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how to decide on if i should start a 401k

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  • #16
    It is difficult to really advise without knowing your current tax situation and your future tax rate at retirement. Also, we don’t know how much you are planning to contribute.
    I recently read (on another financial board) about a Dad that regretted recommending his DD contribute to a 401k to get the match. He discovered that contributions and match money were being 100% consumed by monthly administrative fees and his DD could not make any in service rollovers — so she couldn’t do anything about it. I believe she was working part time hours possibly minimum wage — so this might not apply in OPs situation, but it is something to be mindful of.
    It seems to me that more companies are passing on some of the 401k administrative/ record keeping fees to participants— either a fixed fee or as a percentage of assets.

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    • #17
      The choice of administrator, fees, seeming lack of transparency, and both future employment and vesting uncertainty make this an understandably tough decision. In your shoes, I'd probably continue to make funding the IRA my priority. Whether or not I funded the 401(k) in addition to the IRA would depend on how much more information I could unearth (and what I discovered), and how much I would be able to contribute. If I were planning to contribute, let's say, $250 a year, I wouldn't do it, because the eventual rollover fee would be a ridiculously high percentage. Any possibility of moving from temp to permanent at the job? It might be an easier decision at that time.

      P.S. FWIW, I believe there's very little in personal finance that is a "no brainer." Careful consideration and personalization is always a good idea. Perhaps one of the "no brainers" is "do your homework" which it sounds like you are doing.

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