I’m 24 years old. How much should I save in my retirement plan?

Q. I am 24 years old and just got my first full time job with benefits. I have a choice between a Roth 401 (k) and a normal 401 (k), and there is a 4% match. How do you decide how much to save and in which account?

– Employee

A. First of all, congratulations on getting your first full-time job.

We are delighted that you decided to start saving for your retirement at an early age.

The money you save today will be the most powerful money for your retirement because it will have so much time to grow, said Matt Rembish, financial advisor at JFL Total Wealth Management in Boonton.

Typically, you should be saving between 10% and 12% of your gross income for your retirement if you are starting out in your 20s, Remish said.

“This percentage includes your match, so saving at least 6% of your gross income and matching 4% would allow you to achieve that goal, ”he said. “At the very least, you should contribute 4% to fully enjoy your business game. Anything less would leave you with money on the table.

Now let’s talk about the Roth and the traditional 401 (k) options.

In a Roth you will pay the tax today, but in the future your contributions and the income will flow to you tax-free, said Remish.

“Most likely, you are in the lowest tax bracket of your life, ”he said. “Enjoy it. “

You also have over 40 for that money to grow, he said, so you’re looking at a hefty amount of tax-free dollars in your future retirement fund. Remish called them “your most powerful investment dollars,” so you should take advantage of that by freeing them from tax when you retire.

Over time, he said, your income will increase, as will your tax bracket.

“Once you’re in a high tax bracket, it would make sense to switch to a traditional, tax-deductible 401 (k),” he said. “You are unlikely to be in the same high tax bracket in retirement. In this case, you would want to defer the taxation of contributions in the future when your tax bracket is lower.

Email your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.

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