I (32m) have just been hired at a company that has a 401k plan, and (just as the title states) they will match up to 4.5% provided I put away at least 6%. I’m trying to decide if I should put away the max amount they would let me select, which is 12%. I would still only get 4.5% from them, but here’s the factors on why I would think I should deposit as much as possible:
1) At this point, I have absolutely no previous savings. I feel like I need to get serious about this NOW, and aggressively start saving.
2) This job pays significantly better than my previous employment with amazing healthcare benefits and other perks. I went from $28,500 at my last job, which after taxes and $800 a year being deposited to an HSA netted me about $800 a paycheck (biweekly pay). I now make $44,000 a year, still have a plan to deposit $800 into an HSA this year, and so far my first couple of paychecks seem to have me bringing home about $1,300 a paycheck (again biweekly pay).
3) I have zero plans to increase my quality of life, so the way I see it is that I’m making around $1,000 a month now of disposable income that I want to use wisely and not waste on fickle wants. I’m even looking at more things to lower my amount of money necessity expenses, e.g., cheaper cellphone plan, different car with lower monthly payments, etc. So if I’m depositing a bigger chunk of my new monthly disposable income, isn’t that the right decision to put it in my 401k?
I just want to make sure that there’s a solid reason to go above what gets me the highest matched percent through my company, and that the extra amount I’m considering depositing wouldn’t be more wisely invested elsewhere.
General advice goes – always max the company match.
After that it is more personal, but IMO – since time is the MOST important factor now, set it up as MAX, set it and forget it….. if and when you find another option you want to try, you can always cut it back.
DO NOT LET INDECISION GET IN THE WAY OF MAKING A DECISION!