401K – How Much Should You Contribute? (Part II)

September 30, 2006 at 10:18 pm Leave a comment

I asked about contribution to 401K back in May and received many good advice. I also found some good articles regarding 401k as well. However, thus far, I had not increased my 401k contribution.

The general accepted tactic for contribution is what DTC suggested:

1) Contribute to 401k up until you do a company match.
2) Contribute to Roth IRA until you max it out.
3) Continue to contribute 401k up to your affordability.

However, after taken consideration of my investment-prowness, the best strategy for me at this point would be:

  1. Contribute to 401k up to maximum of my affordability.
  2. After max out 401k contribution, then contribute to Roth IRA

My reasons for doing this is:

  • Tax: I’m single with no dependents, thus I get the biggest tax hit. By contributing as much as I can to 401k, I would reduce my taxable income while saving up for my retirement.
  • Investment Prowness: I have none! I have set aside $3,000 play money (though I have not start playing with it) to start learning about investment. Once I feel more knowledgeble, then I will go with the investment strategy that DTC recommended.

To do list for tomorrow:

  1. Evaluate 401k funds (re-balance profolio if necessary)
  2. Increase 401k contribution to max of my affordability
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Entry filed under: Retirement, Tax.

Airfare 401K Profolio Rebalance

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