What should I do regarding my 401K?

Question

I believe my company, Monarch Industries, has a 401k plan set up for their employees with Fidelity. I want as much growth as possible, but I don't want to an extreme amount of risk with my stocks. I also don't want to have to maintain my investments very much. I just want to put money away every week, and have significant gains for when I am ready to retire. How much should I invest from each check? 20%? Or should I start with 10%, with a 10% increase annually? I also have less than $2,000 saved from a part time jobs 401k, should I rollover that amount, or use that for a couple big purchases I was saving for? I want answers from people who know what they are talking about only!!

Answer 1

First of all do not cash in any 401K to pay bills. The taxes and penalties are oppressive. Besides, this is your retirement money, not your "I need something now" money. Roll old 401K's over or just keep them where they are. As far as where to invest, you have two conflicting goals. High growth and low risk. You can't have both buddy, you need to pick one. Riskier investments pay more over time but may go down. It sounds like you're young enough to take a chance as you'll have plenty of time to recover from any mistakes. I'd say invest in a moderately aggressive stock fund. Maybe a mid-cap or low-cap fund. And everybody should have some international flavor in their portfolio. When you get older, start putting some of your money in a bond fund or guaranteed income fund but expect some lower return from such an investment.

As far as how much to invest, as much as you can. At least as much as the company's match.

Answer 2

20% is a pretty extreme amount, but if you don't need the money for anything else then go for it. If you are in your 20's age wise, 10-15% will do you just fine. Chances are that your 401k plan only lets you invest in mutal funds.  The good news with these is that they require NO maintenance from you.  Just make sure that each fund you invest in is a no-load fund that try to make sure that the expense ratio is under 1%. A little over 1% won't be too bad, but the smaller the better.

Answer 3

You don't say how young you are, but I am assuming in your early 20s.   If your company matches your investments, you should invest up to the point they match, whatever percentage that is.

At your age, you should be fully invested in stocks in your retirement accounts.  You have 35 years or so until you retire, and the market will go up and down during that time.  By investing every payday, you are dollar-cost averaging your investments.  That means when the market goes down, your invesment buys more shares.  When the market goes up you buy less shares.  And that's the way you want it...buy the most when it's cheap and the least when it's expensive.

If you have money to invest over the amount that is matched by your company, invest in a Roth IRA.  You can put up to $4,500 annually and the money can be taken out TAX FREE once your reach age 59 1/2.

Don't worry about the ups and downs of the market at your age.  Invest every month in some of the better Fidelity Mutual Funds and forget about it.  You will be rich when you retire if you start young.

I suggest you check out your library for some good books on investing and read some of the investment magazines just to get a better idea of what it is all about.

Good luck.

Answer 4

Are you keeping score ?  It seems like " get into the 401, roll the old one into an IRA, and be a little aggressive in the investments"   is the agreed upon plan !!

I really like the " twist" of having the old 401 rolled into a ROTH... pay a little tax, but have it over and done with. A nice little plan for the future is SET, and ready to go.

At this point in time...with years and years to go ...you can't really make any "bad " decisions as far as choosing investments...even a target fund ( in the 401 ) would make you something over the years....BUT, do learn just a little more about "investing" to feed that ROTH... it will turn out to be your " best friend" if you stoke it up early ( before your life gets busy with all kinds of other bills... marriage, mortgage, kids, cost of energy, etc.)

Now, you've got " all the answers"...good luck in getting it done... and another thing I'll agree with someone on...Fidelity is a good place to be...get used to them in the 401...and just flourish in a ROTH  with them !!

Answer 5

i don't think you're gonna find your answer here mate! it's too big of a decision for anyone else to make for your life! this is your decision!!!!

Answer 6

as far as i know for my 401K i have 12% invested as is what my company matches. i personally would keep it to what your company will match. otherwise your basicly just putting your money in a risky saving account. If your able, I would roll over, the amount you have saved, cause what the 401K representitive told me was that if you havent been with the company for say 10 years, and close the account and try to get the money they take a large percentage of the money that you made. hope that helped! Good luck!

Answer 7

well, first regarding the rollover - if you withdraw that money to spend it, you'll end up owing a bunch of tax on it (your marginal tax rate +10% [so 25% becomes 35%).  you should either roll it over into your new 410k or a rollover IRA.  you would have more control over your choices in the IRA.

about the new 401k, i say put as much as you can into it.  definitely invest up to the match, though.  then take the next however-much money and put it in the IRA (if you quailfy for a Roth IRA, do that!) up to the IRS contribution limits ($5k if you're under 50).  if you can still afford to save for retirement, then put that extra money into your 401k up to the IRS max ($15k including matching contributions if you're under 50).  after that, you can save any extra money into a taxable account.

the bottom line is that there is no such thing as having too much money!  the more you can save for retirement when you're young, the better quality of life you and your heirs will have.  someone in their 20s should probably plan on needing at least $10,000,000 by the time you retire.

but in your 401k, consider a small cap value fund or an index fund.  these will have smaller expense ratios, and better and more stable returns over the long run.

Answer 8

As long as your 401k isnt invested in B share mutual funds, or variable annuities put as much in as you can, and max it out if possible.  Then start an IRA.  If it is invested in B shares or variable annuities it may be better to just invest up to what the company will match and then start and IRA.  The reason for that is that those two things have high fees.  Also the rule of thumb is to invest the same percentage as your age in fixed income investments, like bonds, and the rest in stocks.  Roll your previous 401k into your current one.  If you roll it over into an IRA and then contribute to that IRA you lose the opportunity to roll it into another company retirement plan.  And of course if you take it out you're going to pay taxes and penalties on it.

Answer 9

If Fidelity is managing your new 401...you are talking to the WRONG people here...( don't get me wrong , contributors are pretty good here ) BUT...Fidelity is " da man!"...log on to a Fido website...get the phone number...talk to a rep..you can roll the old 401 into the new..you can make your changes to investments on- line... and seeing as you have a nice chunk in the 401, ( the old 2 grand) get your contribution down to just whatever the company matches...and SAVE what little extra you have toward opening up a ROTH IRA in a few months...Fido will do that too. ( ...as you get familiar with funds in the 401...you can trade any of those or about 2500 others in your IRA.. or stocks, or ETFs...)  

Get it done then come back to answers with EXACTLY what Fidelity has in the plan.... get opinions then .

SET YOURSELF UP...NOW...and relax for forty years while the snowballS roll into a nice nestegg !!

Answer 10

Wow...that erink answer just about says it all... but you could try one " twist"...if you are willing to pay some taxes...no penalties, just taxes... Fidelity could roll the old 401k into the ROTH IRA...and you'd be one step ahead.

Learn to use their web site/ trading platform and with the approx.$ 1800.00 you would put into the ROTH you could do just a little reading and invest in about two or three ETFs...( like the mutual funds...just a little different)    

...and you end up with two completly different retirement plans, paying in two different ways. You'll love it !

Answer 11

Depends on what your expenditures are right now or are going to be?  How old are you?  Where are you in life?  etc..

Sounds like you are just starting out so IF you can afford it I would contribute as much as possible.  Also keep in mind you can contribute additional funds to an IRA.

As long as you can AFFORD it max your retirement plans out as much as possible.  That way you take advantage of compounding interest and can retire sooner.

You can always lower your contributions to the 401K up to the point your employer matches (FREE MONEY) later.

I would rollover the other 2K into your current 401K if you can.  Do not take the money out and take the penalty on it.  Just not worth it.

My rule of thumb is 15% 401K, max out IRA and 10% into savings (You want to have at least 6 months in monthly salary on hand in emergency situations).

Last bit of advice:  Your lifestyle will always adjust quickly to how much money you have to spend.  If you take let's say 30% of your salary and save it you will get used to it and never miss it.  Versus spending it all and then trying to cut back.  

Good Luck you are on the right road!

Edited to add:  Check out the motely fools and read some of their books!

Regular and ROTH IRA's are always offered and are retirement vehicles promoted by the government.   Follow the link below to read a intro about them: http://www.fool.com/Money/AllAboutIRAs/A...