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12% 401(k) Contribution - What to do? [USA] (kbin.social)

submitted 10 months ago* (last edited 10 months ago) by lqdrchrd@kbin.social to c/personalfinance@lemmy.ml

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Hi everyone, I recently landed a new job where the base 401(k) contribution for all FTEs is 12% of your salary. This is regardless of your contribution, with no additional match. I realize that this is unusual for most people and it is for me as well. In my last job, I got up to a 6% match so I maxed that out and didn't think on it any further.

I currently contribute an additional 5% on top of the 12% that my employer provides, but got chatting with a coworker who mentioned that they were advised to take that money and, since it was not being matched, put it into the stock market instead. I'm open to learning, but have very little knowledge of stocks, cryptocurrency, or likely any other potential option you may suggest.

For a little extra information, I am in my mid-twenties, earn mid-five-figures/year, have little saved for retirement right now, and am open to any suggestions you may have.

So, what would you do in my situation? Thanks for any replies!

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[–] Endlessvoid@lemmy.world 2 points 10 months ago* (last edited 10 months ago)

As others have mentioned, you can invest in the stock market within your 401k, though your options can sometimes be limited or saddled with high fees depending on what broker the 401k is through.

If yours is through a shitty broker then you might be better served by opening an individual retirement account (IRA), likely a Roth IRA given the limited info you've shared. You can open one with a broker of your choice, so go with one of the better ones like vanguard or fidelity. Using tax advantaged retirement accounts will always beat saving your retirement money in a non-tax advantaged one, all else being equal.

Edit to echo the flowchart from one of the other comments: https://imgur.com/u0ocDRI

This is the core of sound personal finance strategy in purified form. Great resource!