New Employees Confused Setting Up 401(k)
Individuals transitioning jobs or starting businesses are struggling to understand and optimize their retirement savings. They face complexities like waiting periods for 401k eligibility, consolidating accounts, and maximizing employer matching, often feeling overwhelmed by the process and seeking advice.
SOURCES (60)
“What percent of your gross income are you setting aside for retirement? Does that number include the money from employer? Ive always heard 20+% needs to be going to retirement. And that is assuming that you are only needing to replace the other 80%. Matches…”
“Hi! Im sure this is a classic question, but im determining if I should open a roth or traditional IRA but am nervous that I am going to be above the roth eligiblity salary soon. I am 21 and starting a career in IB. I roughtly make 110,000 per year plus whatever bonus I get (which is where i get nervous my MAGI could be above the eligibility salary). What is the best approach? thanks!! submitted by /u/Odd-Salt-7157 [link] [comments]”
“Have an investment account where I’m saving for future large expenses. Currently all planned expenses are 15-20 years away. Should and if so when should I add bonds. I know the tax implications aren’t great but worried about being 100% vt when I need to withdrawal money submitted by /u/Obvious-General7516 [link] [comments]”
“Aside from company match, tax deferral, and lowering current taxable income, what other benefits does maxing out a 401k offer before adding to a taxable brokerage? I'm in the 12% tax bracket right now because I max out pretax 401k. If I don't do pretax 401k I would hit 22% but not by a lot. In retirement I'm going to aim to fall in the 12% bracket, maybe 22% but Im going to do my best to not allow that to happen. Why should I continue maxing out my 401k when I'll pay 12%- 22% rat”
“Starting new job with low match -3% Rolling over from my last job, have a Roth IRA I also max out.. should I put new 401 in a target date or roll with a 3 option? If so, which 3? submitted by /u/Ok-Suggestion7186 [link] [comments]”
“Looking for some advice. I’m in a fortunate financial situation right now where I’ve maxed out my IRA contributions and will be maxing my 401K employee contributions before the end of the year. I already have money set aside to max my IRA next year. Once my 401K maxes out this year, is there something else I can be doing to prep for retirement? I’m 33 with ~$94K between both accounts. I am not familiar with additional investing and I don’t want to miss out because of my ignorance! I just want to”
“I understand that. The issue is when you contribute to a Roth you are contributing not only the actual amount deposited but you're also paying taxes up front. So technically $20k in a Roth is a $25k contribution. $20k in a traditional is effectively something lower because you'll need to take taxes out when withdrawing, unless you also save the taxes in another account. But $5k in a brokerage account means you'll have to pay capital gains taxes when you sell to pay those taxes. The p”
“I understand that. The issue is when you contribute to a Roth you are contributing not only the actual amount deposited but you're also paying taxes up front. So technically $20k in a Roth is a $25k contribution. $20k in a traditional is effectively something lower because you'll need to take taxes out when withdrawing, unless you also save the taxes in another account. But $5k in a brokerage account means you'll have to pay capital gains taxes when you sell to pay those taxes. The p”
“Thanks for the explanation. I am married too I suppose I should’ve put that in the original post. Does contributing to a Roth 401k make sense at all, or would it still be better to do a regular 401k to maximize deductions?”
“Keep in mind, you desire to get to keep working for another 16 years. Not all of our jobs will still exist by then. Increasing your spending now has the consequence of pushing you further from financial independence. This is not me saying that you shouldn't do it...but unless you have another million saved somewhere else, I personally would not reduce my contributions of "only" 800/month (if I were in your shoes).”
“You can look at your marginal tax rate as your risk free rate of return. Not the whole rate, but the difference between your current marginal rate and expected rate in retirement. (It's can be even more complicated depending on where you fall in the SS taxability ramp-up among other things.) (It's also obviously a one-time return, not annualized like is often done for rates of return values.)”
“I understand that TIAA is technically a defined contribution plan, not a traditional pension. The money is in my name, and I control how it is invested. But I always looked at it differently than just a retirement account. My goal was never just to build up a big balance and say, “I have money saved.” My goal was to create a retirement paycheck. I looked at TIAA the same way many people look at a pension: put money in while I’m working, then use it to provide income when I retire. A big part of”
“I’m seeing the you have 60 days to put it back and it also looks like you can re contribute if you withdraw and put it back if you are under the max contribution. There are situations where I can see that would be used.”
“So many people saying traditional. If the 401k gets up to 3-4-5 million plus, you’re paying taxes the whole way out. If it’s Roth you don’t. Your 90k now likely is a lower tax bracket than what you will be later in life. Granted, you get more $ for your $ now if it’s tax free, therefore more grows. Verify if your company matches both. I just recently realized mine does that. If that’s the case, match both and then max Roth IRA”
“I use Gusto for payroll and have no complaints currently. I'd like to start offering a 401(k) and don't like not having a choice--but can't add much paperwork or liability to my payroll process. Can anyone recommend an option other than Guideline, which Gusto now owns, that integrates easily with their software? submitted by /u/ClassicLongjumping85 [link] [comments]”
“My employer offers a 401k through vanguard. Theres no option for VT, VTI, OR VXUS. Would Vanguard Institutional total stock market index trust and Vanguard Institutional total international stock market index trust be the same thing? There are no tickers for these options that I can't look up information on them. Other options for US funds are: VEXRX, VFTNX And international funds: VESGX, VWILX They also have JPMCB smartret passive blend TDFs. I'm not sure which funds to choose to emulat”
“Hi all. My wife and I have a combined income of about 225. We contribute like 18k per year pre-tax and 12k per year roth. Currently, 90 is in taxable brokerage, 155 is in pretax, and 13k is in Roth. What percentage of our income are we contributing to retirement, and how do we assess our progress so far? Our combined federal/state/local marginal tax rate is like 33% or so. I assume post tax should be considered differently, but the math is hurting me. Relatedly, when people use rules of thumb li”
“I have a 401k loan with a pretty hefty monthly payment that I need to pay off before I retire. But if I pay it off right now with funds I've already paid taxes on I'm taxed twice. I get that is how the current loan works. You pay it with taxable dollars from your paycheck & then you get taxed on it again. I'm wondering if I should put the $$ in a brokerage account that I could draw from without compromising taxes or IRMMA & then keep paying the loan. Any thoughts? submi”
“IBEW brothers are we putting more money into other accounts or just using our pension for retirement? 21 so I have a ways to go and I understand we’re not accountants. submitted by /u/Senior-Fill2751 [link] [comments]”
“This is my first job with retirement benefits and I want to ensure I am doing things right. My gross income is 110k and this is what is outlined in the 403(b) SPD: After you satisfy the eligibility requirements described above, your Employer will match 25% of the first 6% of your Compensation that you defer to the Plan each payroll period. If you defer 6% of your Compensation for a pay period to the Plan, you will receive a matching contribution equal to 1.5% of your Compensation for that pay pe”
“I've been running numbers for next year. My wife has a solo 401k for consulting work she does. Anticipated taxable income is ~475k, net consulting income is ~68k for the year. Since we're in the QBI phaseout range, my calculations show my two best options are max her $24.5k employee contribution and then evaluate how much of an employer profit share she should take (0-25%). My understanding is as the percentage of employer profit share increases, the amount available for MBDR decreases.”
“My company is offering Roth 401k this year and I’d like some advice of if I should stick with 403b I had been contributing for years. I have around $740k in 403b, should I contribute to Roth 401k instead? I might retire in 10-15 years (55 or 60), would that make any difference of my decision? FYI I also have Roth IRA and brokerages. Thanks! submitted by /u/nikita58467 [link] [comments]”
“31F teacher in MA who just finished year 7. I contribute to pension and max out ROTH IRA. I want to start putting money in 403b. The research has been challenging. Only advice I got was to look for mutual funds. Any suggestions from my districts list? Ameriprise Financial/RiverSource Brighthouse Life Ins (MetLife CT/Travelers) Corebridge Financial (formerly AIG/VALIC) Equitable (formerly AXA) Fiduciary Trust Co. of New Hampshire (Formerly Waddell & Reed) Horace Mann Life Ins. Co. Horace Mann”
“31F teacher in MA. Just finished year 7 of working. I contribute to my pension and have had a Roth IRA for years. Just got to the stage in salary progression where I’m maxing out my Roth IRA comfortably. I’d like to contribute some money into 403b. The research has been challenging. My only feedback from family was to focus on mutual funds. Please help me pick from district options: Ameriprise Financial/RiverSource Brighthouse Life Ins (MetLife CT/Travelers) Corebridge Financial (formerly AIG/VA”
“Hi! I’m trying to determine whether I should continue contributing to a Roth 401(k) or switch to Traditional. Background: • W-2 income around $121k base plus bonus/RSUs (~$150k total compensation) • Rental property • HSA • Employer stock (RSUs) • Long-term goal of financial independence What factors would you consider before deciding between Traditional and Roth contributions? submitted by /u/One_Roll_7609 [link] [comments]”
“Each company has different rules for any pensions that exist. The rules cover amounts and how long you have to work to get them. When you leave a company when you were vested in the pension plan, they still owe you that pension, but your new time with the company may contribute to a separate pension. It could be the new pension that is only up to $20 and that statement makes no reference to the old pension. The company may or may not ever combine the old and present years-of-service into one pen”
“How hard are you going to be saving? General rule of thumb is traditional to lower taxes. However, I think maxing a Roth 401k during your 20s sets you up for a huge tax free account in your 50s and later. And you avoid having a $5m tax problem as a 65 year old All depends if you’re shooting for millions in retirement, but earning $90k as a 22 year old is a great start and makes that path possible.”
“I mean if the idea is to die with it, then you (not necessarily your heirs) aren’t paying any taxes either way. The whole point to retirement savings is to use that money in retirement, so if you’re doing that, RMDs don’t matter.”
“I’m in a similar situation to you age and income wise. I’m maxing out Roth 401k and IRA contributions which I intend to do long enough that my retirement income will be significantly higher than my current income, so Roth comes out ahead for me. Also, going means I contribute 30,500 (24,500 irs limit plus ~6,000 in taxes paid now) for a net 24,500 instead of contributing 24,500 for a 18,500 net (accounting for ~25% future taxes). See if you can afford to pay the taxes now and if you can, you get”
“I feel like my common sense is saying Roth due to the deferred treatment of gains, but also feel the current tax deduction for traditional is appealing. Also, I understand my question might be kinda dumb and/or come across kinda snarky, I understand everyone faces different challenges and I don’t mean for this come off as such. Genuinely just curious, no offense intended. I’ll be 22yo making 91.8k, with approximately 15k in bonuses in 2027. I’ll be living in NJ, and already be putting away money”
“Short answer: Bad idea; don't do it. Long answer: You need to understand the tax treatment more precisely. What NJ law is actually saying is that the only tax-deductible contribution is an 401(k) contribution. All other retirement plan contributions are not deductible, and therefore create after-tax basis. Furthermore, "doesn't recognize" is misleading language, because NJ recognizes other aspects of retirement plans, such as tax-free rollovers and tax-deferred earnings. So the”
“Spouse is changing workplace contributions from 403b to Roth 403b. Our portfolio is currently 70(50/20)/30. Prior to Roth switch, future contributions were going into RLBGX(spouse is 61, I am 62 and disabled so not contributingto my own portfolio). We prefer that future 403b Roth contributions to be in 100% equities(we'll rebalance 403b accordingly). Options are FXAIX, VTSAX domestic and VFWAX international. Should we choose just 1, or do both domestic and international? Thoughts? Kind thoug”
“I have an 401A with a 3% employer match and a traditional 457b with my employer. They just announced that they’ll now offer an Roth 457b. I match my employers 3% for my 401A and I do $300/paycheck (biweekly) into my traditional 457b to save extra on taxes. Would it be worth having an 3rd retirement account I.e the new Roth 457B or are the two I have fine as they are? I make about $165k a year and I already have about 30% of my paycheck taken out in deductions and taxes. submitted by”
“Recently, the small business I work for started offering us 401k plans with 3% matching. I contribute 5% (around $200 monthly) and they contribute 3% (around $100 monthly) currently. It looks like I'm invested in the general Vanguard Retirement Fund, but I'm wondering if I should try to diversify some of it into bonds or s&p500. I have less than $4k currently. Perhaps it's better if I just forget about it until a reach some other milestone (10k?) and then choose to do something?”
“In your shoes, I would essentially ignore the ESOP. This means contributing to get the 401(k) match and then a Roth IRA, and then funding the 529s once you are contributing ~15% to 20% of your salary. And I have been in your shoes. I've worked for three different companies with ESOPs. Let's call them A, B, and C. Experiences ranged from A) very strong growth followed by the opposite, to B) modest consistent growth (and company was sold a handful of years after I left, doubling everyone&#”
“I'm going to be joining a new company soon that is an ESOP and still provides 401k plan with 4% company match. The ESOP is very strong, performing extremely well since inception in 2015. They showed me a conservative valuation for me at 15 years, and I was shocked at the numbers. Yes, there exists a possibility of a down year which is why I'm contemplating contributing more than the match in the 401k. I ran the numbers, and going with a 5% to 6% contribution is not an issue for me financ”
“My employer has a generous 401k match. 7.5% match for 6% contribution. The issue is, they pay the match in a lump sum in February. There’s also a 5 year vesting period. Does it really make sense to keep contributing 6% when I plan on leaving my job ASAP? Assuming I stick it out for the match, I’m only vested for 20% once February comes. I would also like to raise liquidity in the short term due to an uncertain life situation, so that 6% would make a difference. I have a Roth that I actively cont”
“Hello all, I was wondering if people had any suggestions on what amount to put into my 401k and or Roth 401k. I’m 29, I currently make around 65k a year at the moment. My employer matches half of up to 9% of what I put into either Roth or 401k. I have a decent emergency cash savings, as well as no debt with the exception of a mortgage. Just needing some guidance as I’m not too savvy when it comes to this stuff. Any help or advice would be appreciated. submitted by /u/DeezNuttzInc [li”
“This. If you can increase the amount of your contributions to reach your goals by tax deferred route, that might make the most sense.”
“Thanks! I would be leaving the employer with the employee match to be per diem with another employer. I currently invest 15% in 403B + 6% match. I also put into an HSA and Roth IRA.”
“Hi PF, I currently work FT making 78k a year and contribute 15% to my 403B with a 6% employer match. Raises are 3-4% each year. I also take a $2+ hr differential currently, that is included in that 78k figure as I will be able to maintain that differential. I am considering having a child and switching to per diem work, $65/hr (W2 income) and I intend to work 24 hours a week at least (approx 78k working 50 weeks a year at this rate). No raises, no differential, and no employer match. I can conti”
“OP can’t directly contribute to a Roth IRA, but they can still get money into a Roth IRA. Make sure you specify that.”
“I earn $111k, spouse earns $75k, I have absolutely no idea what our future will look like but we’re 41 and 43 respectively. Hoping to retire in our 60s. Obviously it’s a gamble and there are no guarantees but my spouse has been promised a $2M inheritance. We understand it’s currently held in a trust. Spouse’s parents are already retired and in their 80s and otherwise all set for more than enough cost of their nursing home monetarily, not even counting the 2 houses they own in prime real estate a”
“You were probably in a higher tax bracket while working, in which case no you wouldn’t have been better off contributing to Roth.”
“Traditional is always better than Roth. This is true for all accounts. The reason Roth IRA specifically is because the traditional IRA deduction has a limit based on income for getting the deduction. So does the Roth IRA technically but both its way higher and also Roth IRA has the backdoor method to fund it. The reason it goes employer sponsored retirement match to IRA to employer sponsored retirement is because the match is free money but IRAs are not limited to specific funds with specific fe”
“The 401k calculator shows the tax savings and growth impact of different contribution levels including employer match: https://automatorlabs.co/calculators/401k-contribution-calculator/”
“I wish teachers got a match haha. We also don't qualify for HSA accounts. However, I did apply for an FSA this year, so that's something! So I my understanding is to contribute to a Roth IRA up to the limit bc there are no fees, then switch over to the Roth 403b. Thanks for the advice on dropping a tax bracket too. I'll keep an eye on how close I get”
“401k up to match because it’s free money, then IRA because little to no fees, then 401k w/o match because of the fees. If you have a high deductible health plan, then HSA with IRA. Depending on your state, your pension could be taxed as income. It’s always taxed as income for federal. If you also get social security, there is a potential you could have more taxable income in retirement than do now. In that case, you want to contribute more to Roth compared to traditional (pre-tax). You sound ear”
“I always see people give advice to max out a Roth IRA before investing in a 403b or 401k. I've seen this advice on posts, in articles, and in financial books. But I have never seen anyone mention Roth 403b or 401k accounts. Is there a reason why? Are Roth IRA accounts better for some reason? My Roth 403b account has an annual contribution limit 24.5k. As a teacher, I can't afford to max it out but put as much as I can into it. Currently 34 with 108k saved in the account. I do not have an”
“Hello everyone, Today I learned that for the past 6 years I've had my Solo 401K account, I over contributed during 4 of them by over $50K total... I opened the tax-sheltered account on a whim thinking that I was being financially savvy but did not fully understand it, which is totally my fault. Trying to remedy asap, knowing that I'm probably faced with double taxation on the $50K+ excess contribution and its growth since (which I don't know how to calculate). I've called 10 CPAs”
“My company matches up to 5%, but all said and done the actual contribution comes to be about 30%ish of what came out my check, seems terrible to me, as I am used to most people I know getting 100% of the 5%match for example. What else should I be doing to balance that and save better for retirement? submitted by /u/misterscorp [link] [comments]”
“While this is generally true, I think it’s important to note that it still depends on 1) tax rates/brackets now and at retirement, and 2) how much income you’ll need in retirement. That $200K a year person might still benefit from a Roth if they plan to maintain that lifestyle and if tax rates increase/tax brackets change. My conceptual brain likes to understand the “why”. :)”
“Roth 401(k) is after-tax, or am I missing something? I'd like an option to maximize my deductions.”
“-Continue to invest 8% into my Roth 401k and $100-200 into the S&P500 Or -Invest only 5% match and the rest into index funds, CDs, etc. The company I work for only does 5% match. I thought that contributing more would be beneficial despite not matching. submitted by /u/BubblyTumbleweed8455 [link] [comments]”
“Age: 21 Income: $90k Employer 401k Match: 5% Currently I have my 401k at 8%. I have the option to put some extra money in Roth IRA or HSA (California taxes still apply). What should I do? submitted by /u/alwaysconfused737 [link] [comments]”
“I am starting my first job, and my employer states that they will contribute up to 10% into my 401k regardless of any contribution I have made to it. So I could basically contribute 0% but they would still contribute up to 10%. I will be maxing out my roth ira each month, and saving agressively, so I am wondering what the best move here is for me. Should I put in a small % of my paycheck into the 401k even though my employer doesn’t require it? Since this is my first job I will be trying to buil”
“Does your employer offer any sort of retirement benefit? 401k is the most common (applies to for-profit companies) but there are others. A non-profit may use a 403b or a government job with a 457b. A small business may use SIMPLE IRA; despite the name that's different from a personal IRA and uses a separate contribution limit. You might even qualify for a pension, which is still "investing for retirement", just through a different mechanism. Even no other options exist, you can use”