What to Consider For Your 401(k)
BrettFingerhut
Introduction
Acoupleofmonthsago,Iwroteaboutsome tipsforretirement.Thetruthis,evenifyou onlyjustenteredtheworkforce,there’sno timetooearlytostartsaving.Oneofthebest waystodothisisthrougha401(k).Ifyou’re lookingatyourfirstjoboutofcollege,here areafewsimplesteps,takenfromapostI readontheVanguardblog:
Consider
date
a target-
fund: Investmentstrategieswithtarget-datefunds typicallyofferlowcosts,agloballydiversifiedasset allocation,andrebalancing,allcombinedtogether. Ifyoufindyourselfselectingaretirementplan option,thinkaboutatarget-datefundwiththeyear inwhichyouroughlyestimateyou’llretire(typical age,forreference,is65).Yourassetallocationwill thenbeallocatedtostocks,andwilladjustover timetobecomemoreconservativeastheageof retirementgetscloser.
Consider a Roth:
Withatraditional401(k)contributions,you putinmoneybeforetaxes,butyouendup havingtopaythetaxeswhenyouwithdraw themoney.Roth401(k)contributions,onthe otherhand,aremadewithafter-taxmoney, andyou’llgetabreaklater.Inyourearly career,you’regoingtobemakinglessmoney thaninthefuture,soataxdeductiononthe present’straditionaltax-deferredaccount contributionswillbefaroutweighedbya Rothaccount’stax-freegrowth.
Consider starting now:
Inanidealworld,targetatleasta12-15%savingsfor retirement.Thatmightseemlikealotwhenyou’reinyour early20s,butyou’llbehappierinthelongrun.Whilemany peopleintheirearly20shaveplentyofexpensesthatwill quicklyeatuptheirmeagerpaychecks,themoreyousave towardyourretirementnow,thebetter.Focusonwhatyou cancontrol:picklow-cost,diversifiedinvestmentscoupled withadisciplinedsavingsstrategy.You’llsoonfindthat youcanmeetyourlong terminvestinggoalswhilealso balancingyourshort-termnecessities.
Thank You!
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