grokfinance t1_iugerf2 wrote on October 31, 2022 at 3:00 AM

You are in your late 20s? Are you kidding? I'd be putting every single dollar I could get into my 401k. You buy when markets are down. You don't cut back. Especially in your 20s. The compounding growth power of every $1 you get into your 401k today means it will likely grow to $15-20 by the time you retire. Sure, go ahead and save for a house down payment but not at the expense of stuffing as much as possible into retirement. You'll never be able to make up for these lost compounding years. Waiting just one year (or cutting back) will literally cost you tens of thousands (possibly even 100k).

LenzoQ t1_iugf9o9 wrote on October 31, 2022 at 3:04 AM

Should I just be putting money into my 401k and not doing anything else? As in setting or changing allocations and whatnot. I don’t full understand it, do I just let it sit? I’m in my early 20’s, I put 10% of my paycheck.

grokfinance t1_iugfonv wrote on October 31, 2022 at 3:08 AM

The generally recommended strategy is this:

Put enough money into 401k to max out the match you get from your company
Then, I'd switch and max out a Roth IRA (if you qualify income wise, else a Traditional IRA). You can put up to 6k into an IRA for 2022.
If you still have more money left over that you can afford to save then you can go back and contribute more to the 401k beyond the match

PS - I'd suggest using Roth 401k if your employer offers it (most do nowadays). In both 401k and IRA the name of the game is to invest in simple index funds. Ideally your 401k offers a total stock market index fund like VTSAX. If not, it probably offers an S&P 500 index fund. That is it. You could stick with that allocation for probably the next 20-30 years and be just fine.

PPS - Saving 10% of your income for retirement is a bit low. Aim for at least 15%. Again, the more - especially at a young age - the better.

LenzoQ t1_iughen2 wrote on October 31, 2022 at 3:23 AM

Thanks 🙌 I meet my company match for my 401k and put what I can when I can towards my Roth IRA. I’m investing in a target date fund of 2060 for both. Can I just let it sit without having to look at it?

grokfinance t1_iugi40b wrote on October 31, 2022 at 3:30 AM

Yes, that will work. Just make sure the target date fund isn't too expensive (ideally expense ratio as low as possible - anything above ~0.30% I'd be switching for a total stock market index fund which will charge you like 0.04%) and isn't too conservative (low allocation of bonds, or ideally, in your 20s and 30s probably no bonds).