Real Estate Agent · Athens, GA · Member since 2015 · 98 posts · 27 votes
Hello all!
I am debating with my wife as to whether or not to contribute to her 401(k) we are both in real estate school and are going to become real agents. I will be a full time agent as soon as I get my license and she will be working full time while I get established. So should she continue to contribute or just save the money for our new business expenses .
Well you really need to offer us some more information.
First of all does her employer match? If so this is a no brainer, contribute whatever % they will match up to.
Are you guys awesome with money? If no, then contribute the max to 401k. I say this as now I know in your old age you will at least have something saved.
If you guys are awesome with money then no I would not contribute a single penny, this is only if your company doesn't match. If you company matches you need to contribute the max that they match. Don't put another penny on top of that, once again this is only if you are awesome with money.
Well you really need to offer us some more information.
First of all does her employer match? If so this is a no brainer, contribute whatever % they will match up to.
Are you guys awesome with money? If no, then contribute the max to 401k. I say this as now I know in your old age you will at least have something saved.
If you guys are awesome with money then no I would not contribute a single penny, this is only if your company doesn't match. If you company matches you need to contribute the max that they match. Don't put another penny on top of that, once again this is only if you are awesome with money.
Having balance in your finances rather than 'all your eggs in one basket' would be the prudent thing to do. This is especially true in a situation like yours, since you are just getting into real estate and have no idea how it will go. As the above poster stated, in any case you should take advantage of her employer match.
I had a real hard time thinking about that recently. I appreciate that you can contribute up to $18,000 of your money pre-tax to a 401k. PLUS whatever else company match an employee may offer you. However, I feel that the $18,000 could be invested by me with better returns than an index fund (in my case real estate investment property). Furthermore, the $18,000 a year you sock away can't be touched by you until you are old and gray. Conversely, The $18,000 I invest can be used over and over again. So aside from diversifying assets (which is why I contribute the employee match % to my 401k) and reducing your W2 taxable income (doesn't help reduce taxes if you have passive investments, dividends, etc because you will owe tax on that). I don't think it's this great idea that many proclaim IF you can make more money on that money than you would just putting it in a 401k and forgetting about it.
Ditto on the match. I think you'd be crazy not to contribute at least what the company matches and pass on that free money. If there is no match and you are determined to invest into a retirement account, I'd go with a Roth IRA.
Like Michael, Mark and Igor, I don't prescribe to the eggs in one basket model.
Also, remember that the 18k will not be 18k if it doesn't go into the 401k. It will certainly be taxed and result in a loss of up to 40%. Additionally, while it's in the 401k is has the potential to grow tax free as well and may grow fast enough to allow "interest free" financing that can be used to pursue REI.
Hello and welcome to both of you to BP! There are several other things we need to know but I will try my best to answer your question. It can be a good way to save money especially if the employer does any matching anddis a RothIRA is an option. My wife has been doing that for about 25 years ands it is now worth about 300K. Her employers have matched up to 3%. Depending on your ability to perform you might be better off investing the after-taxed money into a Roth account. It depends on your frugalness and restraint to do it that way.
It might be a better, if you are saving for retire and the need for that money until you reach retirement age, to open up a self directed IRA because the IRS cannot touch it and there are more options. My wife is so frugal she thinks we are broke event hout she has that plus about 200K of equity in our house with a paid in full mortgage. It can definitely be a hard thing to talk about and decide on. I have heard from more than one person is that 401K'sare no good. The main thing is to have diversity so one thing happening cannot break you.
A 401k is a good retirement vehicle since the funds grow on a tax deferred basis; therefore, at least the minimum that will trigger matching from your employer should be contributed.
Thank you for all of the advice! This is a hard decision even with all of the advice. On the one hand I want to have as much capital now to start out real estate career. I know we will need a few thousand each to get started so that money she is investing would defiantly help. But on the other hand it's "free money" from the company she is working for. I think for now she will keep investing in the 401(k) until we are officially licensed and working agents.
That $18,000 taxed at 25% To have today is $13,500 this year you would have. If the company matches dollar for dollar it is $36,000 you have in an account at the end of the year. Plus it may even move you to a lower tax bracket so have more value.