Here's an email I recently received from a reader:
Some background info: My baseline gross salary is $74k, but with recent overtime it's looking like I'm on pace to make closer to $85k this year. I've been contributing 30% pre-tax dollars to my company 401k plan. They match 50% up to the first 8% I contribute, so basically I get a free 4%.
On my previous pay period, I hit my max $17,500 pre-tax contribution limit. In that same pay period, there was also a new line item for after-tax contribution spillover, so now I have $280 of after-tax money in my account.
My max employer match is 4% if I put in 8%. I just called my benefits office and they clarified this is applicable to both pre-tax AND after-tax contributions to the retirement account.
I'm 25 years old and don't have a Roth IRA setup yet.
My question is: Should I contribute 8% of my after-tax dollars to my retirement plan so I can get the 4% match from my company? Should I start/max out a Roth IRA? Should I do some combination of both? Any other recommendations?
What's your advice for him?