401k Match Question

[mrpaseo]

Looking at my wife's 401k, the material says that her match is 4%. When I look at the amount that they are investing, it appears they are actually investing 4% of her income not the amount that she invests.

Does the amount that she invest make a difference? She is currently putting 46% of her income into the 401k (This will max the investment by the end of the year). Doing the math, when looking at what she is investing, they are matching about 8%.

Thoughts?

[mrpaseo]

Pre-retirement investing

.....

[Tabs]

I don't know exactly what you are saying. Hopefully, someone else will chime in.

All I vaguely recall is that the Vanguard STAR is one of those starter funds Vanguard created with a low minimum requirement to get more new people investing with them. (Their usual funds have higher requirements but is not at all unreasonable by industry standards.)

For a do-all, static index fund, the STAR isn't all that bad out there, but many believe that they can do better... and with the right asset allocation, I have to agree.

As for how much % bond is too much, well I don't know anything about your wife, such as what her current age is or when she is planning to retire, or what her risk tolerance looks like. Suffice to say, the STAR is designed to fulfill the most important role in investing, which is getting people started in the first place (and get them to go with Vanguard). At the very least, she has accomplished that.

Anyways, just rambling because I have too much time on my hands right now. Haha.

If you decide to create your own asset allocation, I would forego the STAR fund entirely. Oh! Also, please take a look at the Target Retirement funds first, before going out on your own. This is also a do-all fund that may just fit the bill. If it does, it will save you the hassle of doing it yourself... unless you want to do it yourself.

[mrpaseo]

I accidentally posted twice in the same thread, it should have been two threads

I do all the investments for the family so my wife's tolerance is... well, my tolerance.

As for age, we are 42 (Both of us as we were born three days apart).

We have other Vanguard funds in our retirement accounts so we were already with Vanguard when we started the (Pre-retirement) STAR fund. I do enjoy managing the investments but do not take the time to do the best I can. Usually we save up some money, then do some research, make an investment then save up some money and will not invest until we save up again. We are working on doing weekly investments now.

[corn18]

Looking at my wife's 401k, the material says that her match is 4%. When I look at the amount that they are investing, it appears they are actually investing 4% of her income not the amount that she invests.

Does the amount that she invest make a difference? She is currently putting 46% of her income into the 401k (This will max the investment by the end of the year). Doing the math, when looking at what she is investing, they are matching about 8%.

Thoughts?

They match up to 4% of her income, and to get that, she has to contribute 4% of her income.

10,000 monthly income
400 she donates
400 they match

10,000 monthly income
600 she donates
400 they match

10,000 monthly income
10,000 she donates
400 they match

If you hit the $18,000 annual max in December, (or whatever your limit is) that will maximize the employer match. Hit the max too soon and you miss some match (heehee). Hit it too late and you're short on both fronts.

At the end of the year, the amount they match is NOT 4% of the amount you contributed. It is 4% of her income up to what you contributed. Kindof weird how it works. There is a perfect storm where they match 100% of what you contributed (but it's only 4% of your income). At 4%, that is $450,000/year. At that income level, you contribute 4% ($18,000 / year) and they match 4% ($18,000 / year).

Tom

[mrpaseo]

They match up to 4% of her income, and to get that, she has to contribute 4% of her income.

10,000 monthly income
400 she donates
400 they match

10,000 monthly income
600 she donates
400 they match

10,000 monthly income
10,000 she donates
400 they match

If you hit the $18,000 annual max in December, (or whatever your limit is) that will maximize the employer match. Hit the max too soon and you miss some match (heehee). Hit it too late and you're short on both fronts.

At the end of the year, the amount they match is NOT 4% of the amount you contributed. It is 4% of her income up to what you contributed. Kind of weird how it works. There is a perfect storm where they match 100% of what you contributed (but it's only 4% of your income). At 4%, that is $450,000/year. At that income level, you contribute 4% ($18,000 / year) and they match 4% ($18,000 / year).

Tom

You lost me on that last part...lol. But I think I understand. We calculate what it would take to make 26 equal payments to max out the 18K. This is 46% of her income. We will have to do one small adjustment at the end of the year to get to the 18K.

[Petunia 100]

I don't know exactly what you are saying. Hopefully, someone else will chime in.

All I vaguely recall is that the Vanguard STAR is one of those starter funds Vanguard created with a low minimum requirement to get more new people investing with them. (Their usual funds have higher requirements but is not at all unreasonable by industry standards.)

For a do-all, static index fund, the STAR isn't all that bad out there, but many believe that they can do better... and with the right asset allocation, I have to agree.

As for how much % bond is too much, well I don't know anything about your wife, such as what her current age is or when she is planning to retire, or what her risk tolerance looks like. Suffice to say, the STAR is designed to fulfill the most important role in investing, which is getting people started in the first place (and get them to go with Vanguard). At the very least, she has accomplished that.

Anyways, just rambling because I have too much time on my hands right now. Haha.

If you decide to create your own asset allocation, I would forego the STAR fund entirely. Oh! Also, please take a look at the Target Retirement funds first, before going out on your own. This is also a do-all fund that may just fit the bill. If it does, it will save you the hassle of doing it yourself... unless you want to do it yourself.

STAR is not an index fund.

[snafu]

General comment.. It's important to know the Management Expense Ratio your wife is charged for her employer's retirement plan. Hope it's a Vanguard product as their fees are very low by industry standards.

Have you looked into Dollar Cost Averaging {DCA]? By making regular contributions you buy more units when the price is lower, less units when the price increases. You can make the automatic or not, depending on your comfort level.

While the stock market rollercoasters based on emotion, the bond market is controlled mostly by government decisions trying to manage economic levers. We've been doing our best to work in 5 year segments. Where are we today, what is our goal for 2020? What major expenses can we anticipate based on numbers...how old is car/mileage, appliances, furnishings, electronics, trips & toys etc, sweep sums left in chequing account to non retirement portfolio.