Support NeoGAF

[Dies Iræ]

Two pieces of advice:

For passive investors in ETFs, check out canadiancouchpotato.com. While it's Canadian in name, it offers lots of advice that is relevant to Americans and its model portfolios use Vanguard, for example, which is also listed in the U.S., often at cheaper MERs. I'm 25, 100% equity portfolio.

Personally, I invest with wealthsimple.com, a robo-advisor, and I would recommend it to anyone who thinks/acts irrationally with their money. Having the chief value investor at UofT's Rotman School selecting my funds is worth a slightly higher MER to me. There are a number of robo-advisors in the U.S.

What I discovered reading canadiancouchpotato.com was that while ETF investing is simple in principle, there is a lot of nuance that I didn't fully understand. Unless you have a portfolio that has been vetted by someone with a good deal of knowledge, I would be wary of moving forward. ETFs can have all sorts of weird structures, fees, and hedging that can mess up your allocations and risk profiles.

Here's my portfolio:

17.4 VTI
14.9 IEFA
14.2 PHE.B
13.9 PDF
10.4 IEMG
9.5 XIC
9.2 PBD
8.8 PHR
1.7% CASH

Bonus advice: set up automatic contributions from your crediting account into your investing account. I transfer $25 weekly. And make sure to maximize contributions into your most tax-efficient accounts first. In Canada, that's the TFSA.

 

[TylerD]

I have a question about what is the effect of an expense ratio of a fund (exp: T. Rowe Price Retirement 2050 Fund) RRTFX @ 1.26% expense ratio, that invests in other T. Rowe funds that have their own expense ratios. Does only the expense ratio of the fund you are directly invested in apply?

 

[tmdorsey]

Personally, I invest with wealthsimple.com, a robo-advisor, and I would recommend it to anyone who thinks/acts irrationally with their money. Having the chief value investor at UofT's Rotman School selecting my funds is worth a slightly higher MER to me. There are a number of robo-advisors in the U.S.

Does Acorns classify as a robo-advisor?

 

[soulassssns]

Does anybody here know anything about the Thrift Savings Plan AKA TSP?

 

[NossEntertainment]

I Rather invest my money in investments not retirement!

 

[Dies Iræ]

Does Acorns classify as a robo-advisor?

Yep, they are. Cool app too.

 

[soulassssns]

I Rather invest my money in investments not retirement!

What? lol

 

[GhaleonEB]

I Rather invest my money in investments not retirement!

I've been trying frame a reply for a few moments now. This is what I came up with:

Huh?

 

[RumblingRosco]

-

 

[teiresias]

I've been trying frame a reply for a few moments now. This is what I came up with:

Huh?

You know . . . Investments . . . like Vinyl, and limited edition videogame figurines that will surely sell for a pretty penny in the future.

 

[tmdorsey]

Yep, they are. Cool app too.

Cool. Yeah, taking my change (essentially taxing myself for what I spend) and putting it into an investment account is great. I also do small biweekly deposits too.

 

[tnswire]

I'm honestly deathly scared of this whole whacked out financial system that we have. We either -
1.) Put your money in "safe" CD's or Savings accounts, and watch it lose its value due to inflation over the years - and hope any "mini-depressions" like 2008 aren't bad enough to where FDIC can always keep the remainder of the money safe.
2.) Gamble with the money in riskier (than option 1) stocks/mutual funds and pray that they increase to keep up with inflation.

And best of all, neither option protects you from some some sort of real depression where FDIC is insolvent (I'm told FDIC only has like 1 percent of the amount of money that they back). It is ridiculous.

 

[TheWarrior]

My job matches 2.5 times my money up to 15%, I play it mostly safe with a higher bond investment because I'll take the basically guaranteed 6-7% growth with very little risk because I'm already making bank off the match program. We use Fidelity, they aren't so great, and the LOF on most of the stock funds isn't much better, usually between 7-9% but carries a lot more risk. I should probably go with a Roth IRA, but have no idea what the returns on those are.

 

[Cyan]

My job matches 2.5 times my money up to 15%, I play it mostly safe with a higher bond investment because I'll take the basically guaranteed 6-7% growth with very little risk because I'm already making bank off the match program. We use Fidelity, they aren't so great, and the LOF on most of the stock funds isn't much better, usually between 7-9% but carries a lot more risk. I should probably go with a Roth IRA, but have no idea what the returns on those are.

That's an incredible match! Never heard of a better than dollar-for-dollar match before. Definitely max it out.

I'm a proponent of having at least some allocation to bonds, but a guaranteed 6-7% growth with very little risk is something that doesn't exist. If you're looking at extremely safe bonds, they aren't paying out 6-7%, and if you're looking at bonds that pay out 6-7%, they aren't extremely safe. You might want to look more closely at what you're buying, if they're promising that kind of thing.

A Roth IRA is just another type of investment account. You put money into it and can buy investments inside it, just like any other brokerage account. The difference is that when you eventually take money out of it after retirement, you won't pay any taxes on what you're taking out. And note that the amount you can put in a Roth IRA annually is quite limited: $5500 this year.

 

[GhaleonEB]

I'm honestly deathly scared of this whole whacked out financial system that we have. We either -
1.) Put your money in "safe" CD's or Savings accounts, and watch it lose its value due to inflation over the years - and hope any "mini-depressions" like 2008 aren't bad enough to where FDIC can always keep the remainder of the money safe.
2.) Gamble with the money in riskier (than option 1) stocks/mutual funds and pray that they increase to keep up with inflation.

And best of all, neither option protects you from some some sort of real depression where FDIC is insolvent (I'm told FDIC only has like 1 percent of the amount of money that they back). It is ridiculous.

The gamble comes from short term swings, not long term horizons. Over appreciably long term horizons, like the kind we are talking about when young (or in my case, young-ish) people are investing for retirement, risk is quite low. Nothing is guaranteed of course, but there are a couple centuries of stock market data that, when coupled with even a basic understanding of the underlying growth drivers, provide reasonable assurance that the long term trends will continue. And if they don't, we're all in a lot of trouble. Not just from an investing standpoint, but as a global economy.

 

[tnswire]

The gamble comes from short term swings, not long term horizons. Over appreciably long term horizons, like the kind we are talking about when young (or in my case, young-ish) people are investing for retirement, risk is quite low. Nothing is guaranteed of course, but there are a couple centuries of stock market data that, when coupled with even a basic understanding of the underlying growth drivers, provide reasonable assurance that the long term trends will continue. And if they don't, we're all in a lot of trouble. Not just from an investing standpoint, but as a global economy.

Quite frankly, I've always been suspicious of our own understanding of economics. The model that global economies will consistently keep growing into the future (regardless of whether our population starts shrinking, the amount of natural resources we have left, weather phenomena changes, wars, etc..) seems hokey to me. But guess that's a whole different topic.

 

[TylerD]

Quite frankly, I've always been suspicious of our own understanding of economics. The model that global economies will consistently keep growing into the future (regardless of whether our population starts shrinking, the amount of natural resources we have left, weather phenomena changes, wars, etc..) seems hokey to me. But guess that's a whole different topic.

There's always doomsday prepping! It kind of has to work or all out chaos is what we face...That is what keeps me from worrying too much about it. I agree with your criticisms though.
-------------

As of today my investments portfolio is:

31% large-cap stocks
30% mid-cap stocks
16% small-cap stocks
14% bonds
8% international

I'm 31. Open to any suggestions.

 

[Piecake]

Quite frankly, I've always been suspicious of our own understanding of economics. The model that global economies will consistently keep growing into the future (regardless of whether our population starts shrinking, the amount of natural resources we have left, weather phenomena changes, wars, etc..) seems hokey to me. But guess that's a whole different topic.

Well, like you said, you really don't have much choice. You either don't save for retirement, pray you have a job at 65 and work that until you die. If not, abject poverty.

Your other option is to stick it in banks and CDs, but you'll end up having to do the first option with a bit more security since there is no way to save enough with bank and CD interest.

The other option is the stock market and index funds. I think that is the only rational choice because all of the other options suck and the dangers are a bunch of what ifs and unlikely scenarios. If the world comes to an end, well, you can regret not blowing all of your money in an orgy of drugs and hookers. If it doesnt, you'll regret not investing and being forced to work or forced to live off of social security in poverty. I know which regret I would prefer.

As for your scenarios. I think all of those factors are not going to have a crushing detrimental impact on our financial system. The few generations after us might possibly be fucked, but I think we are okay.

Does anybody here know anything about the Thrift Savings Plan AKA TSP?

No idea, just bumping the question

I have a question about what is the effect of an expense ratio of a fund (exp: T. Rowe Price Retirement 2050 Fund) RRTFX @ 1.26% expense ratio, that invests in other T. Rowe funds that have their own expense ratios. Does only the expense ratio of the fund you are directly invested in apply?

No idea on that as well. Is that actually your best option? Since that expense ratio is pretty terrible.

 

[TylerD]

No idea on that as well. Is that actually your best option? Since that expense ratio is pretty terrible.

Nope, I was just taking another look at all the options in my 401k. I'm using the S&P and Russell tracking funds that have the lowest expenses in my options but they are still sky high compared to what Vanguard offers.

 

[Man]

In Norway we are mandated to save at least 2% (normal around 5%) which our employees are responsible in deducting from our pay. The US doesn't have this system?

Index funds sounds like something I should get on asap with my regular savings (as in, savings for space travel and more-life-tm!). I'm 30, soon turning 31. Currently my savings are on a regular savings account.

 

[Piecake]

In Norway we are mandated to save at least 2% (normal around 5%) which our employees are responsible in deducting from our pay. The US doesn't have this system?

Index funds sounds like something I should get on asap with my regular savings (as in, savings for space travel and more-life-tm!). I'm 30, soon turning 31. Currently my savings are on a regular savings account.

We have Social Security, which is paid for by employer and employee payroll taxes. Like I said in the OP, only relying on SS in retirement is not an option because that is poverty.

401ks arent offered to all employees and even if it is offered an employer is required to match funds and the employee isnt required to participate in it.

IRAs are completely optional.

Not surprisingly, there is a fairly big retirement crisis in America since the vast majority of people have not saved enough for retirement. There really is no push to reform this system yet since I'd imagine that the pain will start about 5-10 years after the baby boomer retirement wave hits (when they run out of money). Even then, I am doubtful anything changes significnalty because America has a strong tradition of demanding that people have the freedom to fuck themselves over.

As for your retirement system, that really doesnt sound like it would be enough to retire comfortably either. I have no idea if you have another system on top of that (or pensions), but I would definitely look up index investing. I have no idea what options you have in Norway, but hopefully some of the Europeans here can help you out.

 

[TheWarrior]

That's an incredible match! Never heard of a better than dollar-for-dollar match before. Definitely max it out.

I'm a proponent of having at least some allocation to bonds, but a guaranteed 6-7% growth with very little risk is something that doesn't exist. If you're looking at extremely safe bonds, they aren't paying out 6-7%, and if you're looking at bonds that pay out 6-7%, they aren't extremely safe. You might want to look more closely at what you're buying, if they're promising that kind of thing.

A Roth IRA is just another type of investment account. You put money into it and can buy investments inside it, just like any other brokerage account. The difference is that when you eventually take money out of it after retirement, you won't pay any taxes on what you're taking out. And note that the amount you can put in a Roth IRA annually is quite limited: $5500 this year.

Yeah I've got it maxed out at 15%. Its crazy to see how much my 401k goes up every pay just from the match.

I just checked and the fund is a blended fund with 10 year rate at 6%. The 5 year is 5 and 1 year is 4 which isn't that great but with the work match I'm so hesitant to get too risky especially since the last crash set me back a bit and really hammered my Dad. I wish they offered indexed funds.

I'm still pretty young and can afford at least 10 years of something riskier, Just keep worrying if I waited too long and a bubble is about to burst again

 

[Piecake]

Yeah I've got it maxed out at 15%. Its crazy to see how much my 401k goes up every pay just from the match.

I just checked and the fund is a blended fund with 10 year rate at 6%. The 5 year is 5 and 1 year is 4 which isn't that great but with the work match I'm so hesitant to get too risky especially since the last crash set me back a bit and really hammered my Dad. I wish they offered indexed funds.

I'm still pretty young and can afford at least 10 years of something riskier, Just keep worrying if I waited too long and a bubble is about to burst again

Do you mind posting the details of that fund? I am guessing that is either the 10 year historical return of that fund or the projected. Your mutual fund returns aren't calculated in that manner, so that is why I am a bit dubious.

I really would not worry about the next recession. No one knows when it is going to happen, how big it will be, how long it will last, etc. It is far better to just get your money in the market as soon as possible. Market timing is the best way to reduce your returns. The only way to do it is to get lucky.

 

[GhaleonEB]

Do you mind posting the details of that fund? I am guessing that is either the 10 year historical return of that fund or the projected. Your mutual fund returns aren't calculated in that manner, so that is why I am a bit dubious.

I really would not worry about the next recession. No one knows when it is going to happen, how big it will be, how long it will last, etc. It is far better to just get your money in the market as soon as possible. Market timing is the best way to reduce your returns. The only way to do it is to get lucky.

To echo your point, I started investing in 2000. Not exactly the best timing. If I could do it all over again...I would, because I was starting to invest when I was young (still in college). Looking back now, the drop is barely a blip on the 15 year trendline.

Start now. If you try to time things, you'll just lose time.

 

[Y2Kev]

Yeah I've got it maxed out at 15%. Its crazy to see how much my 401k goes up every pay just from the match.

I just checked and the fund is a blended fund with 10 year rate at 6%. The 5 year is 5 and 1 year is 4 which isn't that great but with the work match I'm so hesitant to get too risky especially since the last crash set me back a bit and really hammered my Dad. I wish they offered indexed funds.

I'm still pretty young and can afford at least 10 years of something riskier, Just keep worrying if I waited too long and a bubble is about to burst again

Wait, your employer matches every pay period? That is extremely abnormal.

 

[RumblingRosco]

-

 

[Cyan]

Wait, your employer matches every pay period? That is extremely abnormal.

Wait what?

 

[simplayer]

Following up on the traditional vs. Roth discussion over the past couple weeks, I just shifted my future contributions to a traditional 401k vs. the Roth we've contributed to for the past year and a half. I'll just leave the existing Roth funds be, rather than convert them. I increased the contribution according to the tax benefit.

I plan to keep the IRA contributions as a Roth, however. We are maxing those out, and so won't be able to take the deduction we receive from the shift and move that into a retirement account (the logistics of managing the tax return funds and correspondingly increasing the 401k contributions is too much of a mess for me to want to manage). It'll also be a tool to keep the tax rate we pay in retirement low.

It occurs to me that with the funds I'm in now, I'm over-weighted to large caps (about half the retirement funds will be in the Vanguard S&P500 index). I've decided to live with that, as I'm more comfortable being overweighed on large caps than tilting small cap, or even with rebalancing toward them.

Thanks for all the great discussion as the year wrapped, it's really helped inform my annual refinements to our retirement savings strategy.

I'm curious about this.

I currently put half of my 401k as traditional, the other half as roth. I also have a roth IRA. Both of these are at max annual contributions.

Would there be any benefit for me to move out of roth in my 401k?

 

[simplayer]

Wait, your employer matches every pay period? That is extremely abnormal.

...that's not how it normally works?

 

[TheWarrior]

Wait, your employer matches every pay period? That is extremely abnormal.

I'm sorry I misspoke before. I put 15% they put an additional 22.5. So its 1.5x contribution



I get paid every 2 weeks so my contribution and the employer contribution both go in. I always thought that was the norm

The fund is Fidelity Advisor Strategic Income Fund http://quotes.morningstar.com/fund/FSTAX/f?t=FSTAX

I know I am probably conservative to a fault.


Its not so much the industry I am in that matters, its a very small company and they consider the match their way of profit sharing. Plus the people that run it are pretty awesome.

 

[Easystride]

...that's not how it normally works?

My employer puts the previous year's match in all at once in mid January. I should be getting mine any day now.

 

[Piecake]

I get paid every 2 weeks so my contribution and the employer contribution both go in. I always thought that was the norm

The fund is Fidelity Advisor Strategic Income Fund http://quotes.morningstar.com/fund/FSTAX/f?t=FSTAX

I know I am probably conservative to a fault.


Its not so much the industry I am in that matters, its a very small company and they consider the match their way of profit sharing. Plus the people that run it are pretty awesome.

Your fund returned 3.52% last year and .09% the year before. Your fund also has an expense ratio of about 1% and a turnover rate of 135%. This means that the total expense of your fund is probably somewhere between 1.5 to 2.5%.

That is not good. You can see the long-term growth of your fund and the impact of fees with this calculator

http://www.begintoinvest.com/expense-ratio-calculator/

I personally think that investing in bonds, especially if bonds is a majority percentage of your porfolio, is a very bad idea. An investor with 30-40 years worth of time before retirement should be concerned with growth. That isnt going to happen with a bond fund.

If you still want to go with bonds because you arent comfortable with stocks, that is totally fine. You should do what you are comfortable with. However, I would read up more on mutual fund and index investing to get you more comfortable with the idea.

I would also see if you can choose a different conservative bond fund because the fees on that fund are terrible.

 

[simplayer]

My employer puts the previous year's match in all at once in mid January. I should be getting mine any day now.

Weird. My job here (in the US) matches every pay period and so did my previous company in Canada. I didn't even realize that not matching per pay period was a thing

 

[Piecake]

Weird. My job here (in the US) matches every pay period and so did my previous company in Canada. I didn't even realize that not matching per pay period was a thing

Mine does it every quarter. Yearly matches is becoming more of a thing because it is a way to save companies money. Companies don't have to pay the match if a person quits or gets fired before that date.

 

[Y2Kev]

Wait what?

Most large caps match once annually. At least from all the research I've done. I just figured it was all the same (from the corporate's perspective, it doesn't make sense to match on a pay period basis).

 

[UraMallas]

Most large caps match once annually. At least from all the research I've done. I just figured it was all the same (from the corporate's perspective, it doesn't make sense to match on a pay period basis).

I think you have it backward. At least, from every discussion I've ever had with people about the subject.

 

[Randolph Freelander]

I'm curious about this.

I currently put half of my 401k as traditional, the other half as roth. I also have a roth IRA. Both of these are at max annual contributions.

Would there be any benefit for me to move out of roth in my 401k?

tl;dr version: There might be, but it's arguably small and might not be worth it for you, given that you are maxing your accounts (I assume you mean the full IRS limit for both), though it would give you more investment freedom than you might have otherwise.

Long version: If you weren't maxing your accounts, there might be a stronger argument for opting more towards traditional contributions in your 401K, as you would benefit from tax deferment and be able to invest more money now. I assume that if you're able to max out your 401K and IRA, you're making pretty good income and therefore pay a top marginal rate of 25% or more, though your average tax rate is considerably less than this (25% for single tax payers starts at $36,900 of taxable income for 2014, 28% at 89,350, 33% at 186,350, and up it goes).

Since you are instead maxing it out, it becomes a question of what you would do with any additional funds (investing traditionally would free up some money to possibly invest in the market on your own), what your average tax rate might look like in retirement, what the capital gains tax rate might be, etc.

Just for giggles, and I've probably done this before, but let's say you were directing $10,000 into the Roth component of your 401K. Let's say that you earn enough to qualify for the 28% marginal rate, but not the 33%. To invest that $10,000, you actually need to gross $13,888.89 (ignoring payroll taxes, which aren't avoided anyway, and any state or local income taxes). If you were to convert that $10,000 into a traditional contribution, you subtract the $10,000 from your taxable income, which means that only the marginal amount of $3,888.89 is taxed, which is a tax of $1088.89. If you notice, your original tax amount was the full $3,888.89, so you just saved $2800. If you're already at your max 401K and your max Roth IRA, you can invest this in the free market.

Let's now give you an annual earnings of 9% for 30 years and we'll just look at this one $10000 in your 401K and the one $2800 in the free market. After 30 years, the 401K amount grows to $132,676.78. If you left this as Roth, this would be untaxed. But you didn't, you converted to traditional to give yourself the additional $2800 to invest elsewhere. This amount grew to $37,149.50. At this point, it just comes down to taxes of the future. Is the after tax portion of $132,676.78 + $37,149.50 going to be more or less value than an untaxed $132,678.78. The answer? I don't know. But if we hold your average tax rate on the $132K to 20%, you'll have $106,141.43 after tax from your 401K component. If we similarly hold the capital gains rate to 20%, you'll have $29,719.60 from your free investment component. These two will add to $135,861.03 after tax, which is higher than just leaving it as a Roth. So is it worth it? Well, look at the assumptions. Do you feel comfortable that your average tax rate in the future will be 20%? (As a starting point, calculate your own rate of today by dividing your federal tax liability by your adjustable gross income.) (This "average rate" can actually be as high as 22.4% in this scenario to even out.) Do you feel comfortable in the capital gains tax rate? Given that the difference here is somewhat small and is dependent upon tax rates of the future, you might just find it more palatable to simply avoid the heartache and stick with a Roth. (Note: I'm not a tax expert, so there could be other factors to consider when dealing with retirement and investment earnings.)

Unmentioned in any of this, of course, is that the additional dollars you are investing in the free market are not restrained, unlike the choices you might have in your 401K plan. Your Roth IRA is wide open, of course, but your 401K might be limited to just a handful of funds, and few of them good. Getting more money into other investment vehicles might be appealing to you beyond any potential difference in earnings (after taxes).

As an additional note, we ignored state and local taxes. If you were to factor those in, it would make your necessary gross earlier (the $13888.89) higher in order to get the $10K into the Roth 401K, which when going to traditional would have given you more funds to invest in the free market, which would have increased your amount on that component after 30 years but would have also increased your tax liability on each component to some degree. With the assumptions above, you would still come out ahead (in theory), but since I can't know your state/local tax situation, those calculations are excluded.

Edit: Unsaid in the above is maybe, regardless of any earnings difference, the additional funds are worth more to you today than they might be in the future. If you need help building or maintaining your liquid savings of today, this will help you. If you project that you'll have more than enough for retirement (making the assumption that life continues to be rosy), this would free up cash for spending however you like in the here and now (including charity work). It basically gives you more options of how to best utilize your money, should you choose to take it.

 

[Randolph Freelander]

Weird. My job here (in the US) matches every pay period and so did my previous company in Canada. I didn't even realize that not matching per pay period was a thing

I work for a large bank that would tip this country over if it failed, and we get our matches on the last day of each quarter. I would love a per-period match, but I would never expect it.

 

[Halvie]

Wait, your employer matches every pay period? That is extremely abnormal.

Our normal match is every pay period too. We also get a non-match contribution made every March.

My job matches 2.5 times my money up to 15%, I play it mostly safe with a higher bond investment because I'll take the basically guaranteed 6-7% growth with very little risk because I'm already making bank off the match program. We use Fidelity, they aren't so great, and the LOF on most of the stock funds isn't much better, usually between 7-9% but carries a lot more risk. I should probably go with a Roth IRA, but have no idea what the returns on those are.

Typo? Hate you :|

What don't you like about Fidelity? They have a lot of good funds (assuming you can pick from them).

 

[Y2Kev]

Both of mine (match + non-match contribution) are in March. Hm.

 

[Randolph Freelander]

That 2.5x is insane. On the other hand, it's sort of like making a huge portion of your pay something you have to opt into. That's true of any employer match, of course, but it's especially true of this company.

But, gracious, if you're able to max a 401K depending upon your income, and this company was going 2.5x on 15% of your income, you'll actually hit the IRS max for personal + employer contributions ($52,000 in 2014, $53,000 in 2015), amounts that are generally non-accessible for the rest of us (don't let me gripe about that).

 

[Husker86]

The hospital I work for just switched from 'every pay period' matching to 'every six months' last year. It makes me sad.

 

[charlequin]

Most large caps match once annually. At least from all the research I've done. I just figured it was all the same (from the corporate's perspective, it doesn't make sense to match on a pay period basis).

Wow, my plan is better than I thought! I get pay period matching and just assumed that was normal.

 

[Cyan]

Wow, my plan is better than I thought! I get pay period matching and just assumed that was normal.

I thought that was normal too. Never seen this once annually thing.

 

[Randolph Freelander]

Y'all with the per period matching, do you work for large or small companies, does the match go into company stock or into your general allocations.

My gut says smallish companies, no company stock.

 

[Cyan]

Yeah, I've never worked for a large company. At the current place, the match is general allocation, and there is no company stock.

 

[Randolph Freelander]

Yeah, I've never worked for a large company. At the current place, the match is general allocation, and there is no company stock.

My hunch is for companies like that, the match is just part of doing payroll, so doing it every payroll period isn't adding much to the cost of doing business. For a large company, particularly one that puts the match into company stock, there's probably a bit more overhead to it, so they do it less frequently.

But I'm only making assumptions here. It would take one person to say "I work for S&P 500 company Acme Inc and we get 401K matches every day" and my theory goes out the window.

 

[egruntz]

So my employer will match half my 401(k) up to 3%.
So I put in 6% and they'll add 3% to that.

They mentioned something about having to stay with them for 6 years before I get 100% of the money when/if I leave. I didn't understand what that meant. So I could pay into the 401(k), not stay for six years, and they can take money away?

Anyway is 9% 401(k) and 5% pension good for retirement?
Read the OP but am still very confused. I'm naive when it comes to this stuff. I'm 21.

 

[Randolph Freelander]

So my employer will match half my 401(k) up to 3%.
So I put in 6% and they'll add 3% to that.

They mentioned something about having to stay with them for 6 years before I get 100% of the money when/if I leave. I didn't understand what that meant. So I could pay into the 401(k), not stay for six years, and they can take money away?

They're talking about "vesting," and 6 years is an awfully long time to vest in the employer match. Some of them will prorate it, but a lot of the time, if you're not there the entire vesting period, you lose all of whatever they kick in. I've worked for various large corporations that have all had different vesting policies, and those policies could differ based on what type of contribution they're making (matching, non-matching, etc.), but none of them have been 6 years,

My current company has 100% immediate vesting on matching contributions -- they're yours as soon as you get them. For non-matching, discretionary contributions, the vesting period is 3 years of service, but then 100% on any new or existing match after that. For both types of contributions, they do require 1 year of service before they even start, however.

Anyway is 9% 401(k) and 5% pension good for retirement?
Read the OP but am still very confused. I'm naive when it comes to this stuff. I'm 21.

For your age, it's good that you're even starting to think about this. I don't know if 9% is enough on your 401K because I don't know how much you're making, but at any rate, consider increasing your percentage over time. A lot of plans make it easy for you to bump your percentage automatically every year up to some threshold. It's real easy to do this considering annual salary increases -- get a bump of 3%, bump your 401K by a point and keep two for yourself. But at 21, you're at an advantage because you're already participating, and if you keep it up, that will put you far ahead of the majority of your peers. The earlier you start, the more you get the benefit of compounded earnings. Folks starting later than you necessarily have to invest more, so good job and keep up the smart work.

 

[Husker86]

So my employer will match half my 401(k) up to 3%.
So I put in 6% and they'll add 3% to that.

They mentioned something about having to stay with them for 6 years before I get 100% of the money when/if I leave. I didn't understand what that meant. So I could pay into the 401(k), not stay for six years, and they can take money away?

Anyway is 9% 401(k) and 5% pension good for retirement?
Read the OP but am still very confused. I'm naive when it comes to this stuff. I'm 21.

6 years is pretty standard for a vesting schedule. It goes like this:

It's important to remember that when talking vesting and percentages, it's just the matched funds they (the company) put in. You are always "fully vested" in your own contributions.

1 year: 0%
2 years: 20%
3 years: 40%
4 years: 60%
5 years: 80%
6 years: 100%

Now, that may not be what you're company is doing, but it's likely.