I wish our 401(k) let us select a fixed amount that only comes from my regular pay.
Instead it's a percentage of pay and bonuses. I have no idea what my bonuses are going to be. I make a wild conservative guess and usually sometime in October I max things out.
This is so stupid it blows my mind. Why in the world are contributions set by a percentage when the cap is a straight dollar amount? Fidelity does this and does not allow you to set a dollar amount at all, only a percentage.
They won’t let you go over.
That said, I had two jobs last year, meaning two 401ks, so obviously one didn’t know about the other so it was indeed up to me to ensure I didn’t go over. I decided the easiest option was to divide up the remaining amount evenly over the rest of the year, then adjust for the last paycheck only to max out. I’m a few bucks under the max, but otherwise worked like a charm.
This year I set it to 61% and will max in like March.
Not sure how it is with your company, but you might want to spread your contributions out over the entire year otherwise you might miss out on some of the company matching. Companies typically match a maximum amount each paycheck so if you max out in March, you may not get all of the company match that you can if you spread out.
100% how my last employer did it. Sooo lame. B/c the true up event was like April of the following year or some shit. Current employer matches 50% of my contribution up to maximum contribution limit… super simple
Most companies true up their match, even gov't 403b plans.
Also the restriction of dollar vs percentage, and the granularity, is determined by your company and their payroll software, not the financial institution that is performing the record keeping function. All record keepers can handle all combinations.
> Also the restriction of dollar vs percentage, and the granularity, is determined by your company and their payroll software, not the financial institution that is performing the record keeping function.
I don’t think this is universally true— I log directly into my plan administrator’s site to adjust my withholding, and they only support a percentage.
It's *most* payroll software. Within the payroll software, an admin can basically set a limit that says "let this employee deposit *at most* $X this calendar year." When your contributions are over the limit as an employee you'll see your take-home go up accordingly.
If a company is running payroll themselves (or doesn't set the limit for whatever reason) you can wind up over-contributing to your 401k. Typically, there will be some post-calendar-year process that will refund your excess contributions, but that can be messy since they're going to be invested in stocks.
Final note -- many companies *true up* their match, which means that they'll make lump sum at the end of the year if you've contributed above the match for some pay periods, and didn't get a match in other pay periods. (This is common if you max out your contribution before the end of the calendar year.) Others *don't* do true-ups, which means you need to manage your contributions more carefully. It's worth figuring out what your employer does.
Ok man that is so helpful. I work for the federal govt so I’m sure I can find out how it works. I think I’ll shoot for being just over instead of just under. Also I’m so glad you pointed out the match too because I didn’t even think about foregoing the match if you didn’t contribute every check. Thank you so much for taking time to write out that response.
I am not 100% sure about this, but I also work for the gov and believe that, to maximize your match, you need to ensure that you are putting at least 5% into TSP *every single pay period*. In other words, if you were to put the annual maximum in your TSP during the first 11 months of the year, you’d lose out on the match for December (because you weren’t putting any money in during that month).
Not all employers. Mine will let you choose to put the spillover as an aftertax contribution. And then, once you hit that, I make a phone call and start the Mega Back Door Roth Conversion.... My old employer let me convert every 2 weeks. My current employer only nlets me convert one time a year. Next year might not happen if the government cancels that option.
Mine does something similar except it's not a choice, any over-contribution goes straight into my after-tax 401k. Additionally, I can roll those contributions into my Roth as often as I want...even better if you call them they can configure your account to *automatically* and *immediately* do this rollover (from after-tax to Roth), which avoids having *any* gains that you get charged tax on. The downside is this is only talked about in the plan documents and there's no way to configure it without calling them and setting it up.
Here's a sweet deal... Company continues to match after I hit the limit, money rolls into after tax, with immediate instant Roth conversion! Wish I would have known this long ago! Hope the government doesn't shut that door
How would that work? The cap is for combined pre-tax and after-tax contributions, so if they do that, you would indeed be exceeding your contribution limits. FWIW I also have Fidelity and they most certainly don’t do this.
If you max out in march, will your employer still give you match for the rest of the year? (I assume they're not matching your Jan-Mar larger amount at that time, just doing their usual % each paycheck)
Fidelity allowed me to set a dollar amount.
I got 3 raises in 2021 so that would kind of suck to have to figure out every time lol
Edit: 4 raises! Damn that’s a lot
Isn't this a problem if you get employer match? Like if you max out contributions in October, you're not contributing in Nov or Dec, which means your employer isn't contributing any match. For that reason, I intentionally contribute somewhat less than the max throughout the year.
My employer offers a “true-up” in January of the following year. If they see that your account was maxed early, they will one-time deposit the match you were missing in January.
Not all companies do this, but I would say most people who are maxing their 401k early also probably take care to double check they get the true up.
I usually max out the last pay in November, so I only miss a small amount of match. However, my company does the 401k true-up 6-months after the close of the year during the first pay in July, so I get a nice little bump up with the quarterly dividends and company true-up.
Hmm, my employer just matches X% of my contributions, so it doesn't make a difference to me when I finish contributing. How do other people's employer match plans work?
edit: [This article explains the deal] (https://www.forbes.com/sites/jeffreylevine/2019/02/13/how-saving-too-much-too-soon-can-hurt-your-retirement/?sh=3fa765b6754a). My employer doesn't look at per-paycheck contributions, so it's okay. YMMV.
My company handles this in an interesting way. It automatically switches my contributions over to after-tax once I hit the limit, and continues to match against that.
When does your bonus pay out?
I usually max out my percentage early in the year, then once we get bonus/raise at the end of Q1, I adjust for the remaining weeks.
Why oh why do the plans have to do the annoying "percentage" designation? It's so annoying, and hard to get an exact percentage.
Yes, I know WHY they do it, because of the matching, but it's still annoying.
Yeah, I'm hourly, so my contribution changes every month. By the end of the year it's a constant dance of recalculating to make sure I max it out without missing matching by maxing it too early.
The real question is why 401k, IRA, TSP, 403b, aren't all just combined into one thing. It's not like they can't still build in the ability to employer match for it either.
I know at least one reason why is that there are different tax laws and other legal matters that apply differently to each type of account. I am currently doing some learning of how to be a tax preparer and there are different tax reductions, deduction thresholds, and other rules that apply to each. I am sure there may be even more to it than that as well.
I think his point is why do we need these laws, and specifically why do we need a retirement account tied to our employer? You basically get hosed out of $20,000 in tax advantaged savings if you work for a small employer with no 401(k) plan.
Some cases allow for % contribution only. Sucks when you don't get the choice of using static dollar or a confirmation that just says auto max for the year. We all need an auto max check box on the contribution websites.
God the worst is when the 401k software asks for a percentage but doesn’t tell you that its including employer contribution to that percentage. So if you have a 100% 3% match and tell it you want to contribute 10%, it will do 7% from you and 3% from your employer. Made me want to scream because it is so incredibly dumb and I couldn’t figure out why my numbers werent adding up.
Yeah, I hated that. My previous employer's retirement used that format. Took me 3 months to find out. So I only maxed contribution for the final 6 months I was there.
Thankfully my new employer's retirement has it listed clearly "Your Contribution" = X% "EMPLOYER Contribution" = Y% (Put X% for max Y%). It was nice. But I've learned everyone is different...
Thanks! I never would have known to look for that! Fortunately, I have never seen a 401k administrator use the percentages that way.
Fidelity is misleading. They allow me to specify different pre-tax percentages for base salary and bonuses, plus another set for after-tax.
They add up the percentages. So if I elect to contribute 15% of my base pay and 20% of my bonus pay, the total at the bottom will say that I'm contributing 25% of total compensation.
Mine is % and only allows for whole percentage points.
It is not the end of the world or anything, but I honestly can't think of a good reason why the computer can't support a couple more decimals.
Figure the average pretax paycheck is at least 4 figures (plus 2 decimals)--if you get paid biweekly, you only have to make 26k for your paycheck to be >1000.
So you've got plenty of significant figures before you get down to sub-penny amounts. If your paycheck is 1234.56, then 1% is $12.35. and 2% is 24.70. Why not allow another decimal in there so you can make your contribution $18.52?
I mean--its really not a huge deal. Even if you make 200k, you basically have to choose between contributing 20,000 (10%) or attempting to contribute 22,000 (11%)...but if you do the latter, all that really means is that you hit the max in December and your last 2 paychecks of the year are bigger. Call it a Christmas bonus to yourself and stop overthinking it!
> Mine % and only allows for whole percentage points.
God I hate that. Whole percentages only with my 401k provider too.
Of course, I need X.2% to max it out. So I have mine set to contribute X+1% and figured out that after April, I'll be far enough ahead that I can drop my remaining contributions down to X% and still max it out with my last December paycheck. Oh, but then my raise will take effect in October, so then I'm going to have to re-do my math. Again.
I don't understand why I can't just do dollar amounts. It would be so much simpler. I can do exact dollar amounts for my HSA.
That drove me nuts with my previous employer - made a spreadsheet to tell me what % I need for each pay period since bonuses were paid out separately and raises were given separately, so every year I'd have to adjust for the new limit, then adjust after bonus, then adjust for raise, adjust for retro pay for the raise, and adjust every time they fucked up something (often)
I work for 2 places and contribute to both to get the match from both, and they're both percentage contributions, AND one of the jobs is variable pay depending on how many hours I work. I spend the last few months of the year adjusting percentages every 2 weeks trying to dial it in without going over. So frustrating
Vanguard published some data around 2018 saying that 13% of participants maxed 401k contributions. Around 60 million Americans out of a workforce of around 155 million contribute to 401ks. That would mean 5% of workers are maxing 401ks. A 95th percentile household income is 250k, but that usually includes multiple workers, so the average maxer probably makes around 150k.
I think that’s a solid guesstimate as the average savings rate is 12%, which would be 18k making 150k. That’s pretty close to maxing a 401k.
Believe it or not though, there are plenty of workers making 300, 400, even 500k+ who aren’t maxing because they’re stretched too thin in other areas. I know plenty of them - Golden handcuffs are real. So the average maxer is likely even somewhat lower than that.
Oh for sure, and conversely there are some people where circumstances allow crazy savings rates. My own mother was maxing her 401k with catchup on 40k. But she had just rejoined the work force after 20 years of child raising and my parents were used to living off my dad’s salary. She only went to work so they could accelerate retirement.
This seems crazy to me. I understand how taxes, lifestyle creep, kids tuitions, etc. can lead to this kind of money feeling "not rich" anymore, but I don't understand how you could get the point where a 4% 401k contribution is what gets cut from the budget. Like, $480k seems like the same lifestyle as $500k, right?
Side note, is this really "golden handcuffs"? Isn't that more about long-term pay incentives to keep already highly paid employees at a company?
I work at a law firm, where compensation is basically 100% cash so RSU’s, etc. aren’t the limiting factor for the people I know who are paycheck to paycheck on half million+ salaries.
Only like 12-15% of people covered by 401k plans actually contribute the 20k to max it out. Personally, I was able to start maxing it out by the time I got a base salary over 100k.
I dunno how some of these people responding to you are saying they max it at 50-70k salaries, but I’d say anyone making over 100k needs to start considering it.
At 100K max out would mean you're saving roughly 30% of your net. Add an ira to that and you're into the mid 30% saving rate. Very do able sure but that's a decently large target to set. Then HSA savings and if you're saving for a house, car, vacation fund etc.
this is what i'm "struggling" with right now. it's a first world problem for sure. i make enough to contribute to all of these (and max them). but doing so really hampers the shorter term savings for a house. i'm trying to find that balance.
Saving for a house is basically retirement savings anyway ( you have to live somewhere when you’re old and you will, unless you’re silly and do a cash-out refi or what have you, carry that equity the rest of your life. It’s fine to prioritize saving for the house.
Honest question. What is the point of living on so little just to hope to reach retirement age and be able to even enjoy it? At that point you probably won’t even allow yourself to even spend that much.
Also do/did you save outside of retirement?
That assumes that you'll always be scraping by, though. Your income will increase over time (hopefully).
Putting a dollar away now means it will see a lot more compounding than a dollar you put away 10, 20, or 30 years later. That was a big push for me to max out my Roth IRA (I didn't have a 401k) when I was in college with my shitty college jobs.
The other part of it is that it gets you in the habit of paying yourself first. It's a lot easier to ease up on contributions than it is to buckle down and do it. Especially if you got used to having money, reducing standard of living is difficult.
At least that's my view point on it. I'm in my mid 30s and I have enough squirrelled away that if I stopped matching anything today, I'd still have an okay retirement. But now I earn enough that maxing doesn't hurt anymore.
If your retirement accounts are large you can use 72t to schedule early withdrawal without penalty. There are a couple of different distribution schemes, but basically the IRS dictates how much you can receive monthly/annually based on if the withdrawal is for one or two people and their corresponding ages.
I bank everything I make now and live like a scrooge while I'm young so that I can have peace of mind and the best health care when I'm old.
Health care is already expensive as fuck right now and I don't even want to imagine what it'll be like when my generation retires in a few decades. A few months stay at a nursing home can wipe out a lifetime of savings. I do not want to live in a government-funded assistance facility where I have to share a room with someone listening to them screaming in agonizing pain. I want my own suite, my own doctor, eat nice food, and have the best amenities. When you are young, you can get by life not having the best toys, but by golly, when you are old, every little discomfort in your body is magnified so you want those final years to be as comforting as it can be. Money helps buy better care.
I see a lot of elders like my grandparents who had to liquidate/transfer all their hard earned assets to their kids in order to qualify for Medi-Cal and live in a crummy facility. Even those places cost $100k a year. A high end community runs about $300k/year (non-government funded) and that's where I want to live out the rest of my life.
I have a bad feeling a lot of millennials will be ill-prepared for this by YOLO-ing their money when they're young and will be in a for a rude awakening when they're old and ill.
Fuck this is depressing to read. So the goal is to max out your retirement investments so you can die in better care? I’d rather just enjoy life now and pray that I die before I need to get institutionalized.
> Honest question. What is the point of living on so little just to hope to reach retirement age and be able to even enjoy it?
If you're used to it, it doesn't feel like scraping by. To me it's far more important to be financially independent in my old age, so as not to be a burden on my offspring, than to maximize pleasure now.
Not OP, not maxing my retirement contributions quite that hard, but:
\#1 thing for most people is rent/housing. If you want to save more money, you gotta live somewhere cheaper. Unfortunately, some lines of work tend to exist primarily in HCOL areas, and cheaper rent goes hand-in-hand with longer commute. How much is that wasted time worth to you?
Beyond that, it depends a lot on what your expenses actually *are*. Do you keep a budget?
Yeah this is always the trade off unfortunately. I am envious of people who have spouses who are FIRE minded. Unfortunately I would not be able to maintain the relationship I have if I was a frugal as I wanted to be.
I’m still not able to max out my 401k. My household makes $160k a year but we live in Los Angeles and if we maxed ours out, we wouldn’t be able to have any left over money at the end of the month because of the extremely high cost of living.
**EDIT:** I have left reddit due to the hostile API pricing ([details here](https://old.reddit.com/r/apolloapp/comments/144f6xm/apollo_will_close_down_on_june_30th_reddits/)). All of my historical comments have either been deleted or replaced with this text.
People are probably going to hate on me for this but here we go.
I’m 27 and make close to $100k before bonuses, about 115k after. I don’t max my 401k and I don’t put much in a Roth. I started contributing to both when I was 18. Right now, I put 6%, company gives me 3% more. Company also gives me an additional 7.5% in a “pension plan”, it’s invested and grows. Between these three accounts I already have about 1x my annual salary.
I live in a VHCOL. I’m going to need so much money before I retire. Down payment for a condo will be close to $100k. Single family homes are going to likely be 1.5 million by the time I want to/can buy. I can’t have all of my money tied up until I’m retired.
I thought if the contributions were cash you could withdrawal them immediately with no tax penalty? Like if I maxed it last year with cash, I could take that cash out next year.
I maxed out retirement accounts early as soon as I could, and then when it was time to grow up and get married and buy a house I ultimately regret it. More than 90% of my net worth was tied up and I had to wait an extra year to save up my down payment.
This is exactly what I am trying to avoid. I know I’ll need a ton of liquid money in my 30s.
I still plan on saving some for retirement and started early enough that I will be fine. But the “max all retirement as soon as you can forever” should not be a blanket rule that is thrown as much as it is in this sub.
I wish I could do hard numbers. My employer has always insisted on using percentages and between bonuses, overtime and a 2-paycheck lag on changes, I always end up dumping a bunch into the double-taxed after tax account.
I have a spreadsheet. When I hit july I calculate the over/under I’ll have. Then when I hit November I do one last check so that my last paycheck is above the match requirement. It’s a pain but it can work
I always get the match because they at least make catch-ups there, I just always end up doing a bunch of OT filling in for the folks who work for me so they can take their PTO around the holidays. I'd hate to aim short and then not do that OT though.
Additional Reminder: Mega backdoor + backdoor hasn't been killed off. You can get up to $70.6k in retirement contributions a year (for a single person under 50) if employer offers proper plans.
|Account|Contribution Amount|
|:-|:-|
|401k (w/o match)|$20,500|
|Roth IRA via Backdoor IRA|$6,000|
|HSA|$3,650|
|Roth IRA via Mega Backdoor (w/o match)|$40,500|
|**Total:**|**$70,650**|
My wife and I make too much to contribute to Roth IRAs. But we can each contribute a non-deductible $6000 to a Traditional IRA then convert it into our Roth IRAs. That's the backdoor.
Could also be bonuses. I sure as hell don't put $800 a check into my 401(k), but I maxed last year by throwing a huge chunk of my two bonuses in. I know that requires a job that gives bonuses, but just pointing that out because I work with plenty of people who forget that piece of compensation and don't take advantage.
I get that. I work in the 401(k) space so I frequently have this conversation with participants (and friends and family) that they can likely save more than they think if they budget, plot where their money is going, understand how the tax benefits make the impact on take-home pay less than they might expect, etc. But sometimes someone gets all that and they just don't have anything more they can save. Doing whatever you can is what you need to focus on.
I make $30.86/hour in a low COL area. I wouldn't call myself rich by any means but I'm able to max out a 457b (basically 401k for government employees). It's definitely doable.
I have around $30K in cash although $12K of that is earmarked for my student loan payoff before those payments start up again. It helps that I'm single and don't feel the need to leave the house very often.
Engineering says hello. If you take the Google data analytics course you can start getting into data science, big data and programming which is booming and pays well enough to max our 401k, IRA, HSA and then some more! Easy to work from home too
Data Scientist/Machine Learning Engineer checking in (these two titles get mixed up so much it doesn't really matter), this is way too good to be true. Everyone wants to get into Data Science but they either lack the coding or the math (or both). For reference, I have math/CS undergrad degrees and a masters and without all three of those it would have been difficult to get into Data Science.
However, getting into "data" is not that difficult especially if you are employed already in a company that wants to use it (or already has their own analytics/DS/MLE teams). Becoming an analyst is way easier to break into skill-wise and a lot of companies will train up people in other areas to analytics.
I know a lot of analysts who started out at 50k-80k and quickly moved up to manager roles (within 5 years) and make 100k-150k. Many of them also had liberal arts degrees but got a masters in analytics or did a ton of work/certifications through their employer. Happy to chat about it more if you want more info. It's not the easiest field to break into and if you go straight for "big data machine learning engineer making $200k" you will fail but realistic expectations like "analytics SQL monkey making 80k" are still pretty darn good.
It's too good to be true.
They're not lying that there are big-money big-data jobs out there. However, finding one that actually fits someone who doesn't live in the area, and can't fly out to Cali every month for a meeting is very rare.
Even if you live in a large enough city to have a big-data job available, actually meeting all their requirements to make it past the HR hurdle only gets you into the leetcode reviews and whiteboard hell.
Instead, if you find a dev job, then move laterally to a data science job, it's way easier. Take the $70k entry job, learn their tech stack, make friends with the Big-data Dept, and be first on their "We want THEM" list for the next hire.
And, there's always the specter of "Everyone is hiring, but next year when the economy crashes everyone will be firing, and you'll be the new guy." If you can handle that (there are ALWAYS gigs available), then yeah, jump that ship till you're deep in the 6's.
Yep, and with a little elbow grease, you could find an entry level IT tech job and work your skills up from there. These jobs are just basics of setting up computers and helping users with login issues. Especially good for someone young looking to dip their toe into the tech world.
Eh, this doesn't match my experience (been in tech for 10 years). It's way harder to get a dev job than a business analyst job. And while the skills required do overlap, switching from dev to data takes a lot of learning. I don't understand why you would suggest that route to working in data. Just learn data - there's no sense in learning something like web dev too.
Develop a skill, it's very possible today. Employers are so desperate, they will pay to train you. Find a passion that pays well, and go calling.
This is the opportunity knocking to do that.
I think that number would surprise me. I see other statistics about how many people don't have $1,000 in savings, how many missed paychecks they are away from financial ruin, and how much is saved for retirement overall.
Is there a calculator out there that can help me adjust my contributions to a comfortable level without maxing and factor in my employee match?
I want to do more but also dont want to leave myself short paycheck to paycheck.
Does contribution limit go up to $27000 if you turn 50years old this year? I was reading this and just want to be sure I am reading correctly
[LINK](https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-youre-eligible-for-more-than-one-retirement-plan)
was looking at this today and noticed that my employer doesn't take deductions after the contribution limit.
So for last year I was able to max out in November and the rest of my biweekly contributions were paid out as taxed income. Struck me as odd, but kind of makes sense too as I don't have to go back and request a return on over contributions.
So once its maxed the matching contributions stop, and I assume this would be the same if I were to max out at the end of the year? any thoughts here - **am I leaving employer contribution money on the table by maxing out early?**
For context, variable income (base salary plus commission ) and last year I was able to earn enough to max out early. Contribution % was calculated on base salary plus projected commission at 100% to plan.
You may well be. If your employer offers what's called a "true up" then you'd get the extra matching contributions, but without then you'd be leaving a little on the table perhaps.
My employer has a generous percentage on their match but a hard cap at $6,000. I contribute at a rate where I max out in November and my employer's $6k match maxes out before June is done.
In other words, they don't max out their match at ($6k over 12 months) $500/mo. They match what I'm contributing until it equals $6k.
I'm lazy and my employer automatically cuts of 401k contributions when I hit the cap, so I put in 100% of my wages into my 401k to start the year and it stops a bit in and I get paid again haha
I was thinking about doing this too since I don't get any match at all. But not all employers do a year-end true-up, so some people can end up losing out big on employer matches like this.
I was doing 9.5% at 2x paydays per month, compounded annually. Depends what interest rate you use, and you also have to consider any 401k match or raises during a 40-year career.
But still say it is only 7%, $200 per month, no raises, no match. That's still $550k by the time you retire. 4% rule + social security equals $40k per year of income, even more if you ever get married to someone who qualifies for social security or saved some away during their career, and that's 40k in 2022 dollars, not 2062 dollars so it's inflation adjusted.
$40k a year in retirement for one person seems livable.
This depends on when you start. And arguably $1m is not enough to sustain living/medical expenses in old age through retirement to death. Especially if you are also supporting a spouse.
$1MM in retirement allows you to live off $40k/year.
Remember, you no longer need to save in retirement, so that 40k goes a lot farther. You'll also have social security too.
It's more than you think.
I started maxing mine out when I was making 40k a year in the SoCal Low Desert. It made things super tight, but helped me live on a tight budget. Last year I made $55k with about 370 hours of OT for the year and felt like I had tons of extra money.
Note: this only matters if you want 100% consistent cash-flow AND your employer doesn't do a ~~catch-up~~ true up contribution.
If your employer does a catch-up contribution then it doesn't matter when or how you fund your 401k. You can do it all or mostly in one go like I do by putting the vast majority of my bonus in.
If your employer doesn't do a ~~catch-up~~ true up contribution (or you intend to leave partway through the year) then you want to make sure you contribute enough per paycheck to get the company match. You still **do not** need to make consistent contributions all year unless you're concerned about varying cash-flow.
The key takeaway is "make sure you increase you contribution if any raises/bonuses don't already take care of higher maximum". Personally I lower my % contribution each year due to cost of living raises covering the gap.
> less than half of all 401k plans in America actually support it
Bear in mind that many 401(k) plans don't even have matching contributions in the first place.
This may mean no employer contributions at all, but also some companies just straight up make non-elective contributions that are independent of what you contribute. This is one of the ways to fall into the safe harbor that exempts from discrimination testing, for example.
And if you don't get a match, then a true-up is not even relevant.
(That said, I don't know what the proportions here are, and I could totally buy that less than half of *matching* 401(k)s don't have true ups too.)
> Bear in mind that many 401(k) plans don't even have matching contributions in the first place.
Does anyone know what percentage of US companies offer an employer 401k match? I'd like to take this info my employer and ask them why they don't do it anymore.
Yeeeah, mine doesn't allow true up and they don't allow me to specify the dollar amount. I can't even apply a fraction of a percent. If my contribution needs to be 15.7% I'm only allow to do 15% or 16%...
That would prevent me from getting the max out of my employer match. They cap it at $100 per week for a total of $5200 per year.
The changes also aren't instant, it can take 1-3 paychecks before the change is applied. :(
Have you ever asked them if you can join the committee on determining the plans as you believe that other providers can do it better for less and you are willing to do some leg work? I moved ours from a terrible one to Fidelity, which gave us much better controls as employees.
I have been pretty vocal with our hr / payroll groups. I dont think they have a committy, its a pretty large fortune 500 company.
They just switched to this new 401k provider last year. I was pretty upset when they did... We used to have Schwab before and it's app / tools, expense ratios and fund options were WAAAY better.
Ah thank you, I knew catch-up sounded incorrect. Catch-up is the additional amount that 50 and older can contribute.
Regarding OP, the main takeaway is that you (probably) don't need to change anything right away if you were already getting full employer match. The extra $1,000 this year can be added at any point it doesn't need to be distributed evenly.
My employer got rid of the true up but added an up to 6% after tax withdrawal. So we can put the max in early and still get the full company match as long as we contribute 6% after tax.
I set my contribution percentage to max out in November, which yields larger paychecks for December holiday spending.
I hope we get to keep the mega backdoor Roth 401k. The defined contribution limit increased by $3,000:
[https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-irs-401k-contribution-limits.aspx](https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-irs-401k-contribution-limits.aspx)
The defined contribution limit is $61,000 ($67,500 if age 50+ in 2022) minus:
* Your standard $20,500 ($27,000 if age 50+ in 2022) traditional/Roth 401k contribution
* All employer contributions
The remainder is the maximum mega backdoor Roth 401k contribution.
This is a PER-EMPLOYER limit that resets if you change employers or have multiple employers. The standard $20,500/$27,000 contribution is a PER-EMPLOYEE limit.
Just keep in mind that most companies don't true up, meaning that you might miss out on your company match for those paychecks. I do something similar, starting out with a 60% match, but I reduce it later in the year to make sure I'm contributing 8-10% for every check at the end.
Wish that this would be a setting on all 401k servicer websites. Just allow me to Max out contributions, given you know how much I've contributed, how much I've already contributed and how many remainder pay periods
I always felt that saying someone is "lucky" kind of diminishes their success, don't you? It's not like I won the lottery and now can max out my 401k.
At the same time, there are plenty of hard working people who make way less, so I understand where the sentiment comes from.
i don't make a ton of money but i'm maxing my hsa/401k/roth ira. i live in a small house that's nearly paid for, drive a 13 year old car, have no debt other than the mortgage, and make most meals at home. i don't really want for much which helps, but i don't want to work forever.
Because of the tax-advantaged nature of the account.
The match is free money and I'd never turned it down, but if you can get to the place where you're maxing your 401k the match doesn't move the needle very much.
an employer match won't magically get you to retirement. not only are the match percentages usually a low % figure, but they're not all dollar for dollar either (e.g., many are 25 or 50 cents on the dollar).
in relation to maximizing the yearly 401k contribution, the match is a small percentage and shouldn't stop you from using this retirement vehicle.
Not sure if I should create a new thread for this question.
Back in 2015-16, I drained my 401k due to an emergency need for cash. It was only around $20-30k as it was pretty new and I wasn't making as much then. Since about 2017-18 I've been maxing it out.
Is there an exception that would allow me to contribute that amount back into it?
To me, the math and timing involves the (weirdly regressive) OASDI tax; I set a lower percentage for my 401k contribution until I've reached the OASDI cap, and then increase my contribution after that to (sort of) hit the 401k max contribution on my last paycheck of the year. That way my net pay is more or less the same all year.
I set my salary and bonus to 100% contribution at the beginning of each year. It’s mentally challenging to go without a paycheck for a while, but it’s always a relief when it’s done. That way, if I lose my job I’m still invested in my future.
I wish our 401(k) let us select a fixed amount that only comes from my regular pay. Instead it's a percentage of pay and bonuses. I have no idea what my bonuses are going to be. I make a wild conservative guess and usually sometime in October I max things out.
This is so stupid it blows my mind. Why in the world are contributions set by a percentage when the cap is a straight dollar amount? Fidelity does this and does not allow you to set a dollar amount at all, only a percentage.
Yeah it’s really annoying. I can only assume it’s because it takes the guesswork out of ensuring you get the company match
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They won’t let you go over. That said, I had two jobs last year, meaning two 401ks, so obviously one didn’t know about the other so it was indeed up to me to ensure I didn’t go over. I decided the easiest option was to divide up the remaining amount evenly over the rest of the year, then adjust for the last paycheck only to max out. I’m a few bucks under the max, but otherwise worked like a charm. This year I set it to 61% and will max in like March.
Not sure how it is with your company, but you might want to spread your contributions out over the entire year otherwise you might miss out on some of the company matching. Companies typically match a maximum amount each paycheck so if you max out in March, you may not get all of the company match that you can if you spread out.
I’ll double check, but I’m 95% mine trues up.
Draw back to trues up is you have to be employed when they do it. Otherwise you are screwed. Mind does theirs at the end of the year.
100% how my last employer did it. Sooo lame. B/c the true up event was like April of the following year or some shit. Current employer matches 50% of my contribution up to maximum contribution limit… super simple
Most companies true up their match, even gov't 403b plans. Also the restriction of dollar vs percentage, and the granularity, is determined by your company and their payroll software, not the financial institution that is performing the record keeping function. All record keepers can handle all combinations.
> Also the restriction of dollar vs percentage, and the granularity, is determined by your company and their payroll software, not the financial institution that is performing the record keeping function. I don’t think this is universally true— I log directly into my plan administrator’s site to adjust my withholding, and they only support a percentage.
Wait for real? Is this all employers? They cut it off after the max? I had no idea. To be fair this is the first year I’ve been able to do it haha.
It's *most* payroll software. Within the payroll software, an admin can basically set a limit that says "let this employee deposit *at most* $X this calendar year." When your contributions are over the limit as an employee you'll see your take-home go up accordingly. If a company is running payroll themselves (or doesn't set the limit for whatever reason) you can wind up over-contributing to your 401k. Typically, there will be some post-calendar-year process that will refund your excess contributions, but that can be messy since they're going to be invested in stocks. Final note -- many companies *true up* their match, which means that they'll make lump sum at the end of the year if you've contributed above the match for some pay periods, and didn't get a match in other pay periods. (This is common if you max out your contribution before the end of the calendar year.) Others *don't* do true-ups, which means you need to manage your contributions more carefully. It's worth figuring out what your employer does.
Ok man that is so helpful. I work for the federal govt so I’m sure I can find out how it works. I think I’ll shoot for being just over instead of just under. Also I’m so glad you pointed out the match too because I didn’t even think about foregoing the match if you didn’t contribute every check. Thank you so much for taking time to write out that response.
I am not 100% sure about this, but I also work for the gov and believe that, to maximize your match, you need to ensure that you are putting at least 5% into TSP *every single pay period*. In other words, if you were to put the annual maximum in your TSP during the first 11 months of the year, you’d lose out on the match for December (because you weren’t putting any money in during that month).
Not all employers. Mine will let you choose to put the spillover as an aftertax contribution. And then, once you hit that, I make a phone call and start the Mega Back Door Roth Conversion.... My old employer let me convert every 2 weeks. My current employer only nlets me convert one time a year. Next year might not happen if the government cancels that option.
Mine does something similar except it's not a choice, any over-contribution goes straight into my after-tax 401k. Additionally, I can roll those contributions into my Roth as often as I want...even better if you call them they can configure your account to *automatically* and *immediately* do this rollover (from after-tax to Roth), which avoids having *any* gains that you get charged tax on. The downside is this is only talked about in the plan documents and there's no way to configure it without calling them and setting it up.
Here's a sweet deal... Company continues to match after I hit the limit, money rolls into after tax, with immediate instant Roth conversion! Wish I would have known this long ago! Hope the government doesn't shut that door
My company also uses Fidelity and once I hit the max they don’t stop contributions, but they move any further contributions to an after-tax 401(k).
How would that work? The cap is for combined pre-tax and after-tax contributions, so if they do that, you would indeed be exceeding your contribution limits. FWIW I also have Fidelity and they most certainly don’t do this.
If you max out in march, will your employer still give you match for the rest of the year? (I assume they're not matching your Jan-Mar larger amount at that time, just doing their usual % each paycheck)
Don't companies match you based off of percentage? I don't know if that would affect it at all
Fidelity allowed me to set a dollar amount. I got 3 raises in 2021 so that would kind of suck to have to figure out every time lol Edit: 4 raises! Damn that’s a lot
We must use a different module? I tried to do it this morning and only percentages were allowed.
I go in via netbenefits.fidelity.com, and use my fidelity information. Not sure if it varies for different employer 401Ks.
mines with fidelity and I can only do a % for the basic one or for a roth. Kinda sucks.
Could be who your 401k plan is with. Mines with fidelity but managed through someone else
Isn't this a problem if you get employer match? Like if you max out contributions in October, you're not contributing in Nov or Dec, which means your employer isn't contributing any match. For that reason, I intentionally contribute somewhat less than the max throughout the year.
My employer offers a “true-up” in January of the following year. If they see that your account was maxed early, they will one-time deposit the match you were missing in January. Not all companies do this, but I would say most people who are maxing their 401k early also probably take care to double check they get the true up.
I usually max out the last pay in November, so I only miss a small amount of match. However, my company does the 401k true-up 6-months after the close of the year during the first pay in July, so I get a nice little bump up with the quarterly dividends and company true-up.
Hmm, my employer just matches X% of my contributions, so it doesn't make a difference to me when I finish contributing. How do other people's employer match plans work? edit: [This article explains the deal] (https://www.forbes.com/sites/jeffreylevine/2019/02/13/how-saving-too-much-too-soon-can-hurt-your-retirement/?sh=3fa765b6754a). My employer doesn't look at per-paycheck contributions, so it's okay. YMMV.
My company handles this in an interesting way. It automatically switches my contributions over to after-tax once I hit the limit, and continues to match against that.
When does your bonus pay out? I usually max out my percentage early in the year, then once we get bonus/raise at the end of Q1, I adjust for the remaining weeks.
Why oh why do the plans have to do the annoying "percentage" designation? It's so annoying, and hard to get an exact percentage. Yes, I know WHY they do it, because of the matching, but it's still annoying.
Yeah, I'm hourly, so my contribution changes every month. By the end of the year it's a constant dance of recalculating to make sure I max it out without missing matching by maxing it too early.
Does your company not true up if you max out early?
If you have Vanguard, you can tell them to max your contribution, and they'll pull out the right amount and make sure you don't go over.
I have not heard of a 401k provider who will *not* do this. Usually I just set it to some insane percentage, let it max early, and forget about it.
As discussed higher in the thread, you might lose out on employer contributions if you do this. Depending on how your company administers their match.
.... How or where? My Vanguard only allows whole percent
The real question is why 401k, IRA, TSP, 403b, aren't all just combined into one thing. It's not like they can't still build in the ability to employer match for it either.
I know at least one reason why is that there are different tax laws and other legal matters that apply differently to each type of account. I am currently doing some learning of how to be a tax preparer and there are different tax reductions, deduction thresholds, and other rules that apply to each. I am sure there may be even more to it than that as well.
I think his point is why do we need these laws, and specifically why do we need a retirement account tied to our employer? You basically get hosed out of $20,000 in tax advantaged savings if you work for a small employer with no 401(k) plan.
ty. my pay raise typically takes effect in February, so I have to modify my contribution amount again then haha. first world 401k probs.
Does your plan not allow you to set your contribution as a specific dollar amount? That should negate the need to readjust when you get a raise.
Some cases allow for % contribution only. Sucks when you don't get the choice of using static dollar or a confirmation that just says auto max for the year. We all need an auto max check box on the contribution websites.
An auto max check box is the best idea I’ve heard all year
God the worst is when the 401k software asks for a percentage but doesn’t tell you that its including employer contribution to that percentage. So if you have a 100% 3% match and tell it you want to contribute 10%, it will do 7% from you and 3% from your employer. Made me want to scream because it is so incredibly dumb and I couldn’t figure out why my numbers werent adding up.
Yeah, I hated that. My previous employer's retirement used that format. Took me 3 months to find out. So I only maxed contribution for the final 6 months I was there. Thankfully my new employer's retirement has it listed clearly "Your Contribution" = X% "EMPLOYER Contribution" = Y% (Put X% for max Y%). It was nice. But I've learned everyone is different...
I can confirm the TSP for Federal does not play those tricks. First I've heard of that one.
Thanks! I never would have known to look for that! Fortunately, I have never seen a 401k administrator use the percentages that way. Fidelity is misleading. They allow me to specify different pre-tax percentages for base salary and bonuses, plus another set for after-tax. They add up the percentages. So if I elect to contribute 15% of my base pay and 20% of my bonus pay, the total at the bottom will say that I'm contributing 25% of total compensation.
Mine only allows for integer digits, it drives me crazy. I can do 6% or 7%, but not 6.5% Makes no sense!
Mine is % and only allows for whole percentage points. It is not the end of the world or anything, but I honestly can't think of a good reason why the computer can't support a couple more decimals. Figure the average pretax paycheck is at least 4 figures (plus 2 decimals)--if you get paid biweekly, you only have to make 26k for your paycheck to be >1000. So you've got plenty of significant figures before you get down to sub-penny amounts. If your paycheck is 1234.56, then 1% is $12.35. and 2% is 24.70. Why not allow another decimal in there so you can make your contribution $18.52? I mean--its really not a huge deal. Even if you make 200k, you basically have to choose between contributing 20,000 (10%) or attempting to contribute 22,000 (11%)...but if you do the latter, all that really means is that you hit the max in December and your last 2 paychecks of the year are bigger. Call it a Christmas bonus to yourself and stop overthinking it!
But in the Xmas bonus example you risk missing out on employer matching on those last two paychecks.
> Mine % and only allows for whole percentage points. God I hate that. Whole percentages only with my 401k provider too. Of course, I need X.2% to max it out. So I have mine set to contribute X+1% and figured out that after April, I'll be far enough ahead that I can drop my remaining contributions down to X% and still max it out with my last December paycheck. Oh, but then my raise will take effect in October, so then I'm going to have to re-do my math. Again. I don't understand why I can't just do dollar amounts. It would be so much simpler. I can do exact dollar amounts for my HSA.
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That drove me nuts with my previous employer - made a spreadsheet to tell me what % I need for each pay period since bonuses were paid out separately and raises were given separately, so every year I'd have to adjust for the new limit, then adjust after bonus, then adjust for raise, adjust for retro pay for the raise, and adjust every time they fucked up something (often)
I work for 2 places and contribute to both to get the match from both, and they're both percentage contributions, AND one of the jobs is variable pay depending on how many hours I work. I spend the last few months of the year adjusting percentages every 2 weeks trying to dial it in without going over. So frustrating
Thankfully my provider has the option to automatically adjust to the federal limit every year without me having to do anything.
In a thread of people rightfully complaining of only being able to contribute a percentage of their pay, you are a beacon of hope!
How much does the average 401k-maxer make?
Vanguard published some data around 2018 saying that 13% of participants maxed 401k contributions. Around 60 million Americans out of a workforce of around 155 million contribute to 401ks. That would mean 5% of workers are maxing 401ks. A 95th percentile household income is 250k, but that usually includes multiple workers, so the average maxer probably makes around 150k. I think that’s a solid guesstimate as the average savings rate is 12%, which would be 18k making 150k. That’s pretty close to maxing a 401k.
Believe it or not though, there are plenty of workers making 300, 400, even 500k+ who aren’t maxing because they’re stretched too thin in other areas. I know plenty of them - Golden handcuffs are real. So the average maxer is likely even somewhat lower than that.
Oh for sure, and conversely there are some people where circumstances allow crazy savings rates. My own mother was maxing her 401k with catchup on 40k. But she had just rejoined the work force after 20 years of child raising and my parents were used to living off my dad’s salary. She only went to work so they could accelerate retirement.
This seems crazy to me. I understand how taxes, lifestyle creep, kids tuitions, etc. can lead to this kind of money feeling "not rich" anymore, but I don't understand how you could get the point where a 4% 401k contribution is what gets cut from the budget. Like, $480k seems like the same lifestyle as $500k, right? Side note, is this really "golden handcuffs"? Isn't that more about long-term pay incentives to keep already highly paid employees at a company?
They "make" 400-500k but a ton of that is typically stock options or RSU grants.
I work at a law firm, where compensation is basically 100% cash so RSU’s, etc. aren’t the limiting factor for the people I know who are paycheck to paycheck on half million+ salaries.
Only like 12-15% of people covered by 401k plans actually contribute the 20k to max it out. Personally, I was able to start maxing it out by the time I got a base salary over 100k. I dunno how some of these people responding to you are saying they max it at 50-70k salaries, but I’d say anyone making over 100k needs to start considering it.
At 100K max out would mean you're saving roughly 30% of your net. Add an ira to that and you're into the mid 30% saving rate. Very do able sure but that's a decently large target to set. Then HSA savings and if you're saving for a house, car, vacation fund etc.
this is what i'm "struggling" with right now. it's a first world problem for sure. i make enough to contribute to all of these (and max them). but doing so really hampers the shorter term savings for a house. i'm trying to find that balance.
Saving for a house is basically retirement savings anyway ( you have to live somewhere when you’re old and you will, unless you’re silly and do a cash-out refi or what have you, carry that equity the rest of your life. It’s fine to prioritize saving for the house.
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Honest question. What is the point of living on so little just to hope to reach retirement age and be able to even enjoy it? At that point you probably won’t even allow yourself to even spend that much. Also do/did you save outside of retirement?
That assumes that you'll always be scraping by, though. Your income will increase over time (hopefully). Putting a dollar away now means it will see a lot more compounding than a dollar you put away 10, 20, or 30 years later. That was a big push for me to max out my Roth IRA (I didn't have a 401k) when I was in college with my shitty college jobs. The other part of it is that it gets you in the habit of paying yourself first. It's a lot easier to ease up on contributions than it is to buckle down and do it. Especially if you got used to having money, reducing standard of living is difficult. At least that's my view point on it. I'm in my mid 30s and I have enough squirrelled away that if I stopped matching anything today, I'd still have an okay retirement. But now I earn enough that maxing doesn't hurt anymore.
If your retirement accounts are large you can use 72t to schedule early withdrawal without penalty. There are a couple of different distribution schemes, but basically the IRS dictates how much you can receive monthly/annually based on if the withdrawal is for one or two people and their corresponding ages.
Somehow I never knew about 72t. Thanks for the heads-up.
I bank everything I make now and live like a scrooge while I'm young so that I can have peace of mind and the best health care when I'm old. Health care is already expensive as fuck right now and I don't even want to imagine what it'll be like when my generation retires in a few decades. A few months stay at a nursing home can wipe out a lifetime of savings. I do not want to live in a government-funded assistance facility where I have to share a room with someone listening to them screaming in agonizing pain. I want my own suite, my own doctor, eat nice food, and have the best amenities. When you are young, you can get by life not having the best toys, but by golly, when you are old, every little discomfort in your body is magnified so you want those final years to be as comforting as it can be. Money helps buy better care. I see a lot of elders like my grandparents who had to liquidate/transfer all their hard earned assets to their kids in order to qualify for Medi-Cal and live in a crummy facility. Even those places cost $100k a year. A high end community runs about $300k/year (non-government funded) and that's where I want to live out the rest of my life. I have a bad feeling a lot of millennials will be ill-prepared for this by YOLO-ing their money when they're young and will be in a for a rude awakening when they're old and ill.
Fuck this is depressing to read. So the goal is to max out your retirement investments so you can die in better care? I’d rather just enjoy life now and pray that I die before I need to get institutionalized.
> Honest question. What is the point of living on so little just to hope to reach retirement age and be able to even enjoy it? If you're used to it, it doesn't feel like scraping by. To me it's far more important to be financially independent in my old age, so as not to be a burden on my offspring, than to maximize pleasure now.
Average? Idk. But I make 77K and max out 401K and Roth IRA. So it’s definitely possible. As I get raises it’ll become even easier.
How do you keep the rest of your expenses so low?
Not OP, not maxing my retirement contributions quite that hard, but: \#1 thing for most people is rent/housing. If you want to save more money, you gotta live somewhere cheaper. Unfortunately, some lines of work tend to exist primarily in HCOL areas, and cheaper rent goes hand-in-hand with longer commute. How much is that wasted time worth to you? Beyond that, it depends a lot on what your expenses actually *are*. Do you keep a budget?
Yeah it's amazing how much money you piss away in rent and even a mortgage. By far the biggest expense any of us have
No wife, no kids, no debt, no house, no vacations, live with the parents.
Yeah this is always the trade off unfortunately. I am envious of people who have spouses who are FIRE minded. Unfortunately I would not be able to maintain the relationship I have if I was a frugal as I wanted to be.
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I would never charge my mother rent
Maybe they can't afford the rent without the mother's help and the mother is getting a much lower rate than she could afford otherwise
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Congrats on being able to buy yourself and your mom a home. That's quite an accomplishment for most people.
Do you save any cash outside of retirement?
I’m still not able to max out my 401k. My household makes $160k a year but we live in Los Angeles and if we maxed ours out, we wouldn’t be able to have any left over money at the end of the month because of the extremely high cost of living.
Damn, that's rough. What is your rent like in LA? And do you all have any kids?
**EDIT:** I have left reddit due to the hostile API pricing ([details here](https://old.reddit.com/r/apolloapp/comments/144f6xm/apollo_will_close_down_on_june_30th_reddits/)). All of my historical comments have either been deleted or replaced with this text.
My buddy maxes it out and makes about 140 and lives well below his means. He also invests an additional 35k/yr in brokerage and does a back door ROTH
People are probably going to hate on me for this but here we go. I’m 27 and make close to $100k before bonuses, about 115k after. I don’t max my 401k and I don’t put much in a Roth. I started contributing to both when I was 18. Right now, I put 6%, company gives me 3% more. Company also gives me an additional 7.5% in a “pension plan”, it’s invested and grows. Between these three accounts I already have about 1x my annual salary. I live in a VHCOL. I’m going to need so much money before I retire. Down payment for a condo will be close to $100k. Single family homes are going to likely be 1.5 million by the time I want to/can buy. I can’t have all of my money tied up until I’m retired.
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I thought if the contributions were cash you could withdrawal them immediately with no tax penalty? Like if I maxed it last year with cash, I could take that cash out next year.
I maxed out retirement accounts early as soon as I could, and then when it was time to grow up and get married and buy a house I ultimately regret it. More than 90% of my net worth was tied up and I had to wait an extra year to save up my down payment.
This is exactly what I am trying to avoid. I know I’ll need a ton of liquid money in my 30s. I still plan on saving some for retirement and started early enough that I will be fine. But the “max all retirement as soon as you can forever” should not be a blanket rule that is thrown as much as it is in this sub.
There are ways to withdraw from your IRA/401k for a home purchase. But overall your idea is correct if you are planning to buy in under 4 years.
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I started when I got a new job making 150k. Family of 4, sole earner, MCOL area owning an inexpensive house.
I wish I could do hard numbers. My employer has always insisted on using percentages and between bonuses, overtime and a 2-paycheck lag on changes, I always end up dumping a bunch into the double-taxed after tax account.
I have a spreadsheet. When I hit july I calculate the over/under I’ll have. Then when I hit November I do one last check so that my last paycheck is above the match requirement. It’s a pain but it can work
I always get the match because they at least make catch-ups there, I just always end up doing a bunch of OT filling in for the folks who work for me so they can take their PTO around the holidays. I'd hate to aim short and then not do that OT though.
Double taxed? What's getting double taxed?
Additional Reminder: Mega backdoor + backdoor hasn't been killed off. You can get up to $70.6k in retirement contributions a year (for a single person under 50) if employer offers proper plans. |Account|Contribution Amount| |:-|:-| |401k (w/o match)|$20,500| |Roth IRA via Backdoor IRA|$6,000| |HSA|$3,650| |Roth IRA via Mega Backdoor (w/o match)|$40,500| |**Total:**|**$70,650**|
What is a mega backdoor?
You contribute after-tax dollars to 401k (need an employer plan that will allow it), then roll those over into a Roth IRA.
That’s a new one for me as well
Why does the $6000 Roth contribution have to be a "backdoor" anything? Can't most people do $6000 into a Roth even if they max their 401k?
Backdoor is a way of avoiding the income limits on Roth and regular IRAs
My wife and I make too much to contribute to Roth IRAs. But we can each contribute a non-deductible $6000 to a Traditional IRA then convert it into our Roth IRAs. That's the backdoor.
$800+ per paycheck?! You guys hiring?
Could also be bonuses. I sure as hell don't put $800 a check into my 401(k), but I maxed last year by throwing a huge chunk of my two bonuses in. I know that requires a job that gives bonuses, but just pointing that out because I work with plenty of people who forget that piece of compensation and don't take advantage.
I get a bonus, albeit a small one. I'm currently putting 5% (highest my employer will match) I guess I have a few years to go lol.
I get that. I work in the 401(k) space so I frequently have this conversation with participants (and friends and family) that they can likely save more than they think if they budget, plot where their money is going, understand how the tax benefits make the impact on take-home pay less than they might expect, etc. But sometimes someone gets all that and they just don't have anything more they can save. Doing whatever you can is what you need to focus on.
I make $30.86/hour in a low COL area. I wouldn't call myself rich by any means but I'm able to max out a 457b (basically 401k for government employees). It's definitely doable.
God damn do I love retirement options for government employees. I've got access to 403b, 457b, 401k, plus my pension, and reasonably priced benefits.
Do you have any real savings outside of your retirement? I just don’t see how that is possible.
I have around $30K in cash although $12K of that is earmarked for my student loan payoff before those payments start up again. It helps that I'm single and don't feel the need to leave the house very often.
Engineering says hello. If you take the Google data analytics course you can start getting into data science, big data and programming which is booming and pays well enough to max our 401k, IRA, HSA and then some more! Easy to work from home too
How true is this? It sounds too good to be true. Can anyone without any programming knowledge take this course and become hireable?
Data Scientist/Machine Learning Engineer checking in (these two titles get mixed up so much it doesn't really matter), this is way too good to be true. Everyone wants to get into Data Science but they either lack the coding or the math (or both). For reference, I have math/CS undergrad degrees and a masters and without all three of those it would have been difficult to get into Data Science. However, getting into "data" is not that difficult especially if you are employed already in a company that wants to use it (or already has their own analytics/DS/MLE teams). Becoming an analyst is way easier to break into skill-wise and a lot of companies will train up people in other areas to analytics. I know a lot of analysts who started out at 50k-80k and quickly moved up to manager roles (within 5 years) and make 100k-150k. Many of them also had liberal arts degrees but got a masters in analytics or did a ton of work/certifications through their employer. Happy to chat about it more if you want more info. It's not the easiest field to break into and if you go straight for "big data machine learning engineer making $200k" you will fail but realistic expectations like "analytics SQL monkey making 80k" are still pretty darn good.
It's too good to be true. They're not lying that there are big-money big-data jobs out there. However, finding one that actually fits someone who doesn't live in the area, and can't fly out to Cali every month for a meeting is very rare. Even if you live in a large enough city to have a big-data job available, actually meeting all their requirements to make it past the HR hurdle only gets you into the leetcode reviews and whiteboard hell. Instead, if you find a dev job, then move laterally to a data science job, it's way easier. Take the $70k entry job, learn their tech stack, make friends with the Big-data Dept, and be first on their "We want THEM" list for the next hire. And, there's always the specter of "Everyone is hiring, but next year when the economy crashes everyone will be firing, and you'll be the new guy." If you can handle that (there are ALWAYS gigs available), then yeah, jump that ship till you're deep in the 6's.
There are companies everywhere dying to fill business analyst roles for good pay requiring marginal experience.
Yep, and with a little elbow grease, you could find an entry level IT tech job and work your skills up from there. These jobs are just basics of setting up computers and helping users with login issues. Especially good for someone young looking to dip their toe into the tech world.
Eh, this doesn't match my experience (been in tech for 10 years). It's way harder to get a dev job than a business analyst job. And while the skills required do overlap, switching from dev to data takes a lot of learning. I don't understand why you would suggest that route to working in data. Just learn data - there's no sense in learning something like web dev too.
You'll need to get some entry level experience as an intern to start climbing the ladder. You'll hit a glass ceiling without degrees, too.
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Develop a skill, it's very possible today. Employers are so desperate, they will pay to train you. Find a passion that pays well, and go calling. This is the opportunity knocking to do that.
Oh I have one and I'm honing it. I'm currently a test engineer planning to switch to swe after school. Just underpaid I guess.
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I think that number would surprise me. I see other statistics about how many people don't have $1,000 in savings, how many missed paychecks they are away from financial ruin, and how much is saved for retirement overall.
In 2017 13% of Vanguard 401ks and 9.1% of fidelity 401ks were maxed out.
Which doesn’t sound too bad, but then you remember just how many people don’t open a retirement account in the first place
Is there a calculator out there that can help me adjust my contributions to a comfortable level without maxing and factor in my employee match? I want to do more but also dont want to leave myself short paycheck to paycheck.
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I currently do 4% to get the match. Was thinking another $1k a month.
You can always run your numbers through a paycheck calculator.
Does contribution limit go up to $27000 if you turn 50years old this year? I was reading this and just want to be sure I am reading correctly [LINK](https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-youre-eligible-for-more-than-one-retirement-plan)
Yes, $27,000.
was looking at this today and noticed that my employer doesn't take deductions after the contribution limit. So for last year I was able to max out in November and the rest of my biweekly contributions were paid out as taxed income. Struck me as odd, but kind of makes sense too as I don't have to go back and request a return on over contributions. So once its maxed the matching contributions stop, and I assume this would be the same if I were to max out at the end of the year? any thoughts here - **am I leaving employer contribution money on the table by maxing out early?** For context, variable income (base salary plus commission ) and last year I was able to earn enough to max out early. Contribution % was calculated on base salary plus projected commission at 100% to plan.
You may well be. If your employer offers what's called a "true up" then you'd get the extra matching contributions, but without then you'd be leaving a little on the table perhaps.
My employer has a generous percentage on their match but a hard cap at $6,000. I contribute at a rate where I max out in November and my employer's $6k match maxes out before June is done. In other words, they don't max out their match at ($6k over 12 months) $500/mo. They match what I'm contributing until it equals $6k.
I'm lazy and my employer automatically cuts of 401k contributions when I hit the cap, so I put in 100% of my wages into my 401k to start the year and it stops a bit in and I get paid again haha
I was thinking about doing this too since I don't get any match at all. But not all employers do a year-end true-up, so some people can end up losing out big on employer matches like this.
I do the same thing. If I leave the company for one that doesn’t have a 401k plan - at least I’m maxed for this year.
Also, if you contribute to a Simple IRA the limit was increased from $13,500.00 in 2021 to $14,000.00 in 2022.
Oof. That is like 80% of my check. No wonder people working in jobs like mine will never be able to retire.
You don't need to max it to retire. $100 a paycheck will make you a millionaire by retirement.
$100/paycheck gets you to a million if you get paid 4 times a month and go for 40 years at 7% returns, compounded monthly.
I was doing 9.5% at 2x paydays per month, compounded annually. Depends what interest rate you use, and you also have to consider any 401k match or raises during a 40-year career. But still say it is only 7%, $200 per month, no raises, no match. That's still $550k by the time you retire. 4% rule + social security equals $40k per year of income, even more if you ever get married to someone who qualifies for social security or saved some away during their career, and that's 40k in 2022 dollars, not 2062 dollars so it's inflation adjusted. $40k a year in retirement for one person seems livable.
If you start in your 20s, sure. If you started late (almost 30) you have to play a little catch up. Still, it's not much, and every bit helps.
This depends on when you start. And arguably $1m is not enough to sustain living/medical expenses in old age through retirement to death. Especially if you are also supporting a spouse.
$1MM in retirement allows you to live off $40k/year. Remember, you no longer need to save in retirement, so that 40k goes a lot farther. You'll also have social security too. It's more than you think.
I started maxing mine out when I was making 40k a year in the SoCal Low Desert. It made things super tight, but helped me live on a tight budget. Last year I made $55k with about 370 hours of OT for the year and felt like I had tons of extra money.
Note: this only matters if you want 100% consistent cash-flow AND your employer doesn't do a ~~catch-up~~ true up contribution. If your employer does a catch-up contribution then it doesn't matter when or how you fund your 401k. You can do it all or mostly in one go like I do by putting the vast majority of my bonus in. If your employer doesn't do a ~~catch-up~~ true up contribution (or you intend to leave partway through the year) then you want to make sure you contribute enough per paycheck to get the company match. You still **do not** need to make consistent contributions all year unless you're concerned about varying cash-flow. The key takeaway is "make sure you increase you contribution if any raises/bonuses don't already take care of higher maximum". Personally I lower my % contribution each year due to cost of living raises covering the gap.
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> less than half of all 401k plans in America actually support it Bear in mind that many 401(k) plans don't even have matching contributions in the first place. This may mean no employer contributions at all, but also some companies just straight up make non-elective contributions that are independent of what you contribute. This is one of the ways to fall into the safe harbor that exempts from discrimination testing, for example. And if you don't get a match, then a true-up is not even relevant. (That said, I don't know what the proportions here are, and I could totally buy that less than half of *matching* 401(k)s don't have true ups too.)
> Bear in mind that many 401(k) plans don't even have matching contributions in the first place. Does anyone know what percentage of US companies offer an employer 401k match? I'd like to take this info my employer and ask them why they don't do it anymore.
82% https://www.cnbc.com/2021/09/09/how-long-workers-wait-for-a-companys-401k-matches-to-become-theirs.html
Yeeeah, mine doesn't allow true up and they don't allow me to specify the dollar amount. I can't even apply a fraction of a percent. If my contribution needs to be 15.7% I'm only allow to do 15% or 16%...
If you picked the higher number can you stop it entirely when you hit the limit before the end of the year?
That would prevent me from getting the max out of my employer match. They cap it at $100 per week for a total of $5200 per year. The changes also aren't instant, it can take 1-3 paychecks before the change is applied. :(
Have you ever asked them if you can join the committee on determining the plans as you believe that other providers can do it better for less and you are willing to do some leg work? I moved ours from a terrible one to Fidelity, which gave us much better controls as employees.
I have been pretty vocal with our hr / payroll groups. I dont think they have a committy, its a pretty large fortune 500 company. They just switched to this new 401k provider last year. I was pretty upset when they did... We used to have Schwab before and it's app / tools, expense ratios and fund options were WAAAY better.
Ah thank you, I knew catch-up sounded incorrect. Catch-up is the additional amount that 50 and older can contribute. Regarding OP, the main takeaway is that you (probably) don't need to change anything right away if you were already getting full employer match. The extra $1,000 this year can be added at any point it doesn't need to be distributed evenly.
My employer got rid of the true up but added an up to 6% after tax withdrawal. So we can put the max in early and still get the full company match as long as we contribute 6% after tax.
I set my contribution percentage to max out in November, which yields larger paychecks for December holiday spending. I hope we get to keep the mega backdoor Roth 401k. The defined contribution limit increased by $3,000: [https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-irs-401k-contribution-limits.aspx](https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-irs-401k-contribution-limits.aspx) The defined contribution limit is $61,000 ($67,500 if age 50+ in 2022) minus: * Your standard $20,500 ($27,000 if age 50+ in 2022) traditional/Roth 401k contribution * All employer contributions The remainder is the maximum mega backdoor Roth 401k contribution. This is a PER-EMPLOYER limit that resets if you change employers or have multiple employers. The standard $20,500/$27,000 contribution is a PER-EMPLOYEE limit.
Just keep in mind that most companies don't true up, meaning that you might miss out on your company match for those paychecks. I do something similar, starting out with a 60% match, but I reduce it later in the year to make sure I'm contributing 8-10% for every check at the end.
Wish that this would be a setting on all 401k servicer websites. Just allow me to Max out contributions, given you know how much I've contributed, how much I've already contributed and how many remainder pay periods
All of you people that have enough money to do this are extremely lucky , just know that .
I always felt that saying someone is "lucky" kind of diminishes their success, don't you? It's not like I won the lottery and now can max out my 401k. At the same time, there are plenty of hard working people who make way less, so I understand where the sentiment comes from.
i don't make a ton of money but i'm maxing my hsa/401k/roth ira. i live in a small house that's nearly paid for, drive a 13 year old car, have no debt other than the mortgage, and make most meals at home. i don't really want for much which helps, but i don't want to work forever.
Daaamn. That's like half our income.
My employer stopped matching starting this year. Have to remind myself why it’s even worth it without the match.
Because of the tax-advantaged nature of the account. The match is free money and I'd never turned it down, but if you can get to the place where you're maxing your 401k the match doesn't move the needle very much.
an employer match won't magically get you to retirement. not only are the match percentages usually a low % figure, but they're not all dollar for dollar either (e.g., many are 25 or 50 cents on the dollar). in relation to maximizing the yearly 401k contribution, the match is a small percentage and shouldn't stop you from using this retirement vehicle.
Thank you, internet stranger. I had forgotten to change it back.
Not sure if I should create a new thread for this question. Back in 2015-16, I drained my 401k due to an emergency need for cash. It was only around $20-30k as it was pretty new and I wasn't making as much then. Since about 2017-18 I've been maxing it out. Is there an exception that would allow me to contribute that amount back into it?
Not that I know of, unless you withdrew it as a loan that you're currently paying back.
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To me, the math and timing involves the (weirdly regressive) OASDI tax; I set a lower percentage for my 401k contribution until I've reached the OASDI cap, and then increase my contribution after that to (sort of) hit the 401k max contribution on my last paycheck of the year. That way my net pay is more or less the same all year.
I set my salary and bonus to 100% contribution at the beginning of each year. It’s mentally challenging to go without a paycheck for a while, but it’s always a relief when it’s done. That way, if I lose my job I’m still invested in my future.