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So the place I've worked for the last 10+ years is facing hard times, and instead of firing people they've given across-the-board pay cuts, and also completely killed off 401k employer matching. Previously it was matched 50 cents on the dollar up to 6%, all with company stock. Now, there is no matching, but I can freely contribute up to 30% of my pay, all pre-tax. My question is, would I be better served by reducing my 401k contribution and instead using it to invest in other things, or do the tax benefits of the 401k outweigh anything I could otherwise do with the money? Note: I'm currently contributing 10% per paycheck, my wife is doing 30%. We are already maximizing Roth IRA contributions. 2nd Note: My company 401k plan doesn't allow for a ton of diversity. It is through T. Rowe Price and features their targeted retirement funds plus about a dozen others, from small cap to bonds. As for our IRA accounts, we have started them out in Vanguard's VTI for now (we maxed contrib last year for the first time)
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Jun 28, 2009 15:56
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The Noble Nobbler posted:You're limited in nominal 09 dollars to 15.5k a year, so your wife would need to gross around 50k a year to be able to use that contribution without going over. I'm guessing that's the case, but I just want to make sure you guys didn't make a mistake there. Yes, wife does not gross over 50k a year, she's just under, so we are good on the contribution percentage. The company automatically turns off contributions anyway, if you reach your limit. Company is indeed publicly traded, and I can get rid of the stock at anytime without penalty as long as it's kept inside the 401k and not withdrawn. We have been keeping check on it each month and not letting our exposure to company stock go above 10% of our total 401k. Do you think it would be a wise decision to dump all of that, seeing as how we aren't getting any more via matching? As for VTI, yeah I know it's not diversified at all, and what you say is indeed great advice that I was already planning on doing myself, i.e. investing in something outside the US. We have just not gotten around to it yet because 2008 was the first year that we've contributed to a Roth IRA account at all. Perhaps when we fully fund 2009 later this year we'll use part or all of it to start doing just that. EDIT: After reading through this entire thread, I see now what I need to do. Since we just started with VTI last year, this year's IRA funding will go to bonds, probably BND, and perhaps a little in TIPS. I'm too heavy on pure stock. Same goes for my 401k. I don't think I'm comfortable leaving it in TRowe's 2040 TR fund, and instead I'm going to divide mine up between US stocks, Internation stocks (both via TRowe mutual funds, as that's all I have access to) and bonds. The highest expense ratio in that bunch is 0.77, most are .50-.65 or so. Diseased Yak fucked around with this message at 20:07 on Jun 30, 2009 |
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Jun 29, 2009 16:17
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So the time has come to make my 2nd ever Roth IRA contribution. I started it in 2008, putting the entire initial $5k into Vanguard's VTI ETF. Then the bottom fell out, and it's spent the whole of 2009 climbing back up, and is still -8% from when I first purchased it. Now I'm wondering what I should do with 2009's contribution. Should I start to diversify on such a small scale, given I've just started? I was thinking of picking a Vanguard international ETF and a bond fund (like BND) and dividing it between the two, giving me 50% stock market, 25% international, 25% bond. Does that sound ok? Should I look in a different direction?
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Dec 15, 2009 23:22
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Yup that's exactly what I was looking for. Thanks guys. It feels like it will be easier to diversify a portfolio once I get more built up, but I guess percentages can be applied to any balance, eh? Thanks again.
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Dec 16, 2009 04:22
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80k posted:yea, as long as you are getting dirt cheap commissions on trades. You don't want trading costs to become a significant percentage of your transactions. I have my Roth IRA account at TD Ameritrade. They may not be the cheapest, but I'm only looking at 1 or 2 trades per year. So far I've been letting my IRA contribution build up in a savings account all year long and then investing in one lump sum. Don't know if that's the best way or not, though.
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Dec 16, 2009 17:18
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