the fund. Vanguard is one of the lowest expense family of funds. These expenses (for advertising, broker fees, etc) will reduce your rate of return. you do not want to pay any sales commissions either- neither a sales or redemption fee. Another good thing about index funds is their low tax burden. Index funds hold a specific set of stocks and are not trading them. These trades will add a tax burden if the stocks within the fund were sold at a profit- even if you did not sell the fund yourself. You see this on your 1098b form at the end of the year. A fund with a high portfolio turnover will have a higher tax burden. Index funds have the lowest portfolio turnover rates.

If your retirement fund is not a regular IRA you will be responsible for those taxes in the current year.

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VTGreg

In reference to the last post, invest as much as you can afford to into your 401(k). As long as there are sufficient optioins to invest the money, this is your best vehicle for investing for retirement. This is money that is being invested pretax and is accumulating untaxed. It only gets taxed when you withdraw money and that shouldn't be until you retire.


Right now I think the limits are 13% or $12,000. Absolutely invest the amount your company matches up to since that is free money, but also consider investing as much as you can in the account.

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guiseppewv

I know for a fact that 13% is not the limit. I had 15% in my 401k last year. $12,000 might be the dollar amount limit but 13% is not the percentage limit.

attgig

one question...if your company matches only 6%....are there advantages of using the 401k for the rest of the 9% of income vs putting into a rothIRA?



and the limit increased to 13k this year.

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ray

I would much prefer to have my retirement money in an IRA because I have the option of BOTH mutual funds AND stocks.

With every 401K i've been enrolled, I have only had the option of choosing some kind of fund.

Chgoman

Most people would say to put as much in your 401K as your employer will match. Then max out your Roth IRA, then put more in your 401K.

JackHammer

My take on 401K is go to the max. I think it's like $14k this year, I'll say put in the 14K. It's pretax money. Secondly, you can always borrow from your 401k as oppose to taking it out.

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guiseppewv

With a Roth IRA you can take out money that you deposited in your IRA at any time. You can't touch the earnings until you are 55.5 or 59.5, something like that. One drawback of the IRAs (Both the traditional and Roth) are that if you are sued you can lose your IRAs but your 401k can't be touched. Just one drawback that I remember.

I personally max the Roth out every year and deposit a nice percentage of my pay in my 401k.

Nija

I wish my company would match our 401k's

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