New 401(k) set up. . . where should i allocate ?

[csendlak]

Ok I am 22 years old and I want to set up my 401 (k) but I have a few questions about what to do.


How much of that should be pre-tax deferal and how much should be Roth after-tax?

These are the packages available, where should I allocate?:

Davis NY Venture (2T)
Bond Fund of America (3A)
American Balanced Fund (3E)
Capitol Income Builder (3F)
Europacific Growth Fund (3G)
AMCAP Fund (3K)
Columbia Acorn A (LT)
Growth Fund of America (3L)
American High Income Trust (3S)
Fidelity Adv New Insights (EI)
Pacific Capitol Small Cap A (IB)
Invesco Stable Value Trust (IM)
Van Kampen Comstock (JD)

Any Help would be greatly appreciated.
Thanks

[PennySaved]

I love these questions! This is just one person's opinion, but since you are 22, I'd say:

50% to Growth Fund of America
35% to American Balanced Fund
15% of Europacific Growth Fund

Surprised to not see any index funds as options.

[Broken Arrow]

Hi, welcome.

Are you getting employer match?

Who is your investment company?

What are the tickers?

May I ask what your gross is?

[csendlak]

Thanks for the help guys I'm really anxious to start investing just need to figure out what direction to take.

I don't believe I'm getting an employer match, unfortunately. The new participant enrollment form says BPAS is the investment company. Gross pay is $45,000. I'm not sure if once I'm enrolled more options are available, but these are the only ones listed on the enrollment.

Also, I wanted to start buying stocks myself like through etrade or scottrade. Do you have any suggestions for which is better and where to start with something like that?

[red92s]

I don't believe I'm getting an employer match, unfortunately.

A good target would be 15% of your GROSS pay towards your retirement, or around $6500-6700 in your case. With no employer match, I'd first focus on maxing out a Roth IRA ($5000 per year) and put the remainder ($1500-1700) into the 401(K).

Also, I wanted to start buying stocks myself like through etrade or scottrade. Do you have any suggestions for which is better and where to start with something like that?

I highly recommend you not go go down that road until you have a six month emergency fund in place, all your debt paid off, and the funding plan for your retirement accounts figured out.

[csendlak]

Ok, so put the focus on setting up the 401 (k) and paying school/auto debt before investing in the market, check.

Thanks again

[Broken Arrow]

Yeah, basically what Red92 said.

Just to clarify, with many of the mutual funds you have listed, you will still be investing into the stock market. You just won't be doing it through individual stocks.

And believe me when I say that you're not missing out by not buying individual stocks. In the long run, I think most people will do just fine even if they never do anything beyond passive investing in mutual funds....

[red92s]

Ok, so put the focus on setting up the 401 (k) and paying school/auto debt before investing in the market, check.

Thanks again

I think you should try and be free and clear of all your debt with the possible exception of student loansbefore starting on the 401(k).

[conancare]

Hi csendlak,
The proper direction to start with safe investing is to invest in government bonds and Mutual funds and simultaneously learn the market so that you can later start on with stock trading activity.

Regards,
Conan

[elessar78]

A good target would be 15% of your GROSS pay towards your retirement, or around $6500-6700 in your case. With no employer match, I'd first focus on maxing out a Roth IRA ($5000 per year) and put the remainder ($1500-1700) into the 401(K).

RED,

I'm in a similar boat as the OP and don't have an employer match to my 401(K). Currently I'm contributing 6% of gross ($40K/year) and I'm just curious as to the logic of maxing a Roth IRA before contributing to my 401(k)?

[csendlak]

Ok so I went and checked to make sure, the company does match up to 3% (sweet!) So would this change the way i should invest this as far as the pre-tax and post-tax goes ??