Im 27 and make 70k a year. How much should i invest in a simple IRA (employer matches 3%). I'm new to this

Question

I know there are alot of variable, but am looking for the smartest, long term investment. Know i won't get rich overnight, but looking at retirement in 40-50 years.

Answer 1

Employers don't match IRAs.  Are you talking about a 401(k)?

Generally, you should contribute enough to a 401(k) or similar plan to get the maximum employer match.  After that, fund a Roth IRA if your income so permits.

Answer 2

I would do at least 10% of your salary, and 15% if you can, to cut your taxes even further.

Answer 3

Consider investing as much as you can afford. Believe it or not, your take home pay will be higher. Consider this example:

Billy Bob makes $30,000 a year, but saves no money. His taxable income would be $30,000. Let’s say his tax rate is 25%. He would pay about $7,500 in taxes, and his take home pay for the year would be $22,500.

Freddy, Billy Bob’s brother, makes the same amount of $30,000 per year. However, Freddy participates in his companies’ 401k plan, and he contributes 5% of his wages to be invested. So, Freddy’s taxable income would be $30,000 less 5% or $1,500. Freddy’s taxable income would be $28,500. Taxed at the same 25%, Freddy would pay $7,125 in taxes. Freddy’s take home pay would be $22,875.

Freddy would actually bring home $375 more money than Billy Bob and would have $1,500 plus whatever amount his company matched in savings set aside! Billy Bob thought he was doing well, but actually he was hurting himself!

So, to answer the why, it should be very apparent in the example above - It truly pays to invest, especially when your company matches what you put in for FREE!

So, again - invest as much is possible and allowed. Figure out what percentage will get you to the limit.

Answer 4

I'm in a very similiar situation.  If your company has a Simple IRA they must be relatively small (less than 100 people).  You should contribute at least 3% to get the full match (free money).  I contribute 5% and also have $100 each paycheck direct deposited into a brokerage account for investing and in case I need emergency money.  A Roth IRA may make sense depending on your situation.  You might want to consider meeting with financial advisor to determine what you best options are for your situation.  You can search for one at www.fpanet.org.  Make sure they have the CFP certification and are fee-only.

Bottom line: at least 3% but the more you contribute now the better off you will be when you retire.

Check out my blog at www.sbvfinancial.com

Under client update

Answer 5

At least 3% to get the employer match - that's like free money.  If you have other debts, work them off before increasing your IRA.  If you have no other debts, then I'd invest the max, putting them in diversified mutual funds - like small cap growth and market index.

Answer 6

You are limited to $5000 a year by law when depositing into an IRA.

If your employer will match that to $5000 then go for it.  That extra $5000 is almost a $100 weekly raise.

Answer 7

A minimum of $2100 per year to get the free money....so do a minimum of $81 per pay (assuming bi-weekly paychecks).  Do more if you can.

Answer 8

As IRA's are tax deductible invest the maximum I wish I was making what you make but considering it is tax deductible go for it all.

Answer 9

if you make that much at age 27, look forward to retiring in about 35 yrs, not 40-50 - put as much is allowed into it - not sure what the annual dollar limit is for Simple IRA, but even if it's 10-15,000 a yr (401k is 15500), do it - you shouldn't have to spend anywhere near all that money to live on at your age - if you have other loans/obligations - try and put as much in as will get you the maximum company match (3% if they match 100% up to 3% - the more you put towards retirement early in life, the less you have to do later - by just putting 10,000 a yr for only 4 yrs into it (including match) and getting 8% annual  return,  you could wind up with about $500,000 at age 62