Quote:
Originally Posted by billchrz
Wow...Thanks for that great response!
Currently 11% of my gross salary is going into the 401k (2% mine and 9% company). Basically my employer will contribute 9% of annual salary if the employee contributes 2%. Should I put an additional 8% into the Roth's for a total of 10%?
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YES- you need to set aside 10% of your income.
This will give you some benefits
a) it will teach you to live on less than you earn
b) in a crunch (high medical bill for example) you could stop 10% contributions without disrupting budget/ EF.
c) you will save considerably on taxes if you put the 10% into the 401k.
I would only put the whole 10% into 401k (point c above) if the 401k had good funds.
78k salary
suggests you should set aside $7800 per year.
2% of 78k is $1560 now
I would contribute $5000 to a n IRA for you
I would up 401k to 4% ($3120).
You will not see take home pay drop by a full 2% if you add more to the 401k because the money going into 401k is pre tax.
A few points-
1) make an attempt to set aside 10% of any bonuses you receive. Open an IRA for spouse, for example, with 10% of any bonus.
2) make an attempt to increase 401k contribution by 1% per year (bank a portion of the raises you receive)
3) The yearly 401k max is $15,500. As you approach this limit, you will need to rethink some other issues.
A few questions
1) what is 401k invested in now?
2) how large is your tax return?
3) do you itemize deductions (and deduct mortgage interest)?