403(b) retirement fund; how much to invest?

What percentage of my pay should I invest in my 403(b)?
-My employer contributes 3% regardless of what I contribute.
-I am a young single female quickly approaching 30 years old.
-My income is small, since I work for non-profits, and my previous 403(b) only has $9,000 invested.
-I currently have no children, debt, or serious health problems, and do not anticipate any in the immediate future, although I do hope/plan to have a child, house, and husband sometime in the next decade.
-Since I am young and have no dependents or urgent needs, I am willing to be a little more aggressive now, to secure my future.
-I would also like an easily accessible emergency fund (enough for 3-6months); I currently have $6,000 but I would need $7,500-15,000 total.

I was thinking that 7% would be a good amount... 10% would be a little tough, but should I push for it? Should I start at 7% and put my monthly surplus into my emergency fund until I reach that goal, and then raise to 10%?

First of all, if you feel like your job is solid, I would only slowly increase the emergency fund. If your job was commission based, the $7500-15,000 may be necessary due to the potential ebbs in income. If you are salary-based and work at a sound employer, an emergency fund doesn't necessarily have to consist of 3-4 months' worth of expenses.

Now to your retirement account. You should put away what you are comfortable putting away. If you can only do 7%, that is 10% total. Keep in mind, with an approximate 30% marginal tax rate, the dollar you put into your retirement account will only reduce your take home pay by 70 cents.

Something you can do is start with 7%. When you get a raise (2-5% on average for US employees), bump up to 8%. The more you shelter from taxes, the less likely you are to bump into the next highest tax bracket.

As for putting 7% into retirement and put the surplus into the emergency fund....if you overfund the emergency fund during the year, you can make a contribution to a Roth IRA with that extra money (or the Roth portion of your 403(b) plan if they allow it.

Ron, ChFC

I'd shoot for 8-10%. You're right about needing an emergency fund, though.

As much as possible. BUT, keep in mind, you can't touch that money until you're 59.5. The sooner you start contributing as much as possible, the sooner that money has to begin working for you.

I'd also recommend rolling your old 403b to an IRA so you have better investment options. The mut funds in a plan are usually not the best...

Keep in mind that if you want to live off $50,000 a year when you retire, you'll need about 1 million in the bank (and that doesn't account for inflation--that's today's dollars). Figure that it you're averaging a 10% return each year, your money will double every 7.2 years (rule of 72)...So you need to start SAVIN!

Ideally, you should contribute 4k annually to a Roth IRA (grows tax free and you can withdray it at 59.5 TAX FREE) then whatever else you can afford, put in your 403b.

Hi,

I would go for the maximum amount - this is almost like free money - it is not taxed and the 403(b) is like a 401(k).

I always put the max in my 401(k) and keep it invested in growth stock mutual funds which anyone who is 30 or less should do - let the magic of compound interest work and in 20 years you can retire.

You have a very good start with $9,000 already - keep it up.

Kindest Personal Regards,

Walt Brown
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capecod1@capecod-beaches.com
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wow. You're exactly what I expected from other answers I've read. Very Financial!!!
Me, I would take the Surplus opt and I Do have dated co-Workers maturely with No backfire consequences to either me or Her...
;-)

Bear hugs!