Would it be smart if I put 50-75% of paycheck into 401k?

Question

I'm thinking about putting about 50-75% of my paycheck into my 401k. The company will match 50cents to a dollar up to 10% after 6 months of service. My company says I can put away up to 75% but I thought the max is only 15,000 a year? So once I reach 15000, I can put anymore?

What do you guys think? How it it affect me if the market goes down? What are the risks of putting that much in?

Answer 1

you have already received good answers as to the limit you are allowed?

As to the risks. You got a excellent answer as to some of them.

When you put money into a 401k, normally the company allows you to choose between various investment vehicles, some more risky than others. If you choose stocks you are at risk of some losses in a bear market. By choosing a conservative investment, the risk is less but the rewards might also be less. That is a choice you will have to make.

Answer 2

Your annual limit is $15,000 unless you are over age 50, in which you can put in another $5,000. I would not put all your savings into this particular vehicle. Certainly, there is a tax advantage to tax-deferred savings, but you also want to have savings that you can access more easily for emergencies, home purchases, and other current needs. If you can afford it, definitely do the 10%, because that gives you a big immediate return (although check to see how long it will take for the company portion to be "vested", which means that the money is really yours to take when you move on to another company). Then think about creating an investment plan outside of the 401(k), perhaps involving mutual funds or a money market fund (the rates for these have become more attractive). In your most liquid savings (bank or money market) you should have enough to cover up to three months of living expenses, which covers you if you lose your job or are unable to work). Once this cushion is built, look for longer-term (3 to 5 years) investments, which could include mutual funds investing in stocks or bonds or both. Also think about investing in real estate, either your own home or rental property. Prices had a big run-up in the last few years, and now are flat or even retreating many places. It has gone from a seller's market to a buyer's market, meaning you may be able to find a good deal, if you are prepared to hold onto the property for a number of years. If you can afford to invest so much of your paycheck, make sure your explore all of your investment opportunities to give yourself maximum flexibility in the near future as well as when you retire. The 401(k) should be the place to put funds that you do not need until you retire, so unless you are close to retirement age, do not put all your eggs in that basket.

Answer 3

You should take full advantage of any amount that your employer will match but not a dime more. If they match to 10%, contribute 10%. Now, the next thing you want to do (assuming your home is paid off and you have no debts) is open a Roth IRA that will let you put after-tax money in and should you need the money, you are not taxed on it and no penalties. A Roth IRA lets you have a gamut of investment opportunities that your 401K is limited to. Have you noticed only being able to choose certain 401k funds??? The reason that experts suggest using after tax money is that we are in one of the lowest income tax bracket times in US history so that income tax will have to go up in the future and that money in your retirement will have alot more coming out in the future than you'll have coming out today. There's no reason that you cannot do both. Definately take the money that your employer is giving you ... to the max. Make your money liquid ... dont tie it up in a 401K plan.

Answer 4

There might be a maximum. You conpany's documents should tell you. If not, ask HR.

You should make sure you get the benefit of all the matching funds the company is willing to give you. It's free money!

IF you invest intelligently in your 401k, don't be worried about short term market moves. Your 401k should be invested for the long term. 10-20-30 years later, you will be very glad you started an investment program.

Answer 5

If you can afford it, max it out.

Even though you can defer up to 75%, your still limited by the legal limit (which you said is 15K, not sure but it's around that).

So if 75% of your pay is less than 15K, do 75%. If it is more, than defer whatever percent of your pay equals 15K.

If you're young enough, don't worry too much about putting it in stocks. You have time to ride out the blips in the market

Answer 6

If you are able to live after putting 20% in, that's the way to do it. Most people can't, they live hand to mouth. But hey, if you can, then do it, and don't touch it either, let it grow. Sometimes a bad stock market can be a boon later on -- if you buy lots of stock cheap, when the market recovers you'll see your investments shoot up.

Answer 7

with 15000 maximum by IRS allow, each pay(biweekly), you should put 576$ to get the company matching. If you put too much, and you reach the limit of IRS early, you will miss the company matching, that's really not a wise move.

Yes you could learn invest by yourself. it is your money, you should know how to do with it. for starter check this site out.

http://www.pathtoinvesting.org/index_fla...
http://www.stockcharts.com
http://www.streettalklive.com>... university. a lot amount of information. It will serve you well
I accumulate in good amount in 401k at the young age.I could share with you. when consider invest in stock market. you should consider basic 3 things:

fundamental analysis==(economic data,finincial health, management, business model, competetion)>>what to buy

technical analysis==(chart+indicator)>> when to buy

Sentiment/schycho analysis==>>mood of investor, Contrarian point of view.
Market cycle===>> check out book Trader Almanac by jeff hirsch will give you inside stuff
When you combine 3 thing, It is one of the powerful knowledge goinh with you for the rest of your live

At the age of 32. my 401k is amassed 73,000.00 and 30000.00 in taxble account. by follow simple rule

Answer 8

You must have quit a large paycheck or very little amount of bills to be able to put 50-75% away.

Answer 9

Yes.

After the maximum I suggest you to open a brokerage account and invest there the rest of your money.

If the market goes down you will lose some of your money.

The risk is not investing anything and you die broke.

Answer 10

JUST in MY personnal opinion, IIIIIII would find a good mutual fund, and sock as much of my income into a Roth-IRA. THAT'S TAX FREE GROWTH( I think, still) and TAX FREE WITHDRAWL (at retirment)!! THEN start putting away into your 401(k). DANGER! 401(k)'s sometimes, are raided by the company, in hard times. ESPECIALLY if you aren't VESTED yet. It happened at Enron i think! MOST companies won't do that though, unless they are financially in trouble.