Roth 401k Contribution

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This topic contains 9 replies, has 5 voices, and was last updated by  Lance 1 year, 5 months ago.

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  • #134807
    derbensrderbensr
    Participant

    I contribute to my employers Roth 401k. I put in 8% total with my employer putting in 2%. I have 2% going in pre tax with the other 8% going in after tax.
    There is 50% going into a target date fund 25% going into the S&P 500 index and 25% going into International equity. I am 45 years old.
    Does anyone have any suggestions or comments that may help me improve my retirement?
    Thanks

    #134825
    Petunia 100
    Participant

    If you can afford to contribute more, that will certainly help. 🙂

    Which target retirement fund are you using? Some are much better than others.

    #134844
    SbolsonSbolson
    Participant

    Is 2% the maximum your employer will contribute? Why did you decide to split your contribution between a Roth 401k and a traditional 401k?

    #134845
    Stacy JohnsonStacy Johnson
    Moderator

    You’re also 100% in stocks. Nice while the market is hitting new highs, but are you mentally prepared if it should drop? I’m older than you (almost 60) and I have a little more than half my retirement in stocks. The rest is in cash.

    #134849
    Petunia 100
    Participant

    @sbolson – employer matches are always into traditional. That’s the law. 🙂

    #134853
    derbensrderbensr
    Participant

    Target Retirement 2035 – managed by Vanguard
    Our tax guy talked me into spliting it up. Bad move?

    #134855
    Petunia 100
    Participant

    In my opinion, the Vanguard TR funds are excellent. Broadly diversified total market index funds and rock bottom costs, all automatically rebalanced for you. I own the 2030 fund myself, in both my employer’s plan and my Roth IRA.

    You’re not adding any diversity with the other two funds, you’re just changing your asset allocation a bit. Your TR fund holds Total US Stock Market, which is about 70% comprised of the S & P 500 (the rest is mid- and small-cap stocks). Your TR fund holds Total International Stock Market, which includes thousands of foreign stocks from all over the world, both developed and emerging markets.

    I wouldn’t say it’s a bad move, I think it’s more of an unnecessary move.

    #134861
    derbensrderbensr
    Participant

    The pre tax was for the tax break.
    With what I said about the post tax, should I have just left 100% in the TDF?

    #134887
    SbolsonSbolson
    Participant

    By investing in the stock funds, you have made your retirement portfolio more risky. It’s not necessarily a bad thing if you plan on retiring around 65 and you can stomach the highs and lows of the market.

    I think target date funds alone are wonderful for the average investor . . . simple, diversified, and usually low fees.

    Save more especially if your employer is matching.

    #135214
    Lance
    Participant

    Personally I would only contribute what ever your employer matches and then invest the rest in a Self-Directed Roth IRA. That way you can invest in practically anything you want versus the limited options your employer offers. Plus you can buy investments with lower to no fees.

    Roth is definitely they way to go over traditional at your age.

    Lance

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