401K worth it?

[cicy33]

I have a 401K at work. They do match but not the same rate as my investment, they do 1/2 to what I do. I can't afford much more than 3% but am wondering if I would be better cancelling it and using the money that I am investing and putting it in a savings account or something else. I have been investing since last october.

[disneysteve]

The company is giving you an instant 50% return on your money. You put in $1 and they match with $.50. You can't possibly beat that on your own. Plus, the 401K money grows tax-free until retirement. You'd be nuts to pass that up.

[Ima saver]

cicy, I agree with steve. Stay right where you are. I wish I could get 50% interest.

[m3racer]

This is a no-brainer...take advantage of your 401K!!

[txex86]

Always take advantage of a 401K, especially if your company matches.

[Tree0164]

Take advantage of the match. That is free money.

[autoxer]

Originally Posted by cicy33

I can't afford much more than 3% ...

Why do you feel like you can't afford much more?

I can't afford to not invest in my retirement. I my 401k.

[Daylily]

Keep putting money in the 401k. I am starting a new job soon and I am so upset that I can't contribute to the 401k for the first six months.

Suze Orman gets mixed reviews on this site but I do recall something she said once. It was something along the lines of.... if you're worried about money now, how do you think you'll be in 20 years?

Stick with the retirement fund.

[autoxer]

Remember: Pre-tax contributions reduce your federal taxes now, so saving more may cost you less than you think!

[cicy33]

Originally Posted by autoxer

Why do you feel like you can't afford much more?

I can't afford to not invest in my retirement. I my 401k.

because I have bills to pay and am also trying to save an emergency fund. by no means was I saying I was going to cancel it. I was only asking if it was a wise idea or could I build it faster another way. so I am investing what I can afford and no more. what is the point to saving all my money for retirement if I can't pay the bills and my lights are shut off. I am trying to do both.

[LuxLiving]

I think you are okay where you are getting the match - it is more than you'd get investing the money elsewhere. I understand what you are saying about the bills, but if you concentrate all of your efforts on paying off any CCs and other debts, at the end of a few months/years you should be in a better place to where you can afford to put more back.

Have you read Automatic Millionaire by David Bach? In that book he explains how this all works to your advantage. I couldn't get Hubster to at first understand why we needed to do this and HOW we could afford it, so we started slowly w/only 1% and have slowly increased it up to 15% as other bills went away. You might want to read that book and also the Wealthy Barber - two that are very good at explaining this stuff. Try your local library for them.

[Scanner]

because I have bills to pay and am also trying to save an emergency fund. by no means was I saying I was going to cancel it. I was only asking if it was a wise idea or could I build it faster another way. so I am investing what I can afford and no more. what is the point to saving all my money for retirement if I can't pay the bills and my lights are shut off. I am trying to do both.

Well, you bring up an interesting point - the old "Pay Yourself First" myth.

Truth is, you have to pay yourself last (your retirement) because you have obligations to meet and if you are living in the red, credit card interest could weigh you down and you may be forced to liquidate your 401(k) and pay a 10% penalty.

Still. . .it kinda begs the question.

If your credit card is 20% interest and you get a 50% match from your employer, no risk, and you pay a 10% penalty, you still make out.

Kinda weird when you think about it.

[cicy33]

In all truthfulness I could probably do more but I don't want to be so sufferingly poor now just so I am rich at retirement, I mean what is the point? You have to have some fun now. I am not a person that spends $50 a week at walmart but there are things we like to do, like swimming, small vacations and things like that. I am currently investing what I can afford and still have some money left after I pay the bills and buy food and put gas in my jeep, so that we can have a little fun. my big expense is usually groceries and by that I mean that is where I do my spending. Though I try to keep that as low as possible. I only buy at walmart what I need. I also really want to save an ef so that we can be prepared for our unexpected expenses too.

[disneysteve]

cicy33 - You make a good point that sometimes gets forgotten. Sure, everybody should be saving at least 10% of income for retirement, but the reality is that not everyone can afford to do so, at least not right away. When we first started investing 15 years ago, we were putting away 6% of our take-home pay. Gradually over the years, as income rose and other bills went away, we've increased that and are now putting away 17% of gross income and will increase it to 18% as of July 1.

If all you can comfortably manage right now is 3%, that is great. There are so many people saving nothing that nobody should criticize you for saving "only" 3%. Just don't leave it at that. If you get a raise, direct part of it toward savings. If you pay off some debt, direct part of the money you were paying toward savings. Keep looking for places to trim expenses and direct some of the extra toward savings.