In Australia, the equivalent 401K system requires employer to pay 12% of salary to their choice of managed fund. I'm just saying...time to consider working and retiring in a country of beautiful beaches.
Agreed. i became somewhat a minimalist a couple of years ago and started trading buying things for experiences. one of the best decisions i ever made. didn't realize how much money i had for experiences until i gave up buying a bunch a crap. the fight club message that the things you own end up owning you is so true. a lesson i wished resonated with me when i initially saw the movie. i still pay myself first, but definitely enjoy life afterwards.
Just do the 401k match and thats it. You're way too young to be saving money, enjoy your youth while you still can.
The fact that you are asking this question means you are better off than a lot of youngsters. One of Warren Buffett's biggest regret is that he didn't start investing until he was 13. He believes that had he started investing when he was 11 or 12, he would be even richer now. When I was your age, my finance was a mess. CC debt was out of control and my credit score got hammered. It took me 7 years to fully recover, and now I'm over 800. It makes everything so much easier when you want to finance anything, from a business to a house. I've learned a lot in the mean time. Here is my advice: 1. Use CC as cash cards (pay them off every month) to get the reward and build up your credit. Don't leave any balance on them (not even a little, because it will be a slippery slope). 2. Automatically deposit a portion (between 1/5 to 1/2 of your salaries into a savings account, and don't withdraw unless you absolutely have to. With that saving, you can then divide it up into stock investment, saving for a mortgage down payment, graduate school tuition (if you want to go), and some emergency cash. Don't worry about how little the divided portions are. You are young, and if you do this consistently, they add up quickly. 3. Max out your employer match for your 401K, and then do a Roth IRA. 4. Live within your means. Have cheap fun (if you live in Houston, try roadtrips with friends to New Orleans and Corpus Christi before you fly to Orlando/NYC/LA/Europe). I've done all of them, and more $ doesn't equal to more fun, trust me. 5. Surround yourself with smart friends and great mentors. This is one of the most important and overlooked thing when people talk about finance. Your social circle and support system will have major impacts in your life. You will get mixed advises from this type of forum. Some of them were serious, and some weren't. Go to a finance specific forum or buy a personal finance book. Just remember, you are in a great position in life (asking this question while young). Don't squander it.
At your age, you should be putting 80% to 90% in stocks. The difference should go into bonds (or other fixed interest investments). As you get older, you will want to decrease your stock exposure. As the money grows, you might need to re-evaluate your tolerance for risk. Stocks can drop 50% in value. If you can not tolerate that drop, you will need to reduce your stock exposure. The above advice is for long term investing. You need to match your investments with your investment goal. For example, Goal: Buy a car in three years with a $5000 down payment. This is a short term goal. The investment vehicle should be savings account or money market or bank CD. These investment have little to no down side risk. Goal: Buy a $100,000 house in 10 years with a 20% down payment. This is an intermediate goal. The investment horizon, 10 years, allows for some stock exposure. You could start with a 20% stock exposure, which you trim down to 10% at 5 years and 0% at 10 years. Goal: Retire at 55 with $1,000,000 in the bank. This is a long term goal. You will need to start out with a heavy exposure, like 80% or 90%. By the time you retire, the stock exposure should be trimmed to 50% to 60%.
If the government will pay for it, then yes it's probably worth it assuming he doesn't do it halfheartedly. Otherwise it depends on the line of work or the career he's trying to move up in, but I would say this is false in today's environment. Experience and connections will be more valued, especially since he has a job now.
You're 23 and have your first job, but take all the "have fun and spend it" advice with a grain of salt. Now, you're probably saying to yourself, "Now, I'm gonna go out, and I'm gonna get the world by the tail, and wrap it around and put it in my pocket!!" Well, I'm here to tell you that you're probably gonna find out, as you go out there, that you're not gonna amount to Jack Squat!! You're gonna end up eating a steady diet of government cheese, and living in a van down by the river!
Maybe for simplicity of having all of your monies in the same place. My preference has been to roll 401K monies into an IRA, where I have an unlimited number of investment choices. Thus, I only have investments in my 401/403b plan and a single IRA. If you leave monies behind in your previous employers, that is just another snail mail address you have to update when you move. Your previous employer can go out of business or can be bought out, which also can complicate matters.
This. To the couple of people saying to not worry about saving now...good luck working until you're 70. Personally, my goal is to retire by 55 or 60 and seek less demanding ways of making supplementary income to go with my retirement savings. You could invest $1000 a year for the next 15 years, then stop saving completely and still end up with more money than someone who waits to start saving/investing until 15 years from now. Without question, procrastination is the most common cause of financial failure. You're doing good to be maxing out a 401k at 23 though. I would see how much you have left after expenses and put a chunk of it into a Roth and use a little as fun money. My philosophy is to not skimp on traveling (within reason) and unique experiences, and to spend as minimally as possible on the day to day "stuff" that doesn't matter in the long run (ie gadgets, toys, cars, clothes, fancy furniture).
Do the employers have to pay the 12% in addition to the salary or in lieu of the salary? For example, if an employee made $100,000, would they get $100,000 and have an additional $12,000 go into the fund or would they receive around $90,000 and have around $10,000 go into the fund?
Nice thing about those low interst loans is that you are borrowing your own money and the interest you are paying goes back to your own 401k and not some bank.
Well said. It's never to early to start investing in an IRA. Even just $1000 a year starting at 23 you're probably better off than most. We live in tough economic times so it's important to save and make smart, financial decisions. While I do advocate the have a nice trip or meal, that's once in a while. I do not believe in going out and spending everything in a 3 year time span nor not doing any investing before 30. That's just money wasted and plain stupid. Live within your means.
