Is a 401K simply a mutual fund by another name?

[maybelooking]

The question may make it obvious that im not real save when it comes to this stuff. If it doesn't make it obvious, Ill just state outright.....

Im not real save about this stuff!!!!!

Hope the question isn't stupid but if it is....explain anyway. Thanks.

 

[Mr Natural]

A 401K is a savings plan in which there can be mutual funds, individual stocks, bonds, or cash.

 

[maybelooking]

Thanks Mr Clean. What percentage to most people contribute to a 401k if they plan on that being a very large part of their overall retirement ?

Is that question even answerable? I realize the range can be wide.....but say I were to plan on my 401k being 70% of my retirement income.....what percentage would I want to contribute?

 

[WinterBorn]

Thanks Mr Clean. What percentage to most people contribute to a 401k if they plan on that being a very large part of their overall retirement ?

Is that question even answerable? I realize the range can be wide.....but say I were to plan on my 401k being 70% of my retirement income.....what percentage would I want to contribute?

If your employer offers matching funds for your 401k, you should at least do the maximum they will match. It is basically free money.

Also, the difference between a 401k and a standard mutual fund investment is that a 401k is not taxed until you draw it. Mutual fund investments gains are taxed now.

 

[Otis Mayfield]

Many Americans are darn near rich because of their 401Ks.

 

[maybelooking]

If your employer offers matching funds for your 401k, you should at least do the maximum they will match. It is basically free money.

Also, the difference between a 401k and a standard mutual fund investment is that a 401k is not taxed until you draw it. Mutual fund investments gains are taxed now.

I absolutely understand contributing what the employer matches for sure. No brainer.

im just trying to give my son advice on what percentage overall he should try to contribute. His mother and I waited until later on to really start putting money in. We are at 20% now trying to make up for some lost time.

If I get him started early he won't have to do that much!!!

 

[maybelooking]

Many Americans are darn near rich because of their 401Ks.

Good for them!!!!!! By the time we are both retired, we will be too!!!

 

[WinterBorn]

I absolutely understand contributing what the employer matches for sure. No brainer.

im just trying to give my son advice on what percentage overall he should try to contribute. His mother and I waited until later on to really start putting money in. We are at 20% now trying to make up for some lost time.

If I get him started early he won't have to do that much!!!

It will depend on his income and his expenses.

Shoot for 20% of his income.

 

[MarathonMike]

maybelooking I'll offer a suggestion since my wife and I get a considerable percentage of our income from 401K and 403B accounts we contributed to for many years. Save as much as you can comfortably afford every month. Have it auto-dedected from your check if possible.

 

[JackOfNoTrades]

A 401K can be underpinned with any number of securities. In a lot of cases, it is mutual funds. Usually a selection of funds based on what securities the company providing the 401K offers in their plan.

 

[candycorn]

I absolutely understand contributing what the employer matches for sure. No brainer.

im just trying to give my son advice on what percentage overall he should try to contribute. His mother and I waited until later on to really start putting money in. We are at 20% now trying to make up for some lost time.

If I get him started early he won't have to do that much!!!

Most 401k plans are tied to the securities markets. I haven't looked into it lately but I'm not sure you would find a 401k sponsored by an employer that has other investment vehicles. Well, the dow is up about 9000 since we elected Biden and rose 148% under Obama. So if this is important to you...perhaps you should start voting for people whose policies actually help in that regard.

One thing to be careful about though. Some employers will match your contributions only if you buy their stock. Meaning that if you work for Humana or Cigna, if you put your money into a mutual fund; they may match 0%, or 50%. But if you put your money into Humana or Cigna...they match 100%.

 

[Blues Man]

The question may make it obvious that im not real save when it comes to this stuff. If it doesn't make it obvious, Ill just state outright.....

Im not real save about this stuff!!!!!

Hope the question isn't stupid but if it is....explain anyway. Thanks.

No.

The name is just a reference to the tax code that applies to a particular qualified retirement savings plan.

Any investment can be used to fund the plan. You can use mutual funds, stocks, bonds and ETFs. Most employers will not set up an run the fund as it is a complex mess of legal reporting requirements and tax filings.

Usually a third party will handle the details and provide the investment options to the employees of a business. Most of the time mutual funds are used.

 

[Dekster]

I absolutely understand contributing what the employer matches for sure. No brainer.

im just trying to give my son advice on what percentage overall he should try to contribute. His mother and I waited until later on to really start putting money in. We are at 20% now trying to make up for some lost time.

If I get him started early he won't have to do that much!!!

I do 10%---5% from my check and a matching 5% from my business. I set my business's fund up through my payroll company who in turn set it up with T. Rowe Price. I can make extra contributions if I so desire. I just tell my payroll company and they take it out of my check without the company match on the added contributions. There are some important ins and outs of it I won't bore you with if your son is just an employee of someone else.

The thing is, you are forced to start liquidating your 401K at 70 1/2 so, depending on his age, he might want to do other things than just max out his 401K like setting up a brokerage account and just buy the stocks out of already taxed money and roll over any dividends into new stocks. Robinhood is actually a good deal for younger people.....assuming they stay in business long......because it is convenient as hell and the fees are much lower than they would be if you were buying through more traditional brokers.

 

[my2¢]

Can't add much to what has already been posted other than suggesting YouTube as a good source for basic information.

Here are some of the videos that returned when I searched "What is a 401k" and limiting results to within the past year: