? asked in Business & FinanceInvesting · 6 years ago

Max out on 401(k)? College grad help please?

Hey y'all,

I'm in my 2nd year in college, 2 more years to go. I'm double-majoring in business management and marketing, I probably wanna get into consulting maybe. I've been really interested in investing and saving up for retirement and start saving early. I've read that it's best to max out on the 401(k) so you can save the most, but for a college grad who will probably be making low entry level salary around $40,000, is it even possible to max out? I wouldn't be left with much left. Any alternatives?

Thanks

5 Answers

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  • 6 years ago

    The maximum 401k contribution for 2015 is $18,000. So yes, that puts you on a pretty skinny 22k a year before taxes. But try to put as much as you possibly can into the 401k, or an IRA, or non-retirement investments. By way of example (quick & dirty) let s say you pass on saving $1,440 a year ($120 a month) for 10 years right out of college. Assuming an average return of 7% and retirement at age 65, you re account value will be $20,770 LESS in 10 years, and about $193,835 LESS at retirement than if you HAD contributed that $120 a month. And that doesn t even account for any employer match! Time value of money = more, sooner, is better. Ask your average 55 year old if they had wished they were as insightful as you are at age 20 and 99.99% of them would say yes. The other 00.01% are brain dead. Stick with your plan as best you can. If you re concerned about your quality of living, put some of the savings in a non-retirement plan so you can withdraw it, if need be, without penalty.

  • 6 years ago

    Not many options for you if you cant afford to take a chunk out of each check. If you have a little cash right now maybe you should think about buying some long-term bonds from reliable companies, interest rates are not bad and you won't be too tempted to take it out until they mature.

  • 6 years ago

    There is no one rule that can fit everyone. whoever wrote that you have to max 401K disregarding anything is mistaken. First, you have to make sure you are supporting yourself and having no debts or reasonable debts with reasonable interest rate on debts. otherwise you would end up tabbing your 401K which is a bad option to consider.

    Second, 401K is having relatively high mutual funds in terms of commission and fees. the only reason I myself contribute to the 401 is to take advantage of my employer matching. any extra amount I am willing to contribute, I contribute towards a vanguard roth IRA. it makes more sense for me for several reasons, one of them is that the later grows up tax free, while 401K is only tax deferred.

  • Anonymous
    6 years ago

    I wish when I was out of college that I would have just bought a few stable dividend paying stocks, like proctor and gam, ge, etc. Buy in IRA so you dont pay taxes, and let it grow for 20 years. You will be happy you did especially buying during the huge declines and not risky stocks but the blue chip stable ones that you can trust to hold.

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  • Kim R
    Lv 7
    6 years ago

    If your employer matches what you put in, do it as much as you can, because that's FREE MONEY. You don't have to max it out in the beginning, because you do have to eat and pay bills, but always put in something. It will seem like an exercise in futility at first, but keep plugging away and you won't be sorry later on down the line.

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