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Am i doing it right? 401k retirement.

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45pro
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Am i doing it right? 401k retirement.  Reply with quote  

Hello everyone. I am a 30 yr old male thats married with two children. I have been working the same job for over 10 years. Unfortunately I have only started saving for my retirement 2 years ago. My work offers a 401k that I signed up for but I have no idea if what I am doing is good enough, or wrong completely. Maybe there are better options? I really have no idea how it all works and am just wondering if I'm saving my money for retirement in the best way possible, and if not how it could i be. I am currently putting 5% in an after tax 401k plan which is currently about $4,000 a year. I'm no mathematician but I know I need to do more. Is upping my % enough or is there something better I could be doing? I really wanting to catch up from the years I didn't save and also want to make sure I'm saving my money in the best way possible.
So all in all I'm looking for advice on what I can do to make sure I'm putting my money away for retirement in the best way possible. All replies welcome.

TIA
Post Fri Jul 28, 2017 10:42 pm
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oldguy
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You're definitely on the right track. And you're right, you'll need to do more - but not much more.

The key factor is what you invest that $4000/yr into inside the 401k. Here is a comparison - (1) if you have the $4000/yr put into a low interest savings account, that will be only about $120,000 at the end of 30 years. (2) if you have the $4000/yr put into an 11%/yr index fund, it will be about $885,000 in 30 yrs. So you have to be certain to choose the 401k plan's index fund.

The $885,000 at age 60 might be slightly low, in the Year 2047 things will cost more then than they do now. So the answer is to bump up that $4000/yr - at $6000/yr you'll have $1,340,000. At $8000/yr you'll have $1,800,000. And so on - just select the goal that you want in 2047 and adjust your $4000/yr accordingly. (The limit that you are allowed to put onto a 401k is $18,500/yr).
Post Sat Jul 29, 2017 1:29 am
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45pro
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Thanks for the reply. I'm not sure what an index fund is or where my money is being put. Empower retirement is managing my 401k for me and i receive letters all the time from them letting me know they took money from there and moved it here and so on. I don't know the first thing about it so I just opted to let them manage it for a small fee. Is there a better course i could take?
Post Mon Jul 31, 2017 9:51 pm
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oldguy
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quote:
i receive letters all the time from them letting me know they took money from there and moved it here and so on. I don't know the first thing about it so I just opted to let them manage it for a small fee. Is there a better course i could take?


It's never good to hire someone to manage your longterm investments - #1, it is expensive, and #2, their goal is to charge fee that provide good income to THEM.

The S&P 500 Stock Index is a basic measure of the US Stock Market (much like the Dow Jones Index). Most Mutual Fund companies have an Index Fund that tracks the S&P 500 Index. Their fund buys those 500 stocks, in the same ratio, as the Index. So there is no buying/selling, no management fees. One good choice for you would be Empower's Target Fund, it buys stocks/bond funds based on your age.
Post Tue Aug 01, 2017 2:03 am
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45pro
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Ok, howndoes that work exactly?
Post Tue Aug 01, 2017 11:45 pm
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oldguy
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Look at the list of choices that your 401k Plan offers. There should be a 'target fund' choice. Select your approx retirement year - eg, Target2052. This year the Target2052 will be mostly invested in the SP500 Fund. As you age, it will move slowly toward bonds, eg, in a few years it will be 95% SP500, 5% Bond Fund. A few years later it will be 90%/10%, and so on.

The theory is that you should use a wealth-building fund during your first 30 working years - and then slowly shift to wealth-preservation. When you are age 70 and have a million or two, you need to protect it because one bad market crash would be very expensive for you.
Post Wed Aug 02, 2017 1:44 am
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