SavvySugar

How Much Should I Put in My 401K?

Savvy Community — Wed, 17 Feb 2010 04:00:46 -0800

This question was shared by member elisabeth in our Ask Savvvy? group.

I know you should try to max out your 401K each year, but I don't make enough to put in the max. I have been out of a college for a few years and feel like I should start contributing as I have a good job and have been able to save quite a bit of money as my rainy day cushion. But I want to retire in 30-40 years - hopefully! It seems so far away, but I know the sooner you start the better. What is a good percentage to put away and how much does the average recent college graduate contribute?

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What Type of Retirement Account Do You Have?

SavvySugar — Thu, 28 May 2009 10:30:30 -0700

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What's the Difference Between an IRA and a 401k?

SavvySugar — Fri, 13 Mar 2009 09:30:40 -0700

One of the most common questions I get from readers is, "What's the difference between an IRA and 401(K)?"

If you're an athlete, 401(k) sounds like it should be the length of some torturous marathon. Of course, IRA might evoke images of the Irish Republican Army. I suggest you ignore your immediate word associations and begin thinking about your future immediately. Retirement as a goal really is like a long, slow marathon, and a well mapped out plan makes finishing on your feet a real possibility. I have graphed out the differences between IRAs and 401(k) accounts below. Here's to the long haul!

Name of plan	Purpose	Who can invest	IRS Contribution Limit for 2009	Taxes
401(k)	Tax-deferred retirement savings account offered by many employers.	If your employer offers it, you may be eligible. Check your employer’s plan for requirements.	$16,500 (plus up to $5,000 more if you are 50 or more). Your Employer’s Plan rules may also further limit your contributions.	Deferred until retirement; taxes paid when funds are withdrawn.
Roth 401(k)	After-tax retirement savings account.	If your employer offers it, you’re eligible. Check with your employer’s plan for requirements.	$16,500	Contributions are made with after tax dollars; qualifying withdrawals aren’t subject to income tax.

See the difference between a traditional IRA and a Roth IRA when you read more.

Name of plan	Purpose	Who can invest	IRS Contribution Limit for 2009	Taxes
Traditional IRA	Individual retirement savings account.	Anyone with earned income and under age 70.5 for the year in which the contribution is made	100% of earned income or $5000 ($6000 if you are over 50), whichever is less.	Contributions may be tax-deductible depending on several factors. Withdrawals of income and pretax contributions after age 59.5 are taxed as regular income.
Roth IRA	Individual retirement savings account.	Available to single-filers making an income up to $116,000 or married couples filing jointly making a combined maximum of $169,000 annually. If you are married filing separately, talk to your tax adviser for income limits	100% of earned income or $5,000 (or $6,000 if you are over age 50) whichever is less.	Contributions are made after taxes. Withdrawals of income aren’t subject to income tax if all conditions are met. For example, your withdrawal of income won’t be taxed if at least 5 years has passed since your first Roth contribution and you are at least 59.5 years old.

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Glamour Asks: Are You Normal About Money?

SavvySugar — Thu, 12 Mar 2009 04:30:06 -0700

Money habits might be as personal to you as your pore cleansing ritual, but who isn't a little curious about the way others deal with their hard earned dollars. Glamour magazine solved the guessing game by polling its readers on their cash, asking about everything from money marriages to retirement savings. Check out the findings below; do any of the percentages surprise you?

35 percent missed a credit card payment last year.
43 percent of couples fight about money.
45 percent always pay off their monthly credit card balance.
51 percent would choose money over a dream job.
55 percent don't have a retirement account.
74 percent would marry someone for money if he were worth at least $1.1 million.
79 percent maintain a monthly credit card bill that's less than $1,000.

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Are You Still Contributing to Retirement Savings?

SavvySugar — Thu, 29 Jan 2009 07:15:58 -0800

It's not surprising that some people are tempted to pull the plug on retirement contributions when things are tight, but it's important to continue on the path to saving enough for the golden years. Have you kept up with your contributions as the economic crisis has worsened?

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5 Things to Accomplish Before 2009

SavvySugar — Wed, 10 Dec 2008 04:30:37 -0800

We are down to the wire of 2008, and now is the time when many of us procrastinate with the rationale that we'll be on top of our game in the New Year. There are a handful of money and job-related tasks that can't wait until the ball drops, so get on the ball now by accomplishing these five things before 2009. Start the slideshow to see what should be at the top of your to-do list.

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Savvy ATM: Revisiting the Retirement Account Rollover

SavvySugar — Mon, 10 Nov 2008 04:30:15 -0800

Job hunting might be the only thing on your mind after losing a job, but don't let your 401(k) from your previous employer slip through the cracks. Deal with wrapping up those loose ends before diving into the job search head first, otherwise you're more likely to indefinitely postpone the task.

Your 401(k) savings can be rolled into a Traditional IRA account without penalty. The bank that holds your IRA account will have paperwork for you to complete and will initiate the rollover. Your 401(k) will be liquidated and funds amounting to the account's market value at the time of liquidation will be transferred to your IRA account. From there, you'll need to rebuild your retirement account by choosing new investments. You could try and hold off until you've found another job and roll your retirement savings into your new employer-sponsored retirement plan, but there's no guarantee your new job will offer one.

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Congress Says: It's National Save For Retirement Week

SavvySugar — Wed, 22 Oct 2008 08:00:08 -0700

In an attempt to encourage Americans to save for retirement, Congress is inviting all of us to celebrate National Save For Retirement Week. More than 20 percent of workers admit they don't have any kind of retirement savings and Congress wants to use this week to reinforce the importance of saving early.

Saving for retirement has always been a core issue of personal finance and right now it's more visible than ever, but not because of a special week created by Congress. Panicked Americans have been withdrawing their retirement savings and taking the tax penalties because they fear losing everything, and while the market is a central concern for older workers, younger savers should remember to stay the course in putting money aside for their retirement.

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America's Oldest Worker Can't Stop, Won't Stop

SavvySugar — Mon, 13 Oct 2008 11:00:36 -0700

Mildred Heath was recently honored as America's Oldest Worker for 2008. She and her husband bought a newspaper in Nebraska when she was 23. Today she's 100-years-old. She's been a journalist and publisher for 85 years and still works 30 hours, six days a week. "I enjoy working and things that need to be done I go ahead and do them," Mildred says in the video below. "So it should be some kind of inspiration."

Definition: Hardship Withdrawal

SavvySugar — Wed, 24 Sep 2008 15:30:45 -0700

A hardship withdrawal is when a 401(k) account holder removes funds from her retirement savings because of circumstances like job loss, facing home foreclosure, or overwhelming medical expenses. While withdrawal is permitted during those tough times, the account holder cannot get away from the 10 percent tax penalty incurred when the funds are removed.

According to The Wall Street Journal, several 401(k) plan administrators reported a noticeable increase in hardship withdrawals this year compared to last. The shift signals that many 401(k) participants are more concerned about how they will pay their bills than saving for retirement. Administrators have also observed many employees dealing with the tough economy by reducing the amount they contribute to their retirement plans.

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