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Should my wife and I have one or two 401k's?

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jskudera
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Should my wife and I have one or two 401k's?  Reply with quote  

Good morning. My wife and I are of the same age [28] and both started contributing to our 401k's recently. Both our companies match, except her's won't match for another year, while mine is already doing so. I see my current employer as being a long-term place for me, but once we start having kids, my wife will likely move from FT to PT.

Right now we're contributing 3% each on a combined salary of ~125,000. I have my 401k setup to increase my contribution 1% each year.

So my question is - would it be better to keep them separate or just have me contribute 2x the amount and she stops contributing? As I'm typing this, I guess the question can be brought up that god forbid a divorce ever were to happen, she'd be left without a 401k.

What is everyone's thoughts on this? I just want to make the best decision moving forward.

Thanks!
Post Wed Oct 23, 2013 12:56 pm
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Publius
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I see a few things here to comment on -- one you asked about and some you didn't.

First, don't plan for divorce. In my limited experience (aren't all of our experiences limited Very Happy ), the successful marriage is one that assumes that you will be together for the long haul, despite all the crap that life will throw at you -- and it will throw crap at times. And you will fail to meet some of those crap-storms successfully, but if you do it together, you at least failed as a team. Plan to survive every battle, not win them all.

Second, in most states it doesn't really matter which 401k you contribute to, those assets would be divided upon divorce regardless of the name on the account. So contribute to the accounts in the order that will get the most match, and then try to ratchet those contributions up over time.

Third, you're 28 with no children and a combined income of 125k. Try to contribute more than the 3% you are talking about. The early money is the most important money and when children enter the picture they are the most wonderful gifts that we can ask for that suck more money out of the household budget than you can imagine Smile.

Just my $0.02.
Post Wed Oct 23, 2013 1:19 pm
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jskudera
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Hi Publius, thanks for the comments. Divorce is certainly not in my plan, but it was just something that came to mind when asking about having all the money in one 401k. We currently contribute 6% of our combined salary, and it will go up each year. We just bought a house this year so we're just working on getting acclimated to the expenses.

My 401K matches 75% up to the first 6%, while my wife's employer matches $ for $ up to 6% after the first year.

I guess I'm just thinking that if she leaves this company in the next few years and becomes PT somewhere or even stay at home, is it really worth it to have a 401K with limited funds in it? Or does it not really matter?
Post Wed Oct 23, 2013 1:45 pm
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littleroc02us
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In my limited experiences (LOL) my wife and I try to do 15% each in retirement savings. Which means a total of 30% of our income goes towards retirement. In fact I had to back her off of her previous retirement contributions because she was at 20% herself. So really a good goal for your family is to be at least 15% in total retirement savings if you want to get the ball rolling. The earlier you do this the more wealthy you'll be due to compound interest. I mean you only 28, if you invested for 30 years at 15% contributions you'll be retiring quite wealthy at 58. If you work until your 63 you'd be so wealthy you'd be able do whatever it is you want for retirement. Good luck!

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Oct 23, 2013 2:34 pm
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coaster
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You should go for six percent right now (both of you). The biggest mistake I ever made in my investing career was contributing less than the maximum amount matched. I did that "start small" thing and increase (as my salary increased), too, and when I look back now I kick myself where it hurts. I was buying company stock at a 50% discount with those contributions, stock that now, after splits, has a cost basis of about $5 a share, and its current market value is near $100. If I had put in the maximum .... Shocked

~Tim~
Post Wed Oct 23, 2013 3:48 pm
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oldguy
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To emphasize what the others said - the $10,000 that you invest this yr (age 2Cool will be about $450,000 at age 65. And the $10,000 that you invest at age 29 will be about $400,000. (Just those two yrs alone will almost make you a millionaire). And the $10,000 that you invest at age 64 will only add $11,000 to the fund at age 65. Very Happy
Post Thu Oct 24, 2013 1:02 am
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MatthewL
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You definitely want to contribute as much as you can in the early stages. I'm 27 myself, and my wife & I are trying to contribute as much as we can to our retirement before "life" really starts to get in the way (we are expecting our first child in a few months).

Alternatively, you could contribute to both accounts, and then at some point look at rolling one of them into another retirement account where you can take more control over your investments?

Best of luck!
Post Sun Oct 27, 2013 2:50 am
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