Assuming your at maximizing your match with your 401K, what percentage of your gross income would you say you set aside in a savings account as well? I understand you may have funds going into other investments as well, but how much do you continue to place into a savings account, or do you just stop once you've established a nest egg of 6months living expenses?

12/11/2006 12:49:54 PM

I'm putting in as much as my company matches (currently 6%, will be 9% in Jan. 07). I've started building my "6 month nestegg," so I'm packing away just as much as I can.

I'd suggest never stop saving. You never know when sometime awful will happen or you'll get an itch for a new car or something.

Personally, I wanna get 6 months living expenses saved up, then start saving towards a new car.

12/11/2006 1:09:06 PM

I don't really have a set amount. I deposit a certain amount in my 401k, ira, and then make it a point to spend less than my net pay and the rest goes into savings. I probably end up saving 15% of my gross paycheck into my savings account on avg, althought most of those savings will be going to a house next year.

If you already have 6 months saved up, I would definately contribute to a roth ira and then continue saving in your 401K. A savings account will barely beat inflation so unless you plan on using that money in the near future it is probably a good idea to invest any overflow.

[Edited on December 11, 2006 at 1:34 PM. Reason : 2nd paragraph]

12/11/2006 1:22:02 PM

Unless you invest in an alternate savings account like emigrant direct that gives 5+% interest on thier accounts.

12/11/2006 1:38:12 PM

Yeah. Like I said, you'll barely beat inflation. Making 1-2% on your investments for retirement after inflation won't cut it.

12/11/2006 1:39:29 PM

save 50% of the take home paycheck(which is about 54% of my gross pay since 10% goes to employee stock, 6 % to 401k, 30 something% to taxes) so I guess of my gross, its only about 25% or so.

12/11/2006 1:41:09 PM

Why so much in savings and so little in 401K?

12/11/2006 1:46:51 PM

Roth, and more expendable investments...

Looking to get a nice house in a few years

12/11/2006 1:47:57 PM

word, can't beat tax free returns

12/11/2006 1:50:59 PM

1. Use a savings account only as a means to have emergency funds that can be liquidated w/o penatly. EmigrantDirect.com and ING.com are ideal for this. I recommend you do this before #2, and #3.

2. Give as much as you can to 401K, esp if there is a match. If you have no 401K, go to step 3.

3. If there is anything left that you can contribute, open a Roth IRA, give as much as you can to that.

4. If there is anything left after that, consider a variable annuity.

If you can do all of the above, you'll should be in good shape (and if you do your homework on the funds that you select). 401K, RothIRA, and Variable Annuity all provide tax deferred returns.

12/11/2006 2:12:38 PM

I was with you up until step #4.

12/11/2006 2:14:44 PM

i'd contribute to a traditional IRA before an annuity

12/11/2006 3:20:12 PM

I'd fuck a cheese grater before an annuity.

12/11/2006 3:21:58 PM

Most Americans don't make enough to max the 401K and the Roth, so if you have more to invest when you've done #1-#3 and feel strongly about rejecting #4, I think that's ok.

Personally, I treat a variable annuity as an insurance vehicle (which is what it really is) so that you're protected if your 401K and Roth investments take a dump. If you don't feel the need for something like that before investing in even higher-risk vehicles, then go to:

5. Buy investment real estate or open an investment account and buy stocks, funds, etc.


p.s. don't forget to buy a house along the way if you haven't done so already

12/11/2006 3:22:41 PM

annuities are teh wins.

12/11/2006 3:29:30 PM

heh

if you're the guy selling them.

12/11/2006 3:31:13 PM

They get a really bad wrap and some of it is deserved. Partly because they do have huge commissions. FWIW, I would never have it as a primary investment tool.

I used to feel the same way that you do. A few years ago I was at the point where I felt I could still comfortably make contributions after the 401k and the Roth were "maxxed". I did some reading and talked to a couple of financial professionals and that's where I arrived. My main reason for having it is not so much growth, but as a protection should my previous investments sour. If they do, I'll be ok. If not, I'll be ok. If I'm an idiot, I am an idiot -- but I'll be ok.

The particular one that I have is with Genworth Financial.

12/11/2006 4:00:46 PM

If your portfolio is well diversified then having investments go "sour" shouldn't be a huge concern especially if someone is 20+ years from retirement.

12/11/2006 4:03:01 PM

I have an AIM 403b and a Roth IRA and something else..
My father is a financial advisor so he invests everything for me. (First Investors)
I invest/save about 15% of my earnings (which isn't much considering my salary... )

anything extra right now is going into short term savings (house fund)

12/11/2006 4:05:20 PM

^ 15% is by no means stratospheric, but it's about in line with what you should be investing (particularly if you're saving for a house in addition to that). you're actually doing much better than most people.

12/11/2006 4:49:55 PM

I'm opening a 401k within the next week. This will be the first chance I get to invest.

So I know nothing about investing and any advice would be awesome. Begin with the basics....

[Edited on December 11, 2006 at 5:15 PM. Reason : Looking out for my future.]

12/11/2006 5:12:20 PM

12/11/2006 5:17:33 PM

stratospheric....interesting word choice

Kiki, be aggressive and diversify

12/11/2006 5:44:55 PM

i'm currently doing 15% to my 401k and then max out the Roth at 4k/year (although i think i heard that that will go up next year to 4500 or 5k). i will probably back off the 401k to 10% or so midway through next year when my rent payment turns into a mortgage payment.

i would suggest putting as much as you feel comfortable contributing in your Roth and 401k(first max out company match, then max out Roth, then contribute extra to 401k).

12/11/2006 6:05:06 PM

I think next year 401K max goes up by $500 and the year after that the roth max goes up $1000

12/11/2006 6:15:35 PM

after 401k & roth i put my savings into a money market account

12/11/2006 6:32:44 PM

now that i'm in school again i can't afford to put any money away for savings oh well, at least i put away a lot in my 401k and roth ira when worked for two years

12/11/2006 8:23:59 PM

good call, makes more sense to frontload it, I'm trying to max my stuff out now and then cut back a little if I need to later on

12/11/2006 8:26:35 PM

I save about 18% of my gross, or 21% if you include the company match on the 401k

These are all on auto-pilot:
6% in the 401k, 3% match
$250/mo to the ROTH, plus extra contributions during the months I have a 3rd paycheck
bi-weekly contributions to a savings account toward a down payment on a first home. This isn't a huge priority yet so I'm just making modest contributions.

Extras:
Earnings from side-jobs are currently filling the emergency fund; once that's beefed up again, I'll start funding a "new car" account and a 529 plan for grad school. I don't count the side-job money in the gross funds available because the $ isn't steady and because a lot of it is contracted on 1099's so I won't know the tax impact until next year. My goal is to bank all of the extras toward grad school / car / other intermediate goals.
Company bonus will probably go to the emergency fund, or toward the 529 plan. Depends on how much progress I make in the meantime.

If I made $BobbyDigital, it'd be easy to save 40% or more of my gross and still live like a baller.

12/11/2006 9:01:07 PM

What does he do?

12/11/2006 9:31:09 PM

Apply a degree that isn't wothless.

12/11/2006 9:54:04 PM

i save/invest about 25% of my gross. i max a Roth (which is currently in a variable annuity, which I started when I didn't know much about investing. I'm seriously considering ditching the annuity, but I don't really know the best way to do it, yet). I put some money (less than the Roth) into a money market each month, and put more money (an amount greater than the Roth) into stocks (mostly fairly aggressive growth stocks).

actually, i save/invest more than that if you count permanent life insurance with a cash value.

12/11/2006 10:31:55 PM

So I just got hired by my first real job, graduation is Dec. 20th and I start work on Jan 1st. After planning out my budget with a fair margin of error, I estimate I'm going to have about 25% of my gross to invest.

What should my priority be? Paying off student loans as fast as possible? Maxing a Roth? Saving for a real estate investment? I plan on at least meeting my maximum match for 401k, should I do more?

I want to get off on the right foot here.

12/11/2006 11:11:29 PM

depends on the interest rate of your loan. if it's one of those 2-3% ones, i'd say concentrate more on the 401k than paying down the loans. however if it's one of those nice new ones that is closer to 6 or 7%, concentrate more on the loans.

12/12/2006 12:18:46 AM

seems to be some financially savvy people here, so see if you can answer my Roth question...

BTW, I have looked for specific examples and cant find anything that tells me an answer with 100% surety.

So, I have had my ROTH open for 5 years now... Although the first few years I only invested a few thousand or so. Right now, my wife and I both have ROTHs open, and are maxing them out (2 years straight)

So, when we buy our first house in about 2 years, what are the rules for taking out the principle we invested? I have read that if you have had the ROTH open for 5 years, then you can take all of that money out if you qualify as a first time home buyer. I have also read that the actual principle has to have been in the ROTH for at least 5 years, so contributions from 5, 6, and 7 years ago could be taken out, but not contributions from 1, 2, 3, and 4 years ago.

Can anyone clear this up? I dont really care too much about the increase from investments, just need to know the exact rules for Principle being taken out of a ROTH.

Thanks!

12/12/2006 8:33:56 AM

Quote :

"however if it's one of those nice new ones that is closer to 6 or 7%, concentrate more on the loans."

I'd still pay the min on the loans. You can easily beat that in the market.

Rob, from my understanding you can withdraw the principle at any time. You can withdraw investment earnings tax free for a first time home purchase if they have been in the roth for at least 5 years and these earnings must not exceed $10,000.

Didn't you say in the other thread you already owned a condo?

[Edited on December 12, 2006 at 9:13 AM. Reason : ]

12/12/2006 9:11:34 AM

yeah its sorta a tricky situation .... Thats why i had the additional questions about the principle being taken out.

My wifes mom has lots of cash and is so prudent that she doesnt want to risk loosing it in some fund, so she would keep it in CDs at this point.

So I propositioned her to loan us the money for the condo, and we pay her directly every month.

I have not reported this to any credit agencies yet, but could if we wanted from what they told me when I called. So I am actually not sure if the government considers us to be the owners either, since she actually has a deed of trust for the property. I guess since I pay the taxes on the condo, we are probably listed as already owning our first home, but we have never had an official loan for a first home.

Kinda strange, I know, but it works out for us, and we get a 6% rate with a flexible mortgage, and it was good for us at the time of purchase.

12/12/2006 9:31:17 AM

Is the title in your name?

12/12/2006 9:52:25 AM

i max out the 401k regardless of the contribution - partly because of the tax shield

12/12/2006 10:44:56 AM

agreed, but easier said than done

12/12/2006 10:49:32 AM

Okay, first and foremost, I'm financially not terrifically well educated. ANything beyond money in;money out, where it went, and savings vs checking is ..something I'm working on understanding the details of.

But my question is this-
So lets say you have a budget of x amount per month- and it's about what you spend (say always on target or you spend a little less).
You also have 6 months worth of savings built up for emergencies
And then whatever else 401k,Roth, whatever

Where do you pull money for say- oh, xyz random bullshit happens thats not an emergency, but pretty inconvinient and unexpected? Should it come out of savings? It seems like then you're risking running short if you loose your job etc- or rather you wont have the full 6 months.

Or random xyz thing you really want that's not inside your budget?

I mean, i'm assuming you have the money to do it but i dont know where you keep it i guess is the question. Padding in your checking account? (that seems silly), more than 6 months worth of salary in savings? (seems reasonable?) or where?

i'm talking things smaller than a car or house that obviously you'll start saving for seperately, but like, umm, you want a new TV, yours blew up. or your kid spilled coffee in your laptop and killed it.

[Edited on December 12, 2006 at 11:38 AM. Reason : .]

12/12/2006 11:37:46 AM

If it isn't an emergency scrimp and save until you can afford to buy it. If you have > 6 months saved then take it out of your savings account.

Keep it in a money market account or in a 6 month cd.

[Edited on December 12, 2006 at 11:41 AM. Reason : ]

12/12/2006 11:40:37 AM

just transfer it from savings. DO NOT remove anything from your 401k. the penalties and taxes make it too damn expensive to even consider it. if i was you i would keep a small amount in your checking and just transfer money in from a high yield savings account if you need extra $$.

key word being need

[Edited on December 12, 2006 at 11:43 AM. Reason : f]

12/12/2006 11:43:29 AM

Thx for the advice,although i will say, the assumption i was operating under is that you earn enough and such that you could buy something you want, just where should you put money for that to use later?

Because otherwise it seems like you'll never buy anything you want. ever. (at which screw this working thing)

perhaps a better example would be say you (or your wife) wants a new purse, y'know, like $25.
Is that kind of thing just built into your budgets?

[Edited on December 12, 2006 at 11:57 AM. Reason : .]

12/12/2006 11:56:31 AM

Quote :

"high yield savings"

12/12/2006 11:57:29 AM

yeah, you gotta budget for some level of short term gratification. Delaying ALL gratification till after retirement results in a boring ass life between now and then :-)

12/12/2006 11:58:07 AM

^^ got it. missed that line. I need coffee.

Thanks all

[Edited on December 12, 2006 at 11:58 AM. Reason : .]

12/12/2006 11:58:15 AM

Generally, financial professionals will say you need to save bewteen 10-12% of your gross income.

Only contribute up to the match in a 401k, if you want to invest more, open up ROTH IRA, or some other vehicle. I work as an investment advisor, so feel free to ask if you have any questions.

Matthew Stokes
(919) 341-1636

12/12/2006 1:33:08 PM

Quote :

"Only contribute up to the match in a 401k"

I disagree. I would max it out once you contribute the full amount to your roth.

Quote :

"open up ROTH IRA, or some other vehicle"

You mean some other non tax friendly vehicle?

[Edited on December 12, 2006 at 1:42 PM. Reason : ]

12/12/2006 1:41:32 PM

It obviously depends on your financial situation. If you are older, and need to catch-up, tax deferred vehicles are the way to go. period. However, there is a place for post-tax contributions. It is wise to be "diversified" in your investment portfolio. Having a post and pre tax vehicle gives you some tax diversification as well. I generally advise to match the max (or 10-12% of gross salary) with your employer sponsored 401k, then max out the ROTH (for younger investors), then we can discuss your individual financial situation to see what else to invest in. If you make enough money to max a ROTH and contribute 10-12% in a 401k, then there are a lot of options as to what you can invest in. And those options can be tailored to meet your individual financial needs/goals. The reason you should not put your extra in your employer sponsored plan (unless you are doing major catch-up, or really need the tax help), is because of account ownership.

12/12/2006 1:52:18 PM