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recent college grad 401k?

Hi there, I'm a recent college grad and just started my first job. Part of my benefits pkg is the option to invest in a 401k. However, I am an auditor and as such I am restricted to investing in only nondescript funds (i cant pick stocks just low, mid high risk mutuals) my question is should I invest in the 401k, a type of IRA (help on which to invest in) or pay off my school loans with the extra money?

Public Comments

1. If your employer offers matching funds, you should definitely contribute enough to the 401(k) to "max out" the employer match - it's free money to you. Beyond that, if you are able to put more into retirement funds, contribute to a Roth IRA. At your age, a Roth is the way to go. Do not, however, make the mistake of putting all your savings into retirement accounts. Shorter-term goals (school loans, cars, buying a house) should be saved for outside of retirement accounts.
2. Check to see if the money is being matched. If it, withhold enough to be matched. I'd do 5% to get a retirement account started, the rest of your free cash should go to getting rid of those student loans.
3. FYI - besides company stock 401Ks do not include any stock only mutual funds. In addition, after the Enron situation, many companies are no longer even offering company stock as part of their 401K portfolio.
4. It's hard to argue with contributing to an employer-sponsored 401K, at least up to the limit on which the company provides a matching contribution. Whatever match your employer provides is pretty much a guaranteed return that you wouldn't get in the market. Beyond that, I'm not sure I'd max out the 401K contribution. You do lose control over what you can invest in, although most plans offer a fairly wide range of mutual funds. At your age, I'd probably agree that a Roth IRA might be a good choice. Since you're just starting out, you're in a lower tax bracket anyway, and the tax savings isn't going to be that much.
5. Being an auditor is NOT why you are restricted to a SMALL selection of funds in your 401(k). NO ONE can pick stocks in a 401(k). the plan offers a selection of funds, and the employee picks from those funds. If you want to choose individual stocks, a 401(k) is not an option. I personally recommend paying off the debt first. I am more concerned with paying off school loans in YOUR case, because this question leads me to doubt you will STAY an auditor very long. Accounting 101 should have taught you more about a 401(k) that you exhibit here.