So after being a grade A fuckup most of my life, I got my act together and have a decent job.
I'm now eligible for their 401k, and having never had one before, I'm intimidated by the mountain of forms and jargon. Anyone have any beginner's advice for these things? I think they fully match the first 3% I put in, and then match half of 4-5%.
Oh also, I've got about 15k in student loans I'm trying to grind away at, if that changes anything.
>>1436074
Just do the minimum for full match since it's free money. Since you might need money for other things you shouldn't worry about building it up so fast.
>>1436074
Depending on the interest rate on your student loans, that may affect your decision to put a certain amount of money toward paying off the debt or putting it into a 401K. Another factor is what your salary is and how much money you need to live.
Assuming you make far than enough to cover your living expenses and side aside cash for emergencies (health, broken car, etc.), this is what I would recommend:
1. For certain, put 3% of your salary into the 401K because the company will match it dollar for dollar. This is a 100% return immediately.
2. If the interest on the student loans are greater than 6%, pay those off as quickly as possible before putting any additional money towards your 401K. In the current environment, most people and institutional investors would be hard-pressed to get a better than 6% return.
3. If, after putting in 3% of your pay for the 401K and paying whatever it is for your student debt, you still have money, put another 5% of you salary into the 401K, which according to you is matched 50 cents on the dollar. Some people might suggest contributing this additional 5% before paying down the student debt because of the immediate 50% return from the employer match but I would recommend against it. Student debt can never be discharged and any sort or mix-up or a late or missed payment could cause you to incur usurious fees. It's best to get rid of the student debt as soon as possible. Furthermore, expected returns over the next 7 or so years for stock markets are abysmal. While no one knows for certain that returns will be low, reliable statistical studies indicate that they will be poor.
Finally, since you know very little about investing, try to pick a low-fee, diversified index fund. You'll have to read the prospectuses to get that information and it's boring as heck. However, understand that it is your money and you need to understand how your money is going to be invested and how much you'll be charged in fees.
>>1437041
Note: Ideally, a diversified fund should be one that has investments in all sort of industries across a lot of countries. Investing in the S&P 500 is pretty good diversification but you're entirely concentrated on investing in the U.S., whose stock market relative to other markets is rather overpriced.
If you're curious, compare the holdings of the Vanguard 500 Index Fund (VOO) against the Vanguard Total World Stock Fund (VT). You can get this information from the quarterly updates for the funds at Vanguard's web site.
Finally, don't trade around especially if you don't understand this stuff very well. You have to sit on your hands in periods of high volatility if you expect to make good returns. If you trade around, you're likely to sell at bottoms and then buy back in near tops. Only the most skilled people should consider trading around and even for those people, a core portion of their assets should always be invested.
>>1436074
Put in a high enough percentage to get the full match (5%, sounds like).
A lot of funds are starting to steer people towards 'target 'date' funds, which are supposed to be a kind of 'set it and forget it' option, but these usually charge a higher fee than manually setting and rebalancing stock market index and bond funds.
For reference, my employer offers the vanguard S&P 500 index fund, which has a fee of 0.04%, and the vanguard total bond market fund, which has a fee of about 0.06%. The target date fund for me charges around 0.38%, and there are a few (pretty bad) funds in there charging almost a full 1%.