401k Options

[Mr Josh Zombie]

I'm finally eligible for 401k at work, and need to decide what to do... I figured I'd ask the people that have some experience on the board about this.

Here's a run down of what the company offers.

-401k account, they match half of what you put in, up to 3%. (So i'd have to put 6% in to get the 3% match)
-Profit sharing & stock options
-Fully vested at 6 years of working with the company. I'm at 2 years right now, so I'll only receive 20% if I leave.

Now, the whole concept of this just scares the hell out of me. I'm 21 and I already get all these options to start preparing for retirement. Not to mention stocks... I don't know a damn thing about them. At all. Or how profit sharing even works....

As it stands right now, 58% of my check goes to bills. Now, I'm FINALLY getting my own apartment with the girl friend in a month, two months max, and then 66-74% of my check will go to bills. (this does not include credit card debt, gas, food, or anything like that...) So i can't figure out how comfortable I would be putting 6% in... Or how much I should even consider retirement right now.

What's everyones advice on this? Those that have a 401k, or are reaching retirement in the next few years... whats everyone suggestion? With the stock options, should I be aggresive and toss the money around in "unsafe" options? or just put it in an option that I know it'll be safe, but not gain much?

[dominiaa]

I matched up to the point where my company's match rate dropped. I put in 6% and they put in 4%. The investment company which hosts your 401 K will probably have a calculator to see what you retirement would be like with you rate. Your investment company should give you a list of mutal funds that you can invest in. You shouldn't have any more than 10% of your 401K going to your own company's stock. Make sure your pretty diversified. As far as profit sharing, mine usually comes in my check. I typically try to pay some principal on my highest interest rate loan, usually my car.

Stock Options will probably have vesting period. They basically are the right to purchase stock at a cetain price in the future. For example Typically this is how it would go down. Your company gives you 10 options at a purchase price of 100 dollars. You cannot exercise the options for 4 years and they expire in 7 years. This means that in 4 years, you can purchase 10 shares of stock for your company at 100 dollars. At that point, if the stock is above 100 dollars, say at 150, you could exercise the otions for a 500 dollar profit. You don't actually purchase the stock, you pocket the difference. In all cases its best to hold onto options to the latest possible date, in this case, 7 years. You can purcahse options in the market for other companies, but this takes a lot of knowledge, and is not for noobs. The options your company is probably talking about are for their company, and are just given to you like in the example above.

[kornholio788]

I am 20 yrs old and am already planning for retirement. It is def never too young to start. I am putting 8% in adn they are matching up to 6 depending on how well the buisness does. And I also put money into that account when I have a little left over instead of dropping it into car parts. I don't have any stock options or anything but if I did I would be in them.

[Midnight_Rider]

Josh, contribute so that your employer will give you the match as it is like giving yourself a raise. The important thing is to not make the stupid mistake that I did- not starting to save at a young age. Put away as much as you can afford to now or else you'll end up a future Wal-Mart greeter like me (no smiley face as I'm dead serious here).

The company that administers the 401(k) for your employer should have advisors available to give you investment advice. Make an appointment and find out what they suggest.

[Mr Josh Zombie]

yea, we do have an advisor in the building right now, but he's booked for the day, so i figured i'd ask here first

and i was hoping you of all people would chime in too David, as i know your finicial troubles, so i figured you'd give the most sound advice

[kc2005ptgt]

I think your plan is fine, 6% so company match is at max, that is like saving 9% of your pay after taxes every paycheck. Never to early to start!

[dominiaa]

I think your plan is fine, 6% so company match is at max, that is like saving 9% of your pay after taxes every paycheck. Never to early to start!

401K's are pre tax, which makes it even better. As everyone says above save as much as you can in your younger years. The compounded returns on your early investments are what will ensure your retirement at a young age. Plus I don't know about anybody else, but i'm not counting on social security at all.

[Mr Josh Zombie]

I just came back from talking to our advisor. I'm going to put 6% in, which means i'll be getting the full 3% return from the company. With my stock options, I'm just going to risk it and be aggressive as hell. I 39 years until this money is "mine" so why not go big at a young age?

Just sucks it's about an extra 120 less to live on a month...

[kornholio788]

I think your plan is fine, 6% so company match is at max, that is like saving 9% of your pay after taxes every paycheck. Never to early to start!

401K's are pre tax, which makes it even better. As everyone says above save as much as you can in your younger years. The compounded returns on your early investments are what will ensure your retirement at a young age. Plus I don't know about anybody else, but i'm not counting on social security at all.

I hear ya brotha! SS will be shit by the time I get to it. I am still able to pay rent, pay bills, and live one what little income I have and still have 8% taken out. It cuts into it alot which doesn't allow me to enjoy it now and have to buy cheaper food and not buy toys and such. But I know in the long run it will be WELL worth it when I am able to not have to work and relax at a younger age and not have to greet at walmart.

[dominiaa]

I think your plan is fine, 6% so company match is at max, that is like saving 9% of your pay after taxes every paycheck. Never to early to start!

401K's are pre tax, which makes it even better. As everyone says above save as much as you can in your younger years. The compounded returns on your early investments are what will ensure your retirement at a young age. Plus I don't know about anybody else, but i'm not counting on social security at all.

I hear ya brotha! SS will be shit by the time I get to it. I am still able to pay rent, pay bills, and live one what little income I have and still have 8% taken out. It cuts into it alot which doesn't allow me to enjoy it now and have to buy cheaper food and not buy toys and such. But I know in the long run it will be WELL worth it when I am able to not have to work and relax at a younger age and not have to greet at walmart.

Exactly man. I'm stuck living with my parents for a few more months because my 401K and stock purchase program. I'll sell my SRT before I cut my retirement.

[Midnight_Rider]

Just sucks it's about an extra 120 less to live on a month...

Remember though- your 401(k) contributions are pre-tax so it might give you more take-home pay each check as your taxable income amount is less. Does your employer offer FLEX spending accounts for health/medical expenses? If so, I would definitely sign up for that as well- contributions there will also lower your taxable income.

Off-topic- I used some of the 401(k) from a job that I quit in 1998 to pay off my car yesterday. Lost 10 percent due to the early withdrawal penalty but it saved my butt having the money available for a financial emergency like the one I have been dealing with. Clearly not what I had intended to do with my retirement money but you never know just what might happen in your future.