I’m 29 and have been saving 10% of my pay towards retirement for a few years now, but I don’t remember why I chose 10% and wonder if that’s even going to be enough.
I started looking all over the internet and, of course, I got a bunch of bullshit that just kept contradicting each other.
Now I’m trying to gauge where I am based on other people. So what percentage do ya’ll invest for retirement?
You probably picked an amount that ended up maximizing your 401(k) contribution, up to the allowable limit at the time. You should check each year and re-calibrate to make sure you’re taking advantage of the full amount. For 2008, the max 401(k) contribution is $15,500 ( http://www.irs.gov/newsroom/article/0,,id=174873,00.html ). Some people choose a percentage that equals a smooth income stream over the year (so roughly 12 equal payments) - some front-load contributions so it feels like they get extra cash around the holidays.
You can, of course, save more than that - just not with the tax deduction on the income. Also, depending on your expectations regarding your current and future income tax rates, you should consider whether a traditional 401(k) makes sense for you (a 401(k) essentially gives you a tax deduction now, but it turns capital gains into income, taxed at the full income rate, when you withdraw - as opposed to a Roth plan, should you have that option, which gives you no tax deduction now but makes all the gains tax free).
If you own a home, your mortgage is essentially a forced savings plan - but now that you know that, forget about it and don’t treat your house like a bank account.
You should also save outside your retirement plan - at least to the point where you have a several-month cushion for expenses, and then for any other goals you have (like buying a house if you’re not a home owner - you’ll need that 20% down payment).[/quote]
Simple question, but I’ve been wondering what the answer is: if I max out my 401(k) at $15,500, can I then contribute to a Roth for an additional amount above the $15,500?