I got an offer at Amazon and I'm being told to start contributing to 401k as I am already 31. I have never contributed because I'm of the mindset that I want to work until I die or until my health allows. In this case when you are not looking for an early retirement or a retirement at all is 401k worth it? I know you get tax benefits and also employer matches, but you can only take this money out when you are 60, and you do have to pay taxes then.
Not true. You can still withdraw with a 10% penalty if you need to. Also let’s say you will only withdraw in times of hardship..for example ... no job.. your tax rate is already low or zero. If you get a match.. don’t refuse the free money!
Thank you for your advice. But I know there is a penalty of 10%. Amazon matches 50% up to 4% of base pay. So if my base is 145k and I put in 4% of it that is 5.8k they will match 2.9k something. However I can put up to 18k total at Max in 401k. It's free money for sure, but isn't the penalty and taxes gonna compensate for most of the free money if I take it out in a few years
Early withdrawal penalty is 10% Your employer match covers that. You’ve never paid taxes on the money so that cancel out. Why will you take it out in a few years?
You won't want to work until you die at Amazon
But you'll work until you want to die
You can do Roth conversion when unemployed or in a lower tax bracket. Alternatively 72(t) rule also let's u withdraw. Take the free money would be my advice.
What.
Stupidest thing I read today. Good luck getting a job at 60!
401K gains will compound tax free. That's significant if you have 30 years to grow it. Plus match is free money you're leaving on the table as other people mentioned. Also it's generally better to pay taxes as late as possible so better to take 18K now out of your taxable income. Most likely when you pull the money out your tax rate will be lower.
Thank you for your advice. Amazon matches 50% up to 4% of base pay. So if my base is 145k and I put in 4% of it that is 5.8k they will match 2.9k something. However I can put up to 18k total at Max in 401k. Would you advice to put all 18k or only 5.8k?
Just put 5.8k. You will lose money if you contribute more than that as your employer is not going to match.
Plans change. You might see yourself working until you die but there are so many factors outside of your control that could derail this plan. Also, you might think that you would not be in the U S for your retirement. Again, that could easily change. I know tons of people that moved to the US for (say) 5 years... including me. Well most of us are still here 17 years later with NO plans to move back to our original country. It would be a huge and almost catastrophic mistake to miss out on many years of tax free growth. Do what others said here. At the very very least, contribute up to the full match.
If the employer matches, it is like refusing free money.
But you can only take it out when ur 60. What if you need that money now
You can take it out before then, with penalties. It's not locked down for 30+ years.