Retirement savings part i - the 401k and pension
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After reviewing our student loans, I thought it would be a good idea to switch to something on the savings side. Today, let’s take a look at my husband’s 401k and pension. (I have only had a single 401k in my life, and I transferred it to an IRA, and then to a Roth IRA, after leaving the job.) I am going to use January’s figures since our monthly contribution does not happen for a couple more days.
401k - $46,025
Pension - $9,429
Total $55,454
We started contributing to the 401k plan in April of 2003, and we are currently maxing out the contribution at 20% of my husband’s salary. The company match is 75 cents to the dollar on the first 6% of contributions. There are a variety of investment options (mutual funds and company stock), and we can track our returns, but other than that we are not provided with a lot of information about the individual mutual funds.
The pension plan is something that we didn’t really think much of until last year, when we were given the option to take the money from the pension plan when my husband leaves the company. This would not benefit us if we thought that he would be there for the rest of his life, but this is not the case. He just got a different position within the same company since his old position is being outsourced to China - the job stability at his company is questionable. Also, we do not necessarily see ourselves in this area for the next 20-25 years.
My big question for this year is whether we should lower his contributions to the 401k (still making sure he contributes enough to receive the company match, of course) and use them for Roth IRA contributions. Here are my thoughts on why we should make the change:
1. I think that we have enough financial discipline to do this now, and we would have more control over the money (in terms of investments).
2. Since we are only 31 and 32, taking the tax hit now makes a lot more sense. Also, we are still paying state and local taxes on 401k contributions, so there is no added benefit on these fronts.
3. I don’t have a regular job anymore. Therefore, I don’t see us moving into a higher tax bracket anytime soon.
Any thoughts or suggestions?
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4 Responses to “Retirement savings part i - the 401k and pension”
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I’m 28 and my husband is 30 and this is what we do. Both 401(k)’s are invested just enough to get the match and then both ROTH’s get maxed. Make sure you blog about what you decide to do!
Becky@FamilyandFinances’s last blog post..Favorite Blog Post 2/15/08
Becky,
I’ll definitely blog about this when the time comes - we plan on making a decision after doing our taxes this year. We want to get an estimate on how changing the 401(k) contributions will change our financial situation. For example, we would have to contribute more out-of-pocket since the 401(k) is pretax.
Right now, I am still thinking that we should make the switch, but my husband likes to know the numbers first, which is totally understandable.
Thanks so much for visiting!
Good article!
The earlier you make retirement plans, the more time you have to save and invest for the type of retirement you want. Remember that upon retiring, the majority of people will lose their employee benefits at an age where insurance will be quite expensive. You may want to invest in life insurance while you’re still young and in good health and can take advantage of the low premiums . This may be cheaper than having to get coverage later.
Carin,
Thanks for the comment! This is definitely on our “need to do” list. Both my husband and I have life insurance policies right now, but they are for 1/4 - 1/2 of what we would like them to be.
We figure that if we each take out a 25-year policy, this will carry us through our sons college years. We’re both in good health (thankfully!) and neither of us smoke, so we should go ahead and get this done. I’ll let you know when we do!