Lux Investing - Can someone with knowledge help me with my 401k plan?

Can someone with knowledge help me with my 401k plan?

I'm 23 years old and this will be my first time enrolling. They told me that the company that I work for will match 25% on the dollar of what I contribute. I am just wondering how much is good to start, I have absolutely NO IDEA about this. They told me 5% is good for now? what can anyone tell me? Also I want my money to increase of course so how can I invest my money wisely?? They told me I should put 100% on Freedom fund 2050 and that they do all the work for me. Can someone out there recommend something to me? I appreciate the help. Like I said I am completely clueless!! thank you

Public Comments

contribute as much as you possibly can afford never put all your eggs in one basket
The Fidelity Freedom Fund is fine for now. You can always switch funds later if you want. You can contribute up to $15,500 a year to your 401(k) plan, not including any company match, so the more you can contribute, the better. The company match is free money to you as long as you stay long enough to be vested. I recommend that you read "Investing For Dummies" - it is a great starter book about money. Suze Orman's personal finance books are also good.
First a question. You said 25% on the dollar match for your contribution. Is there a maximum to that, there usually is. For example, 25% match on the first 6% you contribute. If that's the case you want to be sure to contribute at least the full amount of the match (in that example 6%). Beyond any match maximum, you want to contribute as much as you can afford. Now the money is going to be tied up for many years and you can't get at it without paying huge penalties. So you want to be sure you have enough savings elsewhere that can be used in case of an emergency. Don't tie up all your money there. I would say for right now a time managed fund like the 2050 fund may be a good choice. Many 401(k) plans are moving to these types of plans, and generally speaking you pay reasonable low fees to participate in them. You may want to take a look at other investment options they have available in the plan. Every plan is unique, so I don't know what else is available to you. But if you were to invest in other investment options, you want to balance your portfolio, with various stock, bond and fixed income type investments.
The 25% match is like getting free money, it's a great deal. Be careful how much you commit to deducting. If you are saving money now, use that as a gauge.I would start at the minimum allowed deduction, you can always increase. Try 2% at first and work your way to 5%. The money is set aside for retirement only. The 2050 fund is a good idea, that's a Fidelity Mutual Fund which adjusts the stock/bond allocation as you get closer to retirement. You can always change that option also. Ask employer for a prospectus and read up. Find out about any fees involved with changing investments. But definitely get started now, you'll be thankful you did.
A k plan is a great benefit that is designed to help you save for retirement. The money is taken from your check before taxes are taken out - the idea is that you will be in a lower tax bracket when you retire and take the money out (which is when you will have to pay taxes on it.) You will also pay less tax right now since your gross check will be lower (because the k plan deduction came out first.) The company often matches yoru deduction at a certain level (for example, the 25% that your company contributes) - free money, who doesn't love that? The percentage you have deducted is up to you and what you can afford to do. Ask how often you can change your deduction (most plans allow frequent changes) - start low, with 3 - 5%, and increase the deduction as you are able to afford it. The funds which are deducted are invested as you direct. Every k plan has a different set of available investments. Most plans also have a financial advisor you can speak with for free, who can help you to assess your tolerance for risk, your retirement goals, etc., and decide which funds might be the best fit for you. Remember that this is a long-term investment. Fidelity, T. Rowe Price, Charles Schwab, or any other financial services firm will have a website with lots of info on k plans so you can read up on this. Find out who handles your company's k plan and visit their web site, or call their customer service line, to learn more. A k plan is a great way to save, and starting young makes a HUGE difference in the amount of money you will have when you retire. Congrats on taking steps to secure your financial future, and good luck!
Sounds like your in a Fidelity Fund. The 5% is a good place to start you can always increase the amount over time. Yes the Freedom fund is nice becaue it allocates your funds between a fixed account, package fund accounts and certificate accounts. It is placed in riskier investments that may bring a higher return. As you get older and closer to retirement they scale back to safer lower return accounts. The truth is just go ahead and start putting money in the 401k because most likely you will change jobs many tmes before retirement. You can always roll your funds into the new company's plan or into own IRA (Individual Retirement Account) Oh, remember your HR person is not the know all person in this matter. You can always talk to the account rep or the company itself to get more information on your plan. Do yourself a favor and make an appointment with an Investment & retirement advisor. They can help you do the proper projections so that you make sure you are really seting enough aside for the future. And don't spend that money for anyting that isn't life threating. You will regret it if you do. GOOD LUCK with your future!
Ideally, you want to put 15% off your gross (pre-tax) salary into your savings. If you can't afford that right now, start out with 8% or 10%, and increase it every time you get a bonus or raise, or every year. 5% is the absolute minimum you should consider. Remember, thanks to the miracle of compound interest, the more you put in now while you're young, the less you'll have to put in overall and the more you'll be able to amass in the long run. (ohhh, I only wish someone had told me this at 23... I'm only 30 and I'm regretting the time I wasted....) Since you're young and have a lot of time for your investments to grow and recover from any setbacks, go heavy on stock mutual funds (maybe 80-90% of your portfolio) and lighter on bond funds (10-20%). A targeted-date fund like the one you mentioned will do that diversification for you automatically, so it's a good place to start. Also, read up! Taking control of your personal finance is a lifelong and highly rewarding skill. David Bach and Suze Orman are great, reliable authors to consider.