No 401 matching; what next

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Topic Author
Learningat40
Posts: 3
Joined: Thu Feb 07, 2019 8:06 am

No 401 matching; what next

Post by Learningat40 » Thu Feb 07, 2019 8:14 am

For the first time ever, I’m in a position to save for retirement. My employer does not offer 401 matching so I do not contribute. I’ve saved the $6000 for a ROTH, but am unsure how to buy and if this is the right step. I’d like to create a simple investment plan I can manage myself but don’t know where to start.

More details: I am 40, currently in the 24% tax bracket, filing as single. My work 401k is through TransAmerica. There is $18k in there, but I don't know much about it.

I stumbled onto the wiki and was happy to learn that I'm in great place to start investing. I have no debt except my home and expect to save $35,000 this year. I have a day job, but also operate a home based photography business.

You have all given me great homework. I'll look up what was mentioned and dig into the 401k for more details. Thank you so much for your advice and helping to remove the fear of investing.
Last edited by Learningat40 on Fri Feb 08, 2019 5:28 pm, edited 4 times in total.

28fe6
Posts: 306
Joined: Wed Jan 03, 2018 9:01 am

Re: No 401 matching; what next

Post by 28fe6 » Thu Feb 07, 2019 8:22 am

It's probably still worth your while to contribute to the 401k even with no match, if the 401k funds are reasonable. Generally you should start with tax-deferred savings or at least do a blend of tax-deferred and Roth. Check out the wiki article on investment order and savings rate.

DarkHelmetII
Posts: 216
Joined: Mon Jul 24, 2017 12:25 pm

Re: No 401 matching; what next

Post by DarkHelmetII » Thu Feb 07, 2019 8:35 am

After Roth IRA don't miss out on the pre-tax contributions you can make to the 401k. So even if there is no match (an employer benefit, or in your case lack there of) the pre-tax benefit is "automatic" in the sense that is governed by Federal tax law and independent of how your employer has designed the plan. Having said this, do note the expense loads within the 401k. But with the pre-tax benefit, expense loads have to be pretty horrific to completely offset the tax benefit. And once you leave the employer, you can likely roll 401k into new employer's plan or roll into an IRA (if the expense loads are high - the point is the tax benefit is "forever" but the high expense loads are in a sense temporary unless you plan on working there for multiple decades.)

So, in short, do not completely dismiss 401k ... even with no match there are benefits.
Last edited by DarkHelmetII on Thu Feb 07, 2019 8:36 am, edited 2 times in total.

JBTX
Posts: 4614
Joined: Wed Jul 26, 2017 12:46 pm

Re: No 401 matching; what next

Post by JBTX » Thu Feb 07, 2019 8:36 am

Unless the expense ratios of the plan are obscenely high it is still worth to put in as much as you can.

snailderby
Posts: 147
Joined: Thu Jul 26, 2018 11:30 am

Re: No 401 matching; what next

Post by snailderby » Thu Feb 07, 2019 8:41 am

Welcome to the forum!

The Bogleheads wiki is a good place to start: https://www.bogleheads.org/wiki/Boglehe ... art-up_kit.

I think it's fine to start with a tIRA or Roth IRA unless the investment options in your 401k are better. But do max out your 401k before investing in a taxable account. Here's the wiki article on investment order that 28fe6 mentioned earlier: https://www.bogleheads.org/wiki/Priorit ... nvestments.

If you're trying to decide between a traditional and Roth account, see https://www.bogleheads.org/wiki/Traditional_versus_Roth.

You should choose a stock-bond ratio based on how close you are to retirement and your tolerance for risk. Can you stomach a 20% drop in your portfolio’s value in one year? How about a 40% drop? See https://investor.vanguard.com/investing ... tment-risk. “Your age in bonds” or “your age − 10 in bonds” is an often-cited rule of thumb, but many target-date retirement funds don’t hold more than 10% in bonds until investors are in their mid- to late-30s. See www.bogleheads.org/forum/viewtopic.php?t=255850.

What percentage of stocks should be international instead of U.S.? See www.bogleheads.org/forum/viewtopic.php?t=196956; www.bogleheads.org/forum/viewtopic.php?t=256423; https://finpage.blog/2017/03/18/investi ... ld-part-1/; https://finpage.blog/2017/03/25/investi ... ld-part-2/; https://finpage.blog/2017/03/25/investi ... ld-part-3/; and https://personal.vanguard.com/pdf/icriecr.pdf.

At any point, feel free to come back and make another post if you have more questions!

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ruralavalon
Posts: 14713
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: No 401 matching; what next

Post by ruralavalon » Thu Feb 07, 2019 9:21 am

Welcome to the forum :) .

Congratulations on getting started with saving and investing.

A little more information would be helpful.

What fund firm will your Roth IRA be with? I suggest Vanguard.

What is your age?

What is your tax bracket, both federal and state? What is your tax filing status?

What are the 3-5 funds offered in your 401k plan which have the lowest expense ratios?

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), so that all of your information is in one place.

Learningat40 wrote:
Thu Feb 07, 2019 8:14 am
For the first time ever, I’m in a position to save for retirement. My employer does not offer 401 matching so I do not contribute. I’ve saved the $6000 for a ROTH, but am unsure how to buy and if this is the right step. I’d like to create a simple investment plan I can manage myself but don’t know where to start.
In your new Roth IRA to start simply use a single good balanced fund like a Vanguard LifeStrategy fund, or a Vanguard target retirement fund, or Vanguard Balanced Index Fund.

Don't completely dismiss the idea of also contributing to your 401k plan. If any of the funds offered in the 401k plan are at all decent, then the tax benefits make it worth contributing.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
Learningat40
Posts: 3
Joined: Thu Feb 07, 2019 8:06 am

Re: No 401 matching; what next

Post by Learningat40 » Fri Feb 08, 2019 5:31 pm

Last quarter I lost some money:
Beginning Balance $17,053.04
Ending Balance $15,021.34
Fees pay $24.00

Apparently, my company switch from TransAmerica to Slavic. My existing account (that I have not contributed to in over a year) is split between a Roth and pre-tax. All funds are currently "Vanguard Target Retirement 2045". I can easily start to contribute again, and last year I paid roughly $100 in "fees" to this account.

I have no idea how to determine if this 401k is "decent" or what "expense ratios" are so I will continue to research.

HomeStretch
Posts: 69
Joined: Thu Dec 27, 2018 3:06 pm

Re: No 401 matching; what next

Post by HomeStretch » Fri Feb 08, 2019 5:53 pm

If you post your financial details, you can get better recommendations. In general, with $35,000 you can:
1. Create an emergency fund, if you don’t have one already
2. $6,000 already contributed to Roth IRA
3. Contribute up to $19,000 to your employer 401k
4. If your photography business is profitable, you can set up a self-employed 401k and make employer profit sharing contributions

Topic Author
Learningat40
Posts: 3
Joined: Thu Feb 07, 2019 8:06 am

Re: No 401 matching; what next

Post by Learningat40 » Sun Feb 10, 2019 11:22 am

snailderby wrote:
Thu Feb 07, 2019 8:41 am
Welcome to the forum!

The Bogleheads wiki is a good place to start: https://www.bogleheads.org/wiki/Boglehe ... art-up_kit.

I think it's fine to start with a tIRA or Roth IRA unless the investment options in your 401k are better. But do max out your 401k before investing in a taxable account. Here's the wiki article on investment order that 28fe6 mentioned earlier: https://www.bogleheads.org/wiki/Priorit ... nvestments.

If you're trying to decide between a traditional and Roth account, see https://www.bogleheads.org/wiki/Traditional_versus_Roth.

You should choose a stock-bond ratio based on how close you are to retirement and your tolerance for risk. Can you stomach a 20% drop in your portfolio’s value in one year? How about a 40% drop? See https://investor.vanguard.com/investing ... tment-risk. “Your age in bonds” or “your age − 10 in bonds” is an often-cited rule of thumb, but many target-date retirement funds don’t hold more than 10% in bonds until investors are in their mid- to late-30s. See www.bogleheads.org/forum/viewtopic.php?t=255850.

What percentage of stocks should be international instead of U.S.? See www.bogleheads.org/forum/viewtopic.php?t=196956; www.bogleheads.org/forum/viewtopic.php?t=256423; https://finpage.blog/2017/03/18/investi ... ld-part-1/; https://finpage.blog/2017/03/25/investi ... ld-part-2/; https://finpage.blog/2017/03/25/investi ... ld-part-3/; and https://personal.vanguard.com/pdf/icriecr.pdf.

At any point, feel free to come back and make another post if you have more questions!
Thank you for the links. I have been watching them and will post once I have accomplished this phase of learning.

cherijoh
Posts: 5171
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: No 401 matching; what next

Post by cherijoh » Sun Feb 10, 2019 11:53 am

Learningat40 wrote:
Fri Feb 08, 2019 5:31 pm
Last quarter I lost some money: <-- 4Q 2018 was a bad quarter for the stock market! So I wouldn't worry too much
Beginning Balance $17,053.04
Ending Balance $15,021.34
Fees pay $24.00

Apparently, my company switch from TransAmerica to Slavic. My existing account (that I have not contributed to in over a year) is split between a Roth and pre-tax. All funds are currently "Vanguard Target Retirement 2045". I can easily start to contribute again, and last year I paid roughly $100 in "fees" to this account.

I have no idea how to determine if this 401k is "decent" or what "expense ratios" are so I will continue to research.
It is a good sign that your 401k offers VG target retirement funds. Does it also offer individual VG index funds?

I would check online to see if your 401k has fact sheets on the various funds it offers - the expense ratios (ER) should be included here. Plans are required to disclose the ERs of the funds as well as the other fees which might be labeled "record keeping fee", "management fee" or something else altogether.

Fees should be listed as transactions on your 401k statement. Some plans charge a flat fee for each participant, while others may have a fee based on the amount you have invested. Some plans do both. If most of your $100 fee was a flat fee (e.g., $25/quarter maintenance fee) then adding more contributions would actually reduce your fee on a % basis. If the entire fee is proportional to the balance then the fees are probably pretty typical and wouldn't preclude you from investing in the plan.

From an article on Motley Fool, the average expense ratios are dependent on the size of the plan:
In 401(k)s with between $1 million to $10 million in invested assets, average total plan costs were 1.17%, whereas total fees for plans with $100 million to $250 million invested were just 0.52%. And in plans with a total value topping $1 billion, total costs were around 0.30% of plan assets.
Expense ratios are behind the scenes and are already reflected in the NAV of the fund - they won't appear on the statement. Some plans offer various classes of funds designed especially for 401k plans that may have an added kick-back to the company administering the plan. As far as I know VG doesn't do this, although they do have lower fee funds for larger plans that meet a minimum investment (e.g., institutional funds vs. the normal investor grade).

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