Roth's are great, except for the limits. This year I think it is $127K. If you make more than that, you can't contribute to a Roth. I think it's on Modified Adjusted Gross Income, but could be wrong.
Cheers.
So you don't personally get to choose who manages the money, your employer chooses for you, is that correct?
I like that 15% tax rate on withdrawals for retirement. Ours is claimed as regular income and is taxed at your appropriate rates upon withdrawal.
There is an after-tax option called a Roth IRA (or Roth 401k, which is rare) so you can have tax diversification for withdrawals. If anyone asks, I generally say invest in your 401k up to your match, then max out your Roth IRA, then if you need to, invest more in your 401k up to the max.
My employer is offering Roth IRA for the first time starting next year and I'm thinking I'm going to do exactly that.
401k is a corporate lie
Don't fall for that nonsense.
If you don't believe me, ask all the employees that listed ENRON on their resume as well as many other corporations that took advantage of the economic crises and then filed for bankruptcy shortly after.
you can always fund an IRA and then go backdoor to rollover into a roth ira
You can convert from a traditional IRA to a Roth but that’s a taxable event. You can’t do a direct rollover from a traditional to a Roth. Also with IRA’s (assuming you’re under 50 years old) the yearly contribution limit is currently only $5,5000.00 per year. With a 401K you can actually contribute up to 15% of your salary (obviously most people can’t afford to do this).
Also with the money you are contributing to your 401K you are reducing your taxable income (not the case with a Roth IRA). And as it’s been mentioned most employers typically will match the first 3-6%. Also if you ever need money you can borrow against it.
So TS yes, diversify in various mutual funds and in the long term you should be good. Ideally you should have both a 401k and a IRA.
No they are not required to contribute to our 401k plan. Usually most offer a match though, like I put in 4%, they match and add 4% as well.
They are required to contribute to social security though. We have to pay into social security 6.2% up to $117,000 in income with each check, and they add 6.2% on that as well.
Most only out in 50% of what you put in. At most jobs you put in 5-6% whatever is the max for matching and they put in 2.5-3%
you can always fund an IRA and then go backdoor to rollover into a roth ira
Yes, I'm aware. The 4%/4% was an example.
Back in 2001, I knew this guy who had been putting in $300 a month for the last 15 years or so, then after the crash, he told me he was down to like $8k.
I just did the math and if he had saved up the money instead of putting it in his 401k, after 15 years, he would have at least $54k.. that's a LOT of money he had lost. After that happened, he had stopped his 401k.
Eh. It all has risk. I don't think the key here is to NOT do 401k, but to diversify.