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Should I stop my 401k?

Discussion in 'Investing/Trading/Cryptocurrency/Altcoins' started by LauraMorenoCa, May 26, 2017.

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  1. LauraMorenoCa
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    LauraMorenoCa Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Hi there,

    At the moment I work at a company full time and 10% of my salary goes into a 401k. My plan is to start my own company soon but in the meantime, should I stop my 401k?

    I am a little bit confused!

    Thanks so much!
     
  2. jon.a
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    jon.a Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    What's the company match? I still get stuck on going for the company match. I'm sure that someone smarter will chime in.
     
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  3. CareCPA
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    CareCPA Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    Also consider the risks of your new business. 401k funds are generally protected from lawsuits.
     
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  4. Millenial_Kid5K1
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    Millenial_Kid5K1 Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    $5000 in a 401k:
    Worth up to $200,000 40 years from now, but you can't touch it before then, and that's really only $75,000 in 2017 dollars.

    $5000 in a business:
    Could easily be worth millions in a few years.

    Ultimately it's up to you, but that's how I see it.
     
  5. Waspy
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    Waspy Float like a butterfly Read Millionaire Fastlane Speedway Pass

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    Surely if you are concerned you can spread the risk.

    Drop it to 5%?
     
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  6. LauraMorenoCa
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    LauraMorenoCa Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    I like your point. I do have cash ready to invest in my business. I am reading "Unscripted" and it kind of goes against 401k so I was just wondering.

    Thanks so much again!

    Laura
     
  7. LauraMorenoCa
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    LauraMorenoCa Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Yes, 20% company match.
     
  8. jon.a
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    jon.a Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    That's not clear.
    I haven't had a 401k for years. But, back in the olden days the company match was generally on a scale. X% match up to X% of your salary. For example one of mine maxed at 100% at 6%. If I'm remembering right.
     
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  9. CareCPA
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    It also doesn't have to be either/or. If you aren't starting a capital-intensive business, and you have enough to live on, then why stop it? Take the tax deferral benefits.
    When you get to the point you need capital, then worry about it.
     
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  10. Under-Dog
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    Under-Dog Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    If you're not hurting financially and you're able to have funds for your business while continuing to contribute I'd keep on doing it. Especially since your company matches.
     
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  11. JAJT
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    JAJT Ha Ha! Business Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    I agree with the others - keep it until it makes obvious sense to stop it. If you are uncertain, then it doesn't make obvious sense yet to stop.

    Saving in general is a good idea regardless of your job/business situation and they are paying you to do it right now.
     
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  12. Caonex Abreu
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    Caonex Abreu Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    20% company match?! Woah! I have never heard of anything close to that. I say max it to the company match if you have the cash to start your business without the 401k money.
     
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  13. Kinematic
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    It really boils down to your personal risk tolerance. For me (and this is very slowlane), I max out my 401k and IRA every year. I see it as a hedge against never succeeding in my own business ventures and having a sort of consolation prize. Is that a pessimistic view? Maybe. I like to keep it real as well. You can plan and have all of your ducks in line for the highest chance of success. There have been lots of people that poured their everything into their endeavors. Some made it huge, many lost everything and have been forgotten.

    A 20% match is huge though especially since any employer contributions have separate limits from your personal limits. It's $18000 for personal contribution and a maximum of $54000 for combined employer+employee. Most companies offer something like @jon.a said where they'll match half of to a maximum of 6% (my company does this). It's essentially free cash (you could argue that the money you have to put up to get that match could be used elsewhere etc etc) but you see the idea. Most people recommend taking the free cash and calling it there.

    So it's up to you to determine your comfort level in adding more risk by limiting your 401k.
     
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  14. Ivan M.
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    Ivan M. Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Greetings Laura,

    I would least roll it into a Roth IRA. When you do that, you won't get charged any pre-tax dollars, but will grow over time. But since we're in the Millionaire Fastlane Forum, don't rely on that as a source of retirement. If you want to cash that out, your're probably going to get taxed very heavily when you withdraw, say probably up to 40%.

    I think that's my two cents, but I would urge you to cross reference my information with a local "trusted" tax or financial advisor.
     
  15. Mr_Maravish
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    Mr_Maravish Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    I think I need to switch roles. 20%?!?! Mine only matches 5%
     
  16. Yoda
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    Like @jon.a said, you always take the match.

    Here's the caveat... it has to be a dollar-for-dollar match. You put in$1, they put in $1.​

    When you say 20% match, something tells me this is a you put in $1, they put in $.20 type of deal.

    You wouldn't want to participate in that.
     
  17. jon.a
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    jon.a Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    It's either a very good deal or a very bad deal.
    details
    details
    details
     
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  18. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    Still, that's an immediate 20% return.

    I wouldn't overlook that so fast, especially if she's still in the exploratory phase and is also addressing debt.
     
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    If it's a traditional 401k, you will absolutely pay taxes rolling it into a Roth IRA. You would need to roll it into a traditional IRA for it to be a non-taxable event.
     
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    No, it's not.
     
  21. Ivan M.
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    Ivan M. Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    You're absolutely right CareCPA, my mistake. That's why I'm not a financial advisor :). Listen to him Laura.
     
  22. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Just so everyone is clear, this is your specialty right? While the rest of us are armchair QB'ing, you're on the field?

    How so? I admit, I'm not well versed in 401(k)s because I never had one, nor had a use for one. I put in $1. Company adds 20 cents. $1.20 = 20% return.
     
  23. CareCPA
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    Yes sir. Licensed CPA specializing in small business and individual taxes.
     
  24. mike24601
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    mike24601 Consumption Bear Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    If putting away 5-10% of your income is not a hassle, then it's just another calculated risk to add to your wealth equation. It is not something you want to rely on, but it's not inherently stupid when you include it as part of a healthy balanced diet. I work with a few people who did it slowlane, have 2-3 million dollars in their 401k/IRA's and are quite healthy and vigorous and ready to enjoy retirement. What is not so smart is just coasting through life expecting that everything will be intact when you arrive at the end of the road. If you leave your job and stop contributing for the rest of your life, that money will still continue to grow and contract while you work on other things. For me, personally, I saw more benefit to having my 401k money liquid and ready to use than to leave it sitting, because I am young and have more time to fail and begin again. I withdrew my account at penalty, and having that cash has given me a lot more flexibility.
     
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  25. Kinematic
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    $1.00 + 20% = $1.20 (20% more to invest)

    $1.20 * (percent change in 401k over time) = Gross Return

    (Gross return) - (Uncle Sam's share) = Net Return
     
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