401K question?

Question

I am 20 and i will begin recieving 401K at my work. They match what i allocate ito my 401K. In the past every year we would recieve a certain percentage from profit sharing directly into our 401K. We are now switching over to this matching program. i believe they match 4% for 4% of income and then after that its 3.5 for every 5% allocated and so on. How much would you suggest i allocate into this? If i switch jobs, can i still keep this 401K? Will i be allowed to continue adding to it even if i do not have a 401K program at my new job? any advice will be appreciated. thanks!

Answer 1

I'll answer your questions in order...

I would allocate as much as I could towards it. Just realize that the money is essentially hidden from you for the next 40 years. Do not borrow against it, let time do it's magic and compound that $ for you. The maximum anyone can put into a 401(k) is $15,500 this year.

If you switch jobs you will generally have several options of what to do with your 401(k). First, if the balance is over $5000 you can leave it where it is. Second, you can roll it over into a rollover IRA. This keeps the tax advantaged status and allows you to have more direct control over it. Third, roll it into your new employer's 401(k) plan (that way your money is all in one place).

You will not be allowed to keep adding to a plan after you have left that company. You will have to set up a new plan at your new job.

good luck and congratulations on thinking about your retirement at age 20!

Answer 2

you can keep it if you switch jobs. i would allocate the maximum that they will match. even if they only match 3.5% out of the 5% you give i would go to the max because actually you are increasing your compensation. you will not be sorry. you can borrow from this usually if you need to.
this is untaxed income. contribute the max that they will match (even if they only match part). if you have extra money and are not struggling, contribute the max that you can.
i contribute about $15K per year. i max the baby out. it's the best investment available.