10% plus a 5% employer contribution. I’m bumping it up to 15% next year and my employer will match 6%. Even at that rate I’m still looking at a minimum of 14 years more work before I can retire. I’m 48 now.
%8. First %3 is matched, next %3 is half matched and the last %2 is just me. Good thing is, our employee stock purchase plan is available to me in Jan. I get to buy stock at %85 of the fair market value, which is not that bad for a Fortune 50 company since our stock is at least a year long high.
Does anybody know about vesting amounts? I think only about half of my funds are actually vested right now, but I think that they may all be automatically vested starting in '05. Once it’s been vested it’s mine right?
10% right now. No company matching but…
We also have a “B-fund” that is 11% of pre-tax earnings deposited into a managed investment account. (This money does not come out of my paycheck: it is additional money).
So the result is 21% of pre-tax earnings every month. I direct 10% of it, and someone else directs the 11%.
We also have an “A-fund” which looks more like a traditional pension (years of service x Final Average Earnings x Multiplier = amount you get every year when you retire). If you’ve been reading anything about the airlines then you know that traditional pensions are under severe attack. I don’t expect the “A-fund” to be there when I retire.
I’m 35 with 25 years to go before mandatory retirement (Age 60 rule for airline pilots).
I’m retired and only had a retirement plan for a few years. However, I saw something on TV that may make those of you that are saving for retirement feel good.
[ul][li]In just a few years the boomers will retire.[/li][li] 60% have less than $50,000 saved for retirement.[/li][li] 30% to 40% have none.[/li][li] Only 8% have more than $200,000 saved (still not enough, so less than that are set).[/li][li] You should have 15-20 times the annual amount you’ll need to live on saved.[/li][/ul]
Actually I am in pretty good shape according to this, except I don’t know how future inflation figures in. Let’s hope the stock market is good to me. Also inflation puts an ugly unknown in figuring your needs. I was impressed by how many of you are saving, but I guess that’s who would be most likely to post.
Oh, I forgot. There will be a total of 77,000,000 boomers retiring over several years, which of course is why Social Security is in trouble. Those of you who are boomers will have a good chance to see how you stack up to your peers.
Gah…as one of those who’s “saving a lot”, let me say this: seeing so many people who have NOT prepared for their retirement does NOT make me feel good.
It would be easy to feel smug because I am planning for for the future…but I know that a lot of those people had the rug pulled out from under them. I personally know pilots who spent 30 years at an airline only to have their pension ELIMINATED after they retired. But you are also talking about people who never planned at all for life after work.
Who will pay for those people’s retirements? Some guy who spent everything he earned while working now looks to who…Social Security? Something else?
SOMEONE will have to pay those bills, and I suspect that the largest portion will land on those who are still working and planning on their own retirement. So color me unimpressed with all those potential retirees with no savings.
I’ve never said “Preach it” on this board, but I will now.
Put me down as a baby-boomer who occasionally loses sleep over this. We’re in the “save a lot” category, but I can see this freight train bearing down on all of us.
Us? 15% (me and mizPullin) 6% company matched. Plus (fairly) regular savings-bonds, and occasionally muni-bonds in a good year. Also “accelerated” our home loan (changed to a much shorter term) so we can get that sucker paid. Color me worried.
There is a book I read called retire on less than you think which seems to imply that the idea that you need 15-20x your annual income to retire is there to scare people. If you have your home paid off, move to a new part of the country with lower living standards, get a reverse mortgage, collect SS and medicaid/medicare then you don’t need 15-20x your income.
14% – 31 yrs old.
The length of time for your money to become vested varies from plan to plan. Your HR department can tell you how long it takes. But to answer your question, yes, once you are vested the money is yours. From Investopedia.
7.5% with dollar for dollar match up to 3%. I’m 32.
I’m an officer of the company (small company) so the boss has to be careful how much he compensates me and I have to watch out how much I contribute so our plan is not top heavy or else we have to do the Safe Harbor route.
I think I’m going to bump it up again to 8 or 8.5% at the next enrollment.
When I went from 7 to 7.5 last month, I calculated that at retirement that .5% could get me approx $60,000 more.
I’m maxxing out my 401(k) contribution. The legal maximum was $16,000 in 2004. It rises to $18,000 in 2005. (The normal limits are $13,000 and $14,000 respectively, but those of us over 50 years old can contribute an extra $3000 and $4000 respectively as a “catch up” contribution.)
FWIW, my employer’s match is 3% (50 cents on the dollar up to 6%), but they kick in an additional 8% of total salary at the end of each year.
Me- 6.7%, no match
My wife- 8%, no match
Combined- 7.5%
Both Mrs. Giraffe and I max out our 401(k). She gets 50% matching in company stock (I think), and I get no matching. It was all her idea, and I’m incredibly grateful for it. We were both grad students before getting real jobs, and her logic was that you’ll adjust to whatever you make. Once you get used to a higher salary, it’s hard to start taking a big chunk of money out every month, whereas if you start doing it from the beginning, you quickly forget about it. It’s completely true – I really only judge much I make based on the size on the check that is direct deposited into my account, not how much I had before taxes and withdrawals.
He doesn’t have to be careful how much he compensates you. You or the HR department only have to be careful how much you contribute so that the plan stays in compliance and doesn’t become top heavy. You don’t even have to be careful of that as long as you don’t mind getting a refund of your excess contributions, or the company doesn’t mind making additional contributions to all the non-Highly Compensated employees. Doing the latter is often way cheaper than going Safe Harbor.
I hope he hasn’t been telling you something like he can’t pay you a higher salary because that would mess up the 401K! Because that is a crock of the highest order.
Doh! I misunderstood. No, he hasnt been telling me that at all, it was our dingbat rep from the 401k company. She’s hellbent on us going into Safe Harbor and she’s an idiot. It was brought up because he wants to signfificanty raise my salary next year and was worried what that would do to our compliance. We got fined a hefty sum which was distributed into the plans of all the other employees a few years ago because of his former partner’s idiocy on the matter. My boss was trying to avoid the same fiasco. He and I, as officers do not get to benefit from that fine.
This is especially for those people in plans with no company match.
I have heard discussions that suggest it may not be the best route to max out your contributions (or participate at all). It goes something like this:
The money you put in is pre-tax so you get the tax benefit now. When you take the money out at retirement age, you are taxed on your contributions and the investment return at the regular tax rate at that time. Since you are over 65 and probably have less income your regular tax rate is lower.
However, and here’s the catch, if you taken the money and invested it in regular investment accounts instead of the 401(k), the investment return would be taxed at the captial gains rate, which is much lower. So, you a trading a tax benefit on the current income while you work for a higher tax on the investment return. Again, this is more of a pain if you don’t have any company match (free money) involved.
I haven’t seen any actual numbers calculated out but I do believe it is something to consider.
An additional point is that many 401(k)'s do not offer a very wide selection of investment options. Money you invest outside of 401(k)'s, you have the whole world to choose from.
My wife and I both contribute 16% with 4% matches from our companies. 30s and 40s.
I think the problem with this argument is the fact that you have a lot less to invest if you use post-tax income compared with pre-tax, so your long-term gains will be significantly lower.
For example, let’s assume you’re in a 35% tax bracket, and you would get a 5% annual return over 30 years.
Case 1: $10,000 in a 401(k)
You end up with $43,219, and owe taxes on the whole lot, based on your retirement income bracket.
If you’re in a 30% tax bracket when you retire, you keep $30,253.
Case 2: $6,500 invested on your own
You end up with $28,092, and owe capital gains taxes on $21,592.
I don’t know what the long-term capital gains rate is, but say 20%. You keep $23,773.
Unless I’m wildly wrong about tax rates, you’re way ahead with the 401(k), even without matching.
Thanks for the workup. BTW the Capital Gains Rate is 15%. I think the variable for me would still be the available investment options. Your formulas work with 5% rate of return applied equally, but (without calling in a panel of economists) I think it is possible that limited 401(k) options could make a difference.