How much should I save in my retirement plan when I'm 24?

How much should I save in my retirement plan when I'm 24? ...

Q. Im 24 and just got my first full-time job with benefits. There is a 4% match between 401(k) Roth and regular IRA, and there is also 0% match. How do I know how much to save and in which account?

Employed Employer

A. Congratulations on your first full-time job.

Were so glad you have decided to start saving for retirement at a young age.

Matt Rembish, a financial advisor with JFL Total Wealth Management in Boonton, said that the money you save today will be the most powerful dollars towards retirement because it will have so much time to grow.

Ideally, you should save between 10 and 12% of your gross income for retirement if you begin in your 20s, according to Rembish.

Saving at least 6% of your gross income and the 4% match would bring you closer to this goal, according to him. To get the most from your firms match, you should contribute at least 4%. Anything less would have you leaving money on the table.

Lets go over the Roth and the traditional 401(k) options.

Rembish stated that while you will pay today the tax, your contributions and earnings will come to you in the future tax-free.

Most likely, you are in the lowest tax bracket of your life, he said. Take advantage of that.

Youll have to live for 40+ years for this money to grow, he added, so youre looking at a huge amount of tax-free dollars in your future retirement pot. You should take advantage of that by having them tax-free when you retire, according to Rembish.

He added that your income and tax bracket will increase with time.

If you are in a high tax bracket, it would be wise to switch to 401(k), which is deductible and tax-deductible, he added. Its highly unlikely that youll be in the same tax bracket in retirement. In this scenario, you would like to defer taxation on future contributions when your tax bracket would be lower.

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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of Follow NJMoneyHelp on Twitter @NJMonEyHide. Find NJMoneyHelp on Facebook. Sign up for's weekly e-newsletter.

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