I’ve finally decided to stop contributing to my 401(k). I say that as if I’ve been contemplating it, but I haven’t, really. It’s quite simple. I’m currently paying in 3%, and the company only matches 10% of that 3%. That’s a little over $2 per paycheck that is being matched. In my eyes, not worth it. Since I started, I’ve contributed almost $400, and my employer has thrown in a whopping 40 bucks on top of that. Wheeee…. My contribution of roughly $25 per pay right now is money that could better be used elsewhere, and I really don’t care to have my entire measly portfolio invested in the markets. By someone else. On top of that, part of the purpose of a 401(k) is to defer taxes. Are my tax rates going to be the same as they are now in 33 years? I doubt it.
Popularity: 55%
My first reaction is “Are you freakin’ nuts?”, but so long as you’re squirreling away money for retirement somewhere, it’s not that big a deal.
That is the same kind of thinking that is preventing me from starting a 401K. The company match is so low and that money could go towards my Roth or debt or fun. I think I’m still going to fund it but it will be extremely low so that I don’t feel that big of a hit.
Wow. I cannot disagree more…I do not even get a company match but I invest in the 401K. Even with all of the drops in two years, I am still doing quite well. Plus, you do have control over what you buy in your investment election.
Yes you can do a Roth but the annual contribution rates are much lower and you are still doing the same thing in that you are selecting funds (like a 401k) and hoping they do well.
As for using the money elsewhere, I cannot imagine what else could be more important than to start working on the compounding of the interest over a lifetime? I am not saying you have to contribute the max % each week but you should be puttting something away. I prefer the 401k to the Roth because the 401k takes the money out before your taxes and helps with your federal tax rates.
I really think this is not a sound idea and before you abandone it totally, I would read up more on it.
Dirac, a retirement fund does not harness the power of compound interest at all, hence it’s ability to go down, as well as up. As I only have $400 or so socked away in it, it’s not that big of a deal. If I do cash it out when I leave this job, it won’t kill me in terms of taxes and penalties, which is yet another reason to ditch it – I’d rather something that doesn’t carry penalties with it and such. A bit more liquid, if you will.
on a lighter note, happy birthday! mine is today too.
Happy Bday Jake! Do something on the wild side. SPEND!!! Kidding…but not.
Happy Bday! Not gonna argue, but makes me wish I had a 401k (or any other retirement vehicle at my firm), that I could choose not to contribute to.
the1chery: You’re kidding! How old are you now?
I.N., try work. Didn’t bother to take the day off. I’d rather make money than spend it, right?
I sure hope for your sake you do not stop contributing to your 401K. With the tax deduction and the employer match I does not cost you all that much.
Daddy Paul,
I have cashed out five 401ks now and currently do not have one (well I do, just 0% goes into it) and yeah, I ate some taxes when cashed out each one. But let’s be realistic for a second, I am going to “retire”? Probably not. I am 35 now and I can see that never happening. I stash away for the kid’s college, which is 1 million percent MORE important since it is irresponsible for him to be hit with tens of thousands of dollars in interest fees because of America’s broken educational finance system. Not only that, I have these things called bills. And if I do not pay them, the people who send me these bills will do things like kick me out of my house, take my car away, turn off the power, things like that. I need every dollar I make to live. I do not feel like putting money is some scam “savings” account so some rich stock brokers can steal it and make themselves richer. It is trickle UP economics. Money NEVER trickles down.
You are on the right track. Please buy this book, you will be convinced that you are doing the right thing. Marginal tax rates in the future will NOT be lower and you will be paying a tax on the compounded growth.
http://www.amazon.com/Tax-Free-Retirement-Patrick-Kelly/dp/1425110827/ref=sr_1_1?ie=UTF8&s=books&qid=1267729793&sr=8-1
No matter what your politics, marginal tax rates WILL be higher, to say nothing about state and local taxes. That will be the biggest threat to financial security, bigger than a market drop. Drop me a line and let me know what you think of the book.