How Much Do I Contribute to My 401(k) If There’s a Match?

[Music] joel is in dallas hi joel how are you dave i'm doing great sir uh good afternoon to you again i want to say thank you so much for what you guys do every day it's important to a lot of folks out here that are trying to better their lives and figure stuff out so thank you well thank you sir how can we help today so here's my question we're on baby step four and um i've got a 401k question the company that i work for does a very generous uh match every year it's a profit sharing it's not actually a match and it can range between 10 and 15 of my total salary not sure what it's going to be every year it's not set in stone kind of fluctuates right now we are putting 15 percent into the 401k the traditional 401k every year good um and have been for the last three or four years so we're looking good but my question is this do i need to be according to the baby steps do i need to be putting that much in given what my company is also contributing and then second part is do i need to be looking at adding the 401k roth option in as well in addition to or separate well if you change your 401k will either be traditional or it will be roth and it's better for it to be roth and so i would change it to roth from this point forward now the matching portion that they give you cannot be roth it will be traditional by law okay uh the matching portion does not affect our baby step four baby step four is you put in 15 of your income if you get gravy on the biscuit extra gravy on the biscuit called a match that's just that much more wealth you'll have but i don't depend on them at all the point of the baby steps is you are controlling your destiny and so you put in 15 if they match if you have a match you certainly take that match and so matches better than roth is better than traditional that's the order of attack the rock paper scissors so to speak and um so yeah switch it to a roth and you put in 15 which it sounds like you are and you just continue to do that uh can so the in the old days the um like when i first started this show 30 years ago uh still at that time a lot of companies had the traditional pension plans now 78 of companies have done away with pension plans they don't have them anymore and so it's pretty much a roth or a 401k or an ira you're going to do your own thing and you're going to do it through your company and the that's the bad news the good news is a lot of them match over 70 percent of the companies do match because they don't do the pensions anymore yeah why did they pull that was it did it come down to taxes for companies or is it too much to manage why the shift from i didn't know that number i wrote it down because that was that was really shocking to me that that many companies aren't doing pension plans why would they do away with them well they're super expensive they're super regulated to manage their pain in the blood to operate right and because can you think about it i mean you have a team member that joins you at 40 at uh 60 they retire and you now manage this pension for them for the next 25 years yeah it's too much time and money and so it just becomes very cumbersome and with regulations on them they didn't perform they don't perform that well they're not allowed to invest the way that i would invest or the way i teach people to invest so they don't make it they don't make a good rate of return and so but it's bad for the individual because now you the only way you have money in your 401k is you have to put money in the 401k it's good for the individual though because the 401k is yours yep and the pension is not if the company goes broke it's an asset of theirs you could lose the you know the old story the mind the mind closed up papa lost his pension that's right you know and so because the the pension was not his it was an asset on the books of the mining company that went broke and so they lost it now that doesn't happen as much but with the regulations and the insurance and stuff we've got now but the union mismanaged the pension and frittered it away you know these are real stories that have happened to real people when it's a 401k the company goes broke it doesn't touch your 401k because it's not in their name it's in your name uh you know accessing it with a broke company with the hr department closed down maybe a bit of a cumbersome thing but the money is still there it didn't leave and so you you are controlling your own destiny you're responsible for it and that's both a blessing and a curse that's right because just like it is when everything that we're responsible for we have to actually step up and man up woman up and get her done

Channel: Ramsey Everyday Millionaires

Views: 188,082

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Id: sNX7rbdY5ZE

Length: 4min 53sec (293 seconds)

Published: Wed Jun 09 2021