Consulting

I’m 25. Not a saver. Never have been. I’m not sure why, but I dislike the idea of locking money away in a 401K. Is saving really that important? Are there non 401K options?

funnylikesmart
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Non 401k options? Well, poverty in old age IS one option. Have the money automatically deducted. You’ll never miss it. Time is the most critical element of retirement investing.

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likehelpful
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I mean....do you want to retire with an income or homeless? A 401k is an investment in yourself. Contributing the max when your income gets higher could potentially lower your tax bracket. You can always save outside in a traditional or Roth IRA but - 1) you don’t get the company match (free money) 2) contributions are limited (yearly - $6k on your own vs $19k in a 401k)

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likesmarthelpful
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No, if you have a rich dad. Invest yourself.

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likefunny
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Especially because you are not a saver, you should lock your money away

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likesmartfunny
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My biggest regret financially was not taking advantage of my 401k thinking I didn't want to lock it away. In retrospect, if I maxed it out it would have made a difference and produced better returns. If you don't invest in your 401k, it's like making a bet that you can get better returns elsewhere after accounting for the tax benefits. Probabilistically, this is unrealistic. Now, my only shot at catching up is if I somehow beat the odds and find better returns in the future. It's not a great situation, but at least I have access to the money if I want to buy a house or something. You're young, why not split the difference and invest half of any savings in a 401k and the rest in something else. Your future self will thank you.

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likehelpful
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OK, first you need to snap out of it. saving is really important, and not just for retirement. Second, I will offer a minority opinion on 401Ks. They have a lot of benefits (namely tax advantages and employer matching), but they also have drawbacks. Your money is locked up for decades, you have limited investment options (mostly name brand mutual funds), and there are fees. Now, employer matching makes up for those if, and only if, it's high enough. Accenture matched 100% up to 6%, so I participated. However, Deloitte's matching was very low, so I didn't.

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likeuplifting
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Fees with Vanguard are pretty minimal

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This can't be a real post.

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like
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If you have a match you’re throwing away free money.

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likesmart
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If you don’t contribute the max your company matches

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I am 44 and maxed out my 401k since I started working in Consulting over 20 years ago. It feels good to look at my statement today - 800k.

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Yeah just sent it over my way. I’ll gladly take it as the “non-401k option” 😂

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likefunny
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You don’t need to need to save your money. You’re background and experience will likely always position you to have a well paying job. Retirement sounds awful so just keep working and spending, it’s not a bad life. Eventually you’ll make so much money you won’t be able to spend it

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funny
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Always invest at least up to the match

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likehelpful
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Take a look at some of the charts that show how much money you will have at retirement if you start saving by 25 vs. if you start saving the same amount at 30 or 35. Time matters a lot. And as others have mentioned, you should at least be taking advantage of the employer match. additionally, if you're not a saver, that is exactly the situation where you need your money to be locked away. As one last comment, I think it's important to immediately put away a designated amount in savings and not even think about it as money you could have spent. When you're budgeting, it's not like you're thinking oh if only I didn't need a place to live or have to eat food, I would have all this extra money...You should be thinking of saving as a necessity. Funnel it into a separate account (direct deposit) and 401k and any other savings (HSA, IRA, etc) right away. Don't even think about it as part of your discretionary funds. With the amount of money you make/will make, this won't even be a hardship.

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Used to be like you. Now I just put in upto the match to get the “free money” at least that’s part of your benefits. The cut from my pay is barely noticeable

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All of the above (company match, the value of compounding over time, etc) are true, but I think that’s more the “how” of saving. But it sounded to me you asked “why?” And my answer to that is that it gives you greater freedom and flexibility over the course of your lifetime. What you do with that freedom will naturally be different at 35 versus 65, but the psychological benefit of having a nest egg at any age can’t be overestimated

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You would be silly to leave the employer match on the table but other options. (Which should be invested in also anyway) are ETFs for the long term. Warren Buffet calls it investing in USA LLC

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On a post-tax basis, there are also automated investment options. For example, I have a semi-monthly bank to brokerage account transfer set up where I then have a set amount scheduled to invest in mutual funds twice per month. If I need it, I can sell some of it and get the money within a few days. But it’s also working for me, and not in my checking account tempting me to spend it or getting a tiny interest rate.

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Use that money to start a business or buy real estate

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You don’t need a 401k to start saving...having any bank account will do

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Max it out now. Retire early. Better your money locked away than you locked away in the future

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