Ramit Sethi: How Much Should I Have In My 401(k)?

Updated : Sep 10, 2019 in Articles

Ramit Sethi: How Much Should I Have In My 401(k)?


If there’s one thing we love in America,
it’s not to keep up with the Joneses. It’s to do better than the Joneses. I got a question saying, “Why should
I not invest in a 401K?” I want to answer that for you because
there’s two key reasons you would not want to invest in a 401K. First: You hate money. I don’t like money. I don’t like free tax benefits. I don’t want it. Get this out of here. Second: You’re a billionaire. No reason to. Not even worth the time. And that’s about it. Your 401K is a terrific investment vehicle
for you to benefit from legal tax advantages. And if you have the
opportunity, you should do it. And even better, if your employer
matches your contributions, you should stop watching this video right now. Close all your computers. Close everything. Call up HR and start it right away. So if you want to know what you
should have in your 401K, you should have maxed it out every year
since you were 22. Most of us didn’t do that. That’s OK. The next best thing we can do is to
take full advantage of it from here on out. Now, of course, you should be
saving up for an emergency fund. It’s going to take you a while, but
I recommend you aim for having six months of minimal expenses
in your bank account. Now when it comes to investing your
money, that’s money you don’t need in the short term, but it’s there
to grow over the long term. This is what you do. I have something called the ladder of
personal finance and this is how it works. If you get a 401K match, start
there and contribute everything you can to hit that match Next: Pay off any debt you’ve got. Contribute to your Roth
IRA if you’re eligible. If you’ve still got money left to invest,
go back to your 401K and fill that thing up. And then finally, if you’ve still got
money, you’re doing very well, create a taxable non-retirement account and
keep investing there in low-cost, long-term funds. That is how you use your 401K
within the ladder of personal finance.

19 Comments

  • Fun fact: the 401k was developed in the early 1980s and became mainstream in the early 90s. Majority of 401ks have never reached the 30+rule as they are barely that old. They also are not fidc insured. Best advice pay of debt next buy a home and pay off as fast as you can. Attain tangible assets the 401k adjusted for inflation and taxes starting in 1980 to 2015 kept up with inflation with a 7 percent return. Wall street doesn't create things unless it greatly benefits them your money locked up for 35 years is a gold mine for them.

  • My mouth actually dropped seeing those $100 bills being flushed down the toilet at 0:23 and at 0:26 with the burning that $100 bill. I hope that was just an affect on the burning of the $100 bill, as well as CNBC being able to recover those $100 bills that went down the toilet.

  • What is your recommendation for Roth 401K? I believe we will pay less tax now than in the future so I have been contribute to Roth 401k for the last 2 years

  • I didnโ€™t max it out. But it worked out even better for me that way ๐Ÿ™‚ But yeah, definitely contribute if you get matching. Maxing it out tho? Depends.

  • Step 0: Spend less than you make.
    …unless you're poor (many times, because you got sick). Then, you'll just die early.
    Good luck out there!

  • I had a little over 100K in my 401k, took 20 years to get that on one salary for a 4-person family, then, in 2000, poof over half of it gone overnight, all that blood, sweat and tears, gone, then, hit again in 2008, WTF. Then, life events happened at 57.5, had to take some out to take care of a financial emergency, yeah, I have a 101k now.

  • Central Banks around the world are hyper-inflating the paper money and are destroying and inflating paper assets.

  • Hi
    https://chrome.google.com/webstore/detail/threelly-ai-for-youtube/dfohlnjmjiipcppekkbhbabjbnikkibo

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