“I’m 24 with a great job and solid prospects (Penn State grad!). I’ve recently become able to put money into a 401(k). The company matches half of what I put in up to 6% of my pay. Can you give me some guidelines to take best advantage of this plan? By the way, I have a whole group of friends that listen every week to your show. Thanks for the great info.”
Thanks for the kind words. I have three daughters all around your age. It’s great to know I may have something of value to offer the next generation.
My advice comes in three pieces. First, put in enough of your pay that you’re at least a little uncomfortable. Don’t just look at the 6% they match. Look at how much you can squeeze yourself. More dollars going in today means tons more dollars coming out in retirement.
Second, increase your contribution with every pay raise. You don’t (and shouldn’t) have to put every dollar of your raises in, but you should (must?) put a big chunk toward your 401(k) plan. More dollars now – many more dollars later.
Last – try to avoid too much diversification. Keep as near to 100% of your money in assets that grow (stocks, real estate, etc.) as your plan allows. You’ve got plenty of time to ride the inevitable ups and downs. Your long term results with this approach should give you a significantly greater shot of higher returns. No guarantees. Just the opposite. Tons of volatility. But over many years – a real opportunity.
Thanks again, good luck, and keep us posted on your results.
If you have questions or comments, please send them to Gene@AskMtM.com