Ok, I just ordered the Bogelhead's book on amazon with my gift card from the holidays. I even got the 2014 edition so I am super pumped. I found my Saturday morning coffee hour companion!
TomTX- sorry to ask, but can you elaborate on
"2) Keep expenses low where you can. 0.10% per year is low. 1% is high."
I am still trying to figure out the whole 401k issue. I contribute the minimum to get the max on my company match which I think is a good start. I am still in awe- if I leave my company/retire/go down in flames from my brain burning how do I even get the money? As in how is it tangible? Right now it is an abstract concept to me. The 4% rule still puzzles me but I know I just need to find the primers and then I can build on it. Excited to delve into this world! Thanks peeps for all the support
Not TomTX, but I think I can answer...
Each mutual fund has something called an expense ratio. This is the price you pay to buy into the fund, for operating expenses and such. So for instance VTSAX (Vanguard's total market index fund) has an ER of 0.05%. Which is super low and thus super awesome. If you start looking at the expense ratios of all the funds out there, you'll find ERs up over 2% or even 5%. These are insane and you should stay away from them. Most funds fall around .50% up to 1.5% range. So you check out the available funds in your 401k for instance, then decide what you want to hold - your asset allocation - of stocks and bonds and the like. And then you find the lowest ER for the best stock mutual funds available and the same for the bond allocation. Sometimes it is simple because you've got a broad stock market fund with a reasonable ER (under 1% like TomTX says), sometimes you might have only large cap or small cap or extended market funds with lots of different ERs... and that is where it gets a bit more complicated (and you can come here and post the list of funds/ERs and ask about what MMMers would choose and why). Sometimes you have nothing but expensive ERs. It's due to your company's admin person choosing those funds and some folks have been successful lobbying for better funds with low ERs, but sometimes you just have to hold your nose and pick the least stinky of the stinky bunch since using a 401k is still a good deal most of the time even with high ERs. (but this is a huge incentive to roll the 401k to an IRA as soon as you quit so you have a wider/better range of fund choices).
As far as the second part of your post... hooray for you contributing to get the max match - it IS a great start! :D
The company that manages your 401k does so for you - not just for your company. It is an individual account, and you would own it just like you do a savings or checking account. With a caveat: you might be out money your company put in for the match due to you not vesting if they have a vesting schedule and you leave before fully vesting. Side track: vesting is where the money they put in belongs to you only after a certain number of years, and at a certain percentage. My former workplace had a 5 year vesting plan. They would put in the full match each year that I put in money, but I vested 20% each year, becoming fully vested after 5 years. Which means that after I stayed there for 5 years, every penny of the matches since the first year is mine when I leave. But say they put in $1,000 as my match each year, and I left after year 4; I'd only get 80% of the $4K they'd put in by that point, so $3200 would be mine and stay in my account, but the company would take back $800 since I would have needed to stay through December 31st of the 5th year to fully vest.
So when you quit a job, you can call up the company and say hey, I just left my company. Do I need to do anything? And they'll most likely say nope, you can leave this as a 401k and just forget about it if you'd like until time to withdraw money. If it's with a more expensive group and you want to move it to someplace Vanguard you can (just takes filing some paperwork and Vanguard would handle the rest).
The only thing that you'd need to do most likely besides the shifting to a better financial company (if you have a not so good one) is roll it over to an IRA, but that depends on a few things: 1) some states offer better protections against judgements and liens (like if you got sued or something) for 401ks and not as much for IRAs. But some states don't care and treat them the same, so that would something to check before rolling if that concerns you. 2) if you have special institutional shares or other funds that were provided as a company perk you might want to leave the 401k as is instead of rolling to an IRA because you wouldn't have access to those funds any more. 3) If your former company/financial group holding the account wants to start charging you a service fee since you're no longer an employee. This happens rarely, but it is something to check into because - extra fees suck, and if they want to charge you to leave it as a 401k then it's not usually worth it and a checkmark in the "roll to an IRA" box. 4) what I already mentioned briefly above: if you only have a limited range of high ER funds, then rolling the 401k to an IRA is a better idea because it's basically like jailbreaking your account (without the possibility of bricking anything :D ) With an IRA, you can choose any fund that is out there - the entire stock market really. Sky's the limit.