Adulting advice solicited

"Dr. Zoidberg - RIP Oppo" (thetomselleck) 11/02/2018 at 17:26 • Filed to: financialopnik

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The new year is approaching, and I have the opportunity to enroll in a simple IRA, where my employer will match up to 3% of my income. In spite of my incredibly conservative approach to monies, I’ve somehow never opted in. And with the new house and new bills and this this and that, opting in sounds even less appealing as that 3% would be nice to have. I’d rather pay down debt or fix up the home. What say you?

RamblinRover Luxury-Yacht > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:31

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Don’t ask me, I’ve been putting in 3% for years now in the face of still having a couple college loans over 6%. I clearly don’t know what I’m doing.

On the plus side, my portfolio is put together okay.

CobraJoe > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:32

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If you can afford it, opt in to the full 3% that they’ll match. Small amounts put into a 401k early are equal to large amounts put in later, and might as well get everything that your employers are willing to give.

If not, even 1% adds up a lot quicker than 0%.

E92M3 > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:32

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At least contribute enough to get the match, otherwise you’re giving up free money.

My advice would be to contribute just enough to get the match, any extra should be invested in a Roth IRA. If you max out the Roth and happen to have more to invest contribute more to your employer IRA  plan.

Tristan > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:33

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I say opt in. 3% is negligible money out of your check, but the 3% they put in is FREE MONEY! Plus, retirement saving is a good idea.

E90M3 > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:34

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It should be pre-tax, so it’s less than 3% of your take home. Unless you plan on qui tting soon and there’s a vesting period, there’s almost no reason not to contribute.

JustAnotherG6 > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:35

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Invest. Especially if said company is matching. Every little bit helps down the road.

The other way to look at it is: what is the expected annual return vs how much are your debtors charging you for the pleasure of using their money. (I prefer a % to % comparison) If you are making a larger % by inve sting then the question becomes much easier.... but that’s me, and I reserve teh right to be wrong.

Akio Ohtori - RIP Oppo > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:35

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Smart money is on doing the minimum you need to get a full match. After that, it is up to you. Saving for retirement is important, I’ve been told.

gmporschenut also a fan of hondas > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:36

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Never too early to start saving. Also you’re leaving cash on the table. At least put some in

BIGBLOCK472 - wide and bizarre > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:37

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I feel like not opting in is like walking away from a 3% raise. Some would argue that if you are paying interest on debt it  doesn’t make sense to opt in and use that 3% required for matching to lower your debt. I disagree.  I’d still opt in.

XJDano > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:39

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I don’t know either, I have a pension through my union and I’m 19/30 of the way to 30 years in. If the union can hold out for another 11 years I’ll be getting a job outside of construction so I can get my full benefits.   

mustangchris66 > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:42

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Also consider that the 3% you put in is taken out pre tax so it helps you come tax time. I was in much the same boat as you when I got my first “real” job. I can tell you that 11 yeas in I don’t miss that 3% any more and contribute more than the minimum 3%.

Sovande > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:43

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Dump as much money as you can in that thing. 

AestheticsInMotion > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:46

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I would love some kind of company-matched fund. I think I’m going to bring this up to my boss... 

Maxima Speed > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:49

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The downsides definitely out way the benefits ever since Ireland went independent.

CompactLuxuryFan > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:50

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Echoing what everyone else has said. Another great way to look at it is the 3% that’s being matched is an investment you’re making that has a guaranteed 100% return rate. That’s phenomenal, so you really oughtta get on it! During my last job change I went from a 3% match to a 0% match and you bet ya I pointed it out as basically a salary decrease and used it to negotiate.

jimz > E92M3 11/02/2018 at 17:50

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Wot ‘e said. If you keep putting it off, you won’t have shit once you reach retirement age. 

Nothing > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:52

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At least get the match. 

TheRevanchist > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:52

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Look, you pour all kinds of money into a house and it never is done. No matter what you do.

Start investing now. Don’t let that money get away from you. It’s important to maximize your future dollars. Essentially, it’s the best paying savings account in the world with the company match.

So, lose your money now or get more money for the future . That’s really what it boils down to.

SilentButNotReallyDeadly...killed by G/O Media > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:54

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Do it. Australia has compulsory superannuation. 5% (or thereabouts) of your pre tax income goes into a fund of your choice and is quarantined till retirement. There are copayment incentive schemes as well along with tax benefits for personal contributions.

I’ve been contributing since the early 90s to a super fund and have a quarter million set aside for retirement as a result. I may not have had income for the last nine months but that little stash is a nice thing to know I have...

TysMagic > CobraJoe 11/02/2018 at 17:58

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110% this!!! I am on the younger end of the 401k process as well. Seeing how poorly prepared my parents are for retirement, I am doing everything possible to be ready for it. 

Manwich - now Keto-Friendly > Dr. Zoidberg - RIP Oppo 11/02/2018 at 17:58

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Enroll in it. It makes financial sense because you’re essentially doubling your money from day 1.

You can’t get better no-risk return like that anywhere. I do the same thing with my employer.

It makes complete financial sense and you won’t miss a measly 3%... but it will add up over time and you will be happy you did it as you start getting closer to retirement age. 

fintail > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:04

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Take the free money.

vicali > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:06

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3% is pretty good, and matching is free money..

facw > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:12

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Sorry, but the adult thing to do is to put in what you need to get the full match (I’m umm... not doing this myself right now, but I should be). I know you’d like to have that money, but if you aren’t saving 3%, you definitely aren’t saving as much as you should be (though if it’s going in to the home instead, then at least you can probably get that cash back later). It’s tempting to say you’ll pay down debt first, but keep in mind you are investing this money, so not only do you get the 3% as basically free money, you get the earnings from your 401k as well. This means that paying down debt first really only makes sense if you have high-interest credit card debt. Interest rates on home and auto loans should be low enough that you are better off having the money invested.  

HammerheadFistpunch > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:18

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take advantage of as much free money as you can afford.  that sounds weird but ALWAYS match out if you can afford it.

John Norris (AngryDrifter) > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:19

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I’ll move in to old people font for emphasis and aged credibility .

YOU MUST START YOUR RETIREMENT PLAN NOW. I STARTED WHEN I GOT MY CAREER JOB IN LATE 1985. MY ONLY REGRET IS THAT I DIDN’ T STUFF MORE IN THERE. I AM IN GREAT SHAPE FOR RETIREMENT, BUT I COULD HAVE BEEN IN EVEN GREATER SHAPE WITH SOME MORE DILIGENCE UP FRONT.

WITH RESPECT TO SOMEONE MENTIONING VESTING, VESTING IS FOR PENSIONS. 401K’s ARE NOT PENSIONS. IF YOU QUIT IN A YEAR YOUR 401K INVESTMENTS AND THEIR MATCHING WILL GO WITH YOU.

THERE IS NO REASON FOR YOU NOT TOO. IF YOU THINK YOU CAN’T AFFORD A FEW PERCENT, CHANGE YOUR HABITS AND MAKE IT SO.

Returning to normal font for normal automotive related conversation not requiring me to disclose nor emphasize my aged status .

Highlander-Datsuns are Forever > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:31

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Yes, match 3% at least being pretax you will not notice the monies. It will lower your tax burden too. I’ve pulled down to 2% now because the market is so high I feel like any shares purchased now will have a terrible return. I’m planning on going to max when the market corrects.

f86sabre > Dr. Zoidberg - RIP Oppo 11/02/2018 at 18:54

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Palpatine commands it.

Officer Jim Lahey is not a real cop > John Norris (AngryDrifter) 11/02/2018 at 18:59

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AGREED

...except many companies’ 401(k) matches do indeed have a vesting requirement. If you quit within, say, 2 years of starting work  there, you can lose the amount they matched. Your contributions, however, will stick.

CompactLuxuryFan > RamblinRover Luxury-Yacht 11/02/2018 at 19:00

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Do you get a full match up to 3%? In that case, putting it in vs paying off a 6% loan makes perfect sense because the return on that 3% of your salary is at least 100% (your company is giving you as much as you ‘put in’, and then it makes some on the market ). Any money you put towards the retirement plan instead of the loan (ideally you would do both) just has its phenomenal return reduced by a little bit .

This doesn’t even account for t ax benefits from not paying income tax on that money while you’re young and earning a lot, and instead deferring it to when you’re retired and in a lower income bracket .

94RRC > John Norris (AngryDrifter) 11/02/2018 at 19:00

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A lot of companies don’t give you control of the entire matched amount right away. For example, you could have a 5 year vesting clause and every year you get 20% to “ control. ” So, in a case like that if you leave the company 3 years in, you only get 60% of what they contributed. After 5 years and going forward you get 100%. This does NOT hurt the part you’re putting in, you have full control of that.

They match your contribution, and the money they put in grows like normal, they just take  away a % of the value of the contribution if you leave early.

Dr. Zoidberg - RIP Oppo > Dr. Zoidberg - RIP Oppo 11/02/2018 at 19:04

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Thanks, everyone. Oppo

Mid Engine > Dr. Zoidberg - RIP Oppo 11/02/2018 at 19:05

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Finance 101: pay yourself first.  Max out the match, always. 

Dr. Zoidberg - RIP Oppo > Mid Engine 11/02/2018 at 19:07

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But my doctorate is  in Art History

Chariotoflove > Dr. Zoidberg - RIP Oppo 11/02/2018 at 19:09

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Opt in to the max.  

ZHP Sparky, the 5th > Dr. Zoidberg - RIP Oppo 11/02/2018 at 19:14

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Do it. Consider it part of your secret saving strategy that you don’t even see in your take home pay so you’re never tempted to spend it. Also gets you used to living within your means instead of always finding new ways to spend that extra money you’re getting in your pay check through raises (which is why I would encourage signing up for annual automatic % increases as well).

My wife just left her job to spend time with our newborn so we had to do some shuffling of our finances. I was almost shocked to learn that unbeknownst to me I had apparently been putting 12% of my salary in to my work 401k plan. So for this temporary period where we’re a single income household that’s an easy place to ratchet down the savings for a little while…but it’s also really helpful knowing that I had been putting away that much of my salary before even looking at my paycheck and stuff we’d been saving after that.

Also as others had mentioned, this is pre-tax and tax free if you let it sit until you’re eligible to take it out. Combine that with the employer match…it really is a triple whammy of reasons to not pass up on it.

slipperysallylikespenguins > Dr. Zoidberg - RIP Oppo 11/02/2018 at 19:37

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I’m gonna go against the grain here. I’m not a big fan of IRAs/401ks. Mostly in that I want to be able to use my money when I need it without a penalty. Putting money away until hitting retirement age is kind of off putting to me (who knows if I’ll even be alive then).Part of this mindset is that I absolutely hate debt. I would feel more comfortable with a paid off house than I would with a nice nest egg.

I do believe saving for retirement and investing is important though. As my current job has a joke of a 401k program, I started investing on my own so I could have control of my money and have had higher returns than my coworkers that enrolled.

Disclosure: I am a weirdo who’s only debt is a mortgage and have a credit score of 840. Don’t listen to me.

John Norris (AngryDrifter) > Officer Jim Lahey is not a real cop 11/02/2018 at 20:21

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OKAY.  I AM OLD AND SENILE AND I STAND CORRECTED.

John Norris (AngryDrifter) > 94RRC 11/02/2018 at 20:21

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OKAY. I AM OLD AND SENILE AND I STAND CORRECTED. And sometimes I repeat myself.

Quadradeuce > Dr. Zoidberg - RIP Oppo 11/02/2018 at 21:13

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Here’s what we did. Always take the match; it’s free money. Anything above that, pay off debt. Once you pay off your debt, start dropping everything you can into retirement accounts.

I don’t know how old you are, but you should be planning on paying off your house in 15-18 years if pos sible. We paid off ours at year 13, but we live in a flyover state. By our late 30s we are max ing out everything at work plus an IRA for each of us.  

My wife and I still budget like we did when we first graduated college. 15 years later she is a VP, and I’ve been running my own company for 13 years. I know people who make half what we do, and they spend much more on a weekly basis. Keep your priorities straight is what I’m getting at.

And since this is a car related site, I only allow one car payment at a time, hopefully with a few years of no debt in between. I know we advocate crazy car buying advice around here, but making wise car choices can have a huge impact on your finances.

So buy a Land cruiser, it's technically cheaper than a fiat 500 when you account for depreciation....

Svart Smart, traded in his Smart > Dr. Zoidberg - RIP Oppo 11/02/2018 at 22:52

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Take the employer match. Five years ago I started putting money into a 401(k) when an employer match became available to me for the first time. Now I have nearly ten grand put away for retirement and it’s only going to grow now that I’ve recently gotten a better job with a bigger salary to take x percent of.

SmugAardvark > Dr. Zoidberg - RIP Oppo 11/03/2018 at 00:35

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Go for the full 3% they’ll match if you can afford to do so. If not, contribute at least some if feasible, then scale up when your other expenses allow you to do so.

For me, 3% is just under $250/month. If you’re a smoker and can get yourself to quit, it’s a wash right there. If you drink Starbucks every day, you’re probably at least halfway there if you drink the coffee in the office instead.

The Snowman > Dr. Zoidberg - RIP Oppo 11/03/2018 at 01:22

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Max the match even if you eat ramen for a while.

RPM esq. > Dr. Zoidberg - RIP Oppo 11/03/2018 at 02:45

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You should contribute up to the match percentage at least . That’s giving yourself a tax-free(ish) 3% raise! Free money, sort of! Beyond that, well...someday, maybe ?

Disclaimer: I moved jobs some years ago and thus moved from a matching plan to a profit sharing plan, meaning that how much I contribute has zero bearing on the near-random amount that my employer contributes at the end of the year , and boy did I reduce my contribution immediately from exactly the match percentage to 1% because incentives work and I am not good at saving money (you know what I drive) .

davesaddiction @ opposite-lock.com > Dr. Zoidberg - RIP Oppo 11/05/2018 at 10:53

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Dude... free money.