Roth IRA vs 401k and other ?s

[pvoisin]

Hello everyone

I am 23 years old and just completed the 13 month mark at my job and im eligible for my 401k plan. I have a Roth IRA with Trowe price as well although I have not been contributing to it (my dad started it for me and I took it over once I graduated).

My concern is where should I be investing my money as far as which retirement plan and how much. I have read enough to know where to put the money once its in an account I think. More aggressive Bc of my age at about 85% stock, and to contribute monthly for averaging purposes.

My employers 401k plan matches 25%
If I leave my company before 3 years I only keep 25% of what they matched,
3-5 years I keep 50% and after 5 years I keep 100%

Does this 401k plan sound good enough to invest in and if so what % of pay pay check should I be investing?
Should I invest in both Roth IRA and 401k?

I did not receive a raise or a bonus after my first year. From what I hear bonuses come more often then raises.
How concerned should I be?

Input would be greatly appreciated!

[disneysteve]

Welcome and congrats for thinking about all this stuff already at your age. This will put you ahead of most of your peers, and even ahead of many people much older than you.

I would recommend investing at least enough in the 401k to get the full company match. You say they match 25% but what is the limit? Get the answer to that question because that will guide your decision.

[snafu]

Raise/bonus: Do you like your job? Does your employer make positive comments about your attitude, commitment and enthusiasm? Since starting this employment, have you had a performance appraisal where your supervisor reviewed all the task your job required and how well you've done? Were there any shortfalls? If not, I suggest you list all your tasks and add an example of anything you've done that added value for the employer. If applicable, do you see yourself as a strong team player? If you've done tasks that aren't part of your job description, make a note of date, task and outcome. If you were able to fix a problem or find a way to do a task easier/faster/cheaper you need to be able to explain when the opportunity comes up.

Have you talked to HR or whoever looks after 401K to instigate the paperwork and get information about your choices? It's in your interest to get as much matching contribution [free money] as possible. I like DCA because it's easy and smooths out market gyrations.

[pvoisin]

The max annual contribution is $16500 (it goes up each year i think) and the company makes a contribution each quarter of .25 cents on the dollar up to 4%.

Up to 4% of what? Thats my next question for HR.

Depending on what my contribution to my 401k is I'm assuming will determine if I should save in my Roth IRA as well?

Also if I want to save for a house should I lower my retirement savings? Sorry for the added questions I'm just so new to this stuff and as an engineer I didn't take any business classes.

Raise/bonus:
As far as my job goes I absolutely love it. My boss has only said positive things to me since I got hired and i get the vibe he wants me to stay long term. I have contributed a lot although there was a huge learning curve starting out. I think my best bet is to let it go 1 more year and then start pressing for a raise once im a bit more comfortable. Snafu I'll def consider your input though before taking any actions.

Thanks for the replies

[disneysteve]

the company makes a contribution each quarter of .25 cents on the dollar up to 4%.

Up to 4% of what?

Up to 4% of your pay. So if you contribute 4% of your income, they will add in another 1%. Let's say you earn 50K. 4% would be $2,000 and they would match it with another $500.

Depending on what my contribution to my 401k is I'm assuming will determine if I should save in my Roth IRA as well?

Yes. In this case, the usual advice would be to put the 4% in the 401k to get the maximum match and then fund a Roth up to the 5K max if you are able.

Your ultimate goal should be to save 15% for retirement. That may or may not be possible early on, especially if you are also saving for a house. It all depends on your income and your expenses.

[Slug]

Agree completely with Steve. Set your 401k contribution at 4%, and then do all you can to max the Roth. Remember that any company match in your 401k, however small, is free money. As your salary increases with time, this becomes more and more important.

If you are a super saver and can afford both the max on the Roth and the 4% in the 401k, the next step would be to increase the 401k gradually up to the match.

[Like2Plan]

The max annual contribution is $16500 (it goes up each year i think) and the company makes a contribution each quarter of .25 cents on the dollar up to 4%.

Up to 4% of what? Thats my next question for HR.

Depending on what my contribution to my 401k is I'm assuming will determine if I should save in my Roth IRA as well?

.

Does your company match .25 on the dollar up to 4% . (meaning you would have to contribute 16% to receive the full match)

Or
Does your company match .25 on the dollar of your first 4% contribution?

[pvoisin]

I think your right Disneysteve (HR emailed me a similar situation). So say I make 50k a year to get the maximum match I need to deposit 16% of my gross income.. By the end of the year my total contribution will be $8000 with a total company match of $2000.

Because I will contribute 16% of my gross income to my 401k I will not be able to save in my Roth. Unless I find out somehow a Roth is better. After bill and "for fun" expenses the rest will go towards a house and other financial needs as they arise.

Thanks for everyone's input I'm sure I'll be posting again soon about how to invest properly

[pvoisin]

Wow I think I'm looking at this wrong. Perhaps it means I can only contribute 4% of my gross income to get the max match. In this case I will put in 4% to my 401k and max out my roth out afterwards.

I'm def stopping by HR to get this cleared up