Dave Ramsey's Expanded Baby Steps - Baby Step 4.0

Baby Step 4.0: Start contributing 15% of your paycheck to retirement

Image via Wikipedia4.1 First fund employer 401K plan up to the match.

4.2 Remainder into Roth IRA, up to contribution limit.

4.3 If Roth IRA is maxed out, go back to the 401K or a standard IRA.

NOTE: Invest in 4 type of mutual funds
· Growth & Income (Large Cap Fund) 25%
· Growth (Mid Cap or Equity Fund) 25%
· Aggressive Growth (Small Cap or Emerging Market Fund) 25%
· International 25%

Here are the personal steps we plan to take when we are ready to continue on this journey:

1. We have followed Dave’s plan and stopped contributing to our retirement for now, until we have paid off the second mortgage on the house. Then we will be debt free except the house and ready to tackle Baby Step 4.

2. My employer does not match any contributions into the 401K. My wife only works part time so therefore doesn’t have a 401K plan. So we jump straight to step 4.2.

3. Maxing out the Roth IRA will get us most of the way to putting 15% in to retirement. If our finances improve, which of course would be nice, we will go to the 401K to take advantage of the tax benefits.

Previous Posts:
Dave Ramsey’s Baby Steps - Expanded
Baby Step 0: Live like no one else…
Baby Step 1.0: Save $1,000 in Baby Emergency Fund (BEF)
Baby Step 2.0: Do debt snowball, paying all your debts from lowest BALANCE to highest
Baby Step 3.0: Save 3-6 months EXPENSES in a Fully Funded Emergency Fund (FFEF)

Coming Up Next:
Baby Step 5.0: Save for kids college fund