workplace 401k

[rodeosweetheart]

If you have a workplace 401k, do you contribute to it? Do you contribute just to the match or do you go beyond that?
I am in the age where I can do catch up contributions but I struggle with wondering how much to contribute and seem to change my amount with more frequency than would evidence conviction as to how to handle this one.

What is your take on contributing to your workplace 401k (or 403b, if that is what you have)

[oldhat]

Not only should you contribute to your 401k, you should be putting every available penny into it, up to the allowable max and including catch-up contributions. At the very least, you should meet your employer match--not doing so is just turning down free money.

[herbgeek]

+ 1 I always max mine out, have always maxed it out except for the first 3 years of working. I started with a small percentage, then every time I got a raise, I put the raise into the 401K instead of inflating my lifestyle. After 3 or so years, I was then max'd out (this was the 80s when decent raises were a norm).

I like that my money is accumulating tax deferred (this also applies to a Roth but I think the earnings there would be tax free and not tax deferred, but I could be wrong).

My big fear is that the government is going to change the rules later down the line, or decide (like Greece) to just help themselves to a percentage of it - over and above the taxes I will pay on it when I withdraw it.

[Simplemind]

Herbgreek +1. I maxed mine out within a few years. Before that I inched up by raising it with every raise and a bit more every quarter. When I retired (early) two years ago I had more in that account than my pension. Since I was used to living with half the salary due to my savings, I live comfortably on my pension and won't need to touch savings for years.

[rodeosweetheart]

I like that my money is accumulating tax deferred (this also applies to a Roth but I think the earnings there would be tax free and not tax deferred, but I could be wrong).

Yeah, earnings in a Roth are tax free, rather than tax deferred

My big fear is that the government is going to change the rules later down the line, or decide (like Greece) to just help themselves to a percentage of it - over and above the taxes I will pay on it when I withdraw it.

I know what you mean.

I have always contributed up to the match, since as you all say, it's free money. I haven't contributed up to the catch up, as I would have no money to live on. I'll be 59 1/2 in a year. So there is that, too. My 401k at work is not my only tax deferred account.

So there are those factors to consider. Keep the thoughts coming, this is helpful to hear what others are doing/have done.

[rosarugosa]

I've always contributed to the match, but only in more recent years have I steadily increased contributions, though still not maxed out (wish I could say that I was!) We have decent funds to choose from, but I have wondered lately if my contributions beyond the match shouldn't be going into a Vanguard account instead, since fees would be lower. I'm mostly in index funds in my 401K, so my fees aren't too high as it is.

[ApatheticNoMore]

I think it's probably better to max out the ROTH first. However putting in the 401k can have certain advantages such as lowering your taxable income (this has enabled me to take other deductions like education credits and occasionally a traditional IRA as well when it's advantagious. I NEVER itemize so these are strict right off the top deductions that don't involve itemizing, you can't take them if your taxable income is too high). Also if you think laws will change for Roths by putting some in a Roth and some in the 401k you are hedging your legal bets so to speak.

On the other hand my Roth money seems to perform much better (less fees also), and after 59 1/2 will never again be taxed. If one is near 59 1/2 I think it's a no-brainer to put the money first in a Roth, but more risky if one has decades as in several decades laws can change a lot ....

Matching, well my company will at max contribute $500 a year to the 401k (no matter what one's salary is). So yes I take it. But no noone is going to eat anything but catfood from that contribution. If that was all I saved for retirement I might as well invest in catfood companies (at least keep up with inflation on my food budget ...).

I have never maxed unfortunately. It's quite a lot of money, people are either putting a large percentage of their gross into 401k or earn really high salaries to hit it. Of course I've never (even for one year) exclusively contributed to 401ks either, or even strictly to retirement funds (I'm always throwing a little money here and there at non-retirement investments as well, even if much of my saving is towards retirement).

[bUU]

Maxing out my 401k since my first day of work after university, thirty years later it still isn't worth enough to fund my retirement, but it is getting there. I can probably work another ten years and I'll be able to live off those proceeds for the rest of my life. If it wasn't for the tax advantage the 401k offers, I'd probably have to work another twenty years to afford retirement at a cost of living comparable to what I enjoy today.

I have very little money in a Roth, for the same reason rodeosweetheart mentioned: I don't trust the country to live up to promises in the future that it makes now. Besides, the folks who benefit from Roth are those who will be taxed less on the money when putting it in than they'll be taxed when pulling it out, and that's generally younger folks since they generally earn more as they get older. Eventually, as you get raises and promotions, the benefit of Roth declines (and if you're lucky, gets taken away, as folks earning more than $130K cannot even make new contributions to Roths).

My company doesn't match (the bums) and offer really crappy and expensive choices. It is still worth going into the 401k, if you're going to max out the limit. If your 401k investment choices are crappy, though, you are better off fully funding IRA contributions up to the limit that you can do so tax-advantaged. Then put the additional amount into the 401k.

A lot of people where I work do that, because our choices are so crappy, and that actually resulted in a situation where there was a big imbalance between how much highly-compensated employees contribute and how much other employees contribute, so much so that the law required that some of the contributions made by highly-compensated employees was returned to them and taxed. (They eventually found a loophole going forward to avoid that in the future.)

[ApatheticNoMore]

I did some caluclation and maxing out might not be as difficult as I thought. I could try for a year and see (I'm not much for commitment :)).

Like I said I do some saving in after tax accounts (ROTHs and just plain taxables) and it's really *hard* to save lots of money after tax (I'm sure I don't go to as extreme measures as some though - so my hard might be your easy but ...). But the before income tax thing seems to make more difference than I ever intuited it would now that I'm trying to crunch some actual numbers! :) Of course state income taxes alone in this state are 10%, I know my tax rate, it still isnt' real until you crunch, a bias to think in after tax terms I guess. Not that it would be the easiest thing in the world for me to max, but it's not as daunting as I thought.

[Spartana]

I didn't have a 401k but a 457 instead. It doesn't have employer matching but it is tax deferred and (the best part) you don't have to wait until you are 59 1/2 to start collecting , you can do that at any age as long as you leave that job. So I maxed it out each years. I would do the same with a 401K too and pay into it as much as I was allowed unless I had debt. If I had debt, I'd probably still do the max it just to reduce my taxes unless the debt had a high interest rate or made it so I couldn't sleep at night from worry..

[Rachel]

I have never heard of anyone regretting that they put as much money as they could into a 401 (or a 457). The tax advantage makes a big difference and it comes right out of your paycheck.

[rosarugosa]

I just decreased my federal withholding again and bumped up my 401k contribution another by 1%. Every little bit helps!