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.
- Dude what kinda whack math is that. He would have had to pay the taxes anyway on his salary if he didnt contribute. The penalty is 2.7k on 27k. Plus the 9k the employer puts in grows with the market too. You will be ahead even with the penalty. Cant believe how dumb engineers are about moneyOct 1, 2017 7
- New / Mktg PVPk22more145k base you can max at 18k reduces your taxable income so the 18k only costs you 9k plus company matches about 6k so you get 24k in exchange for 9k of income each year plus it compounds! You are gonna be 60 sooner than you realize and so mad at your 30 year old self that you were so short sighted. Why don't you make your own meals I bet that action alone would save you 9k a year. If not find some other thing you can give up.
20years later you've got 5mil in your 401k and all you had to do was make some tiny sacrifices and give up 9k a year.
Alternatively at 60 (or sooner) you are exhausted and broke all because you didn't want to give up your daily _______ activity. Smoke, drink, Starbucks whatever it is.Oct 3, 2017 3
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- Saw was impolite but the sentiment is correct. If you re making good money and have a burning need for the money right now such that you cannot invest (e.g. high interest loans, etc), you could consider not using the 401k.
But your stated reason, not wanting to retire, is terrible and shows a complete lack of understanding and unwillingness to do easy web searches in 2017.Oct 1, 2017 4
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- Uber Y65iuxI'd like my wealth to grow tax free. That's it. I hate paying taxes. And I hope to live well beyond 60. And do work that is fulfilling but not necessarily high paying. Usually these two don't go together. At 31 I felt like a king, at 45 I realize the fragility of life and would tell me 31 year old self to double down on saving in 401k.
- My same opinion. I’m 22 and maxing out my Roth 401k my Roth IRA, my wife’s Roth IRA, and half of her Roth 401k. If you have excess money and want to invest, why not do it in the most tax advantageous way possible which is currently though Roth retirement accounts. I don’t think it matters if you want to retire or not. In my opinion, I just use it as a way of sheltering compounding investment growth from Uncle Sam
- Qualcomm jElO67Not 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
- Intuit HGoB21In the short term, you'll want to consider the immediate tax impact. If you are in CA you are being taxed at at least 38%. Investing $5.8k will reduce your taxes now by $2.2. You'll see that immediately, think of it as putting in $3.6 and getting out $8.7. What other investment option has low risk and this high of return.
In the long term, put the money into a passively managed broad market fund and it will double every 10 years. Doing the minimum you will be looking at over $1 million. You don't have to retire. You can start a business, go on vacation, donate to charity... But just in case the other 95% of the people here are right, you will at least have the option to retire.
- 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.
- I'd like to work until I die too, but I'd like to have 10+ million of FU money sitting around the whole time too :) you don't have to retire to use retirement savings
- Facebook DiosDespite what it seems like, there are actually quite a few ways to withdraw from a 401k without penalty, including 72(t) (scheduled and equal withdrawals), or converting to an IRA and withdrawing after 5 years.
You definitely want to contribute up to the match, and probably up to the max.
- Tableau idontgititPlans 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.
- All thank you so much for all the answers. Now I'm convinced not contributing is the stupidest thing a person can do especially if employer matches. I'm gonna be contributing 10k annually and Amazon will match 3k. I calculated that this 13k after 30 more years would have grown up to 226k. And this is only my first year 13k, I can easily imagine the compound at the age of 60 to be over 3 million
- Amazon walterwaltI'll be in USA for just 2 more years, is it advisable to start putting money in 401K now?