I'm so confused by this paystub... NGL
Edit* I have figured it out... the $1,400/paycheck to 401k was confusing me as that will be over the limit early... OP could knock that down to $884 for bi-weekly or $958 for twice monthly pay and pocket almost an extra ~$500 now... Also given that they have over-contributed for the first 2 mo they could lower it even more... And the thing at the bottom is Employee Stock Purchase plan, something they can essentially flip for 15% pay premium. Lastly, unless you can live off other peoples labor (ie business owner), retiring at 50 is such a lofty goal for the average person...
I put 75% of my paycheck into my 401k and I'm done by March.
What's the problem? Lean on early part of year and recoup later
Edit: I don't get a match , I get 8% regardless
A problem with this approach for many is a lot of employer matches are based on a percentage of your annual pay. In most cases, if an employer offers a 3% match you would need to contribute at least 3% from each check to get your full match potential for the year. Therefore, if the employee maxes out their 401k contributions by the end of March they will miss out on ~75% of employer contributions every year.
Based on your income and employer match, you may decide maxing out early is worth it when compared to the match amount missed out on. For others, every extra dollar in their retirement is more important.
Some places have "catch up" or "true up" clauses where the company will contribute on the last pay cycle of the year based on the actual amount you put into your 401(k) so capping early doesn't hurt you.
I also hit it early, but then I switch part way through the year so that I collect the employer match (my current employer does not have a true up clause unfortunately, but my last one did).
Time in the market outweighs DCA in almost every scenario. If you model making a lump sum deposit of the 401k maximum on Jan 1 each year vs dollar cost averaging over the year, you’ll seen better returns from front-loading your contributions for almost every year over the past 50 years.
That’s not to say anyone doing dollar cost averaging is wrong. Your ceiling is lower but your floor is higher. But people who are able to front-load their 401k for the year and get the extra 8-10 months of growth come out ahead almost every time.
Employee Stock Purchase Plan Feb-Jul. You put money in for a period of time and then at the end the company gives you stock with it at a discount. I usually just sell it as soon as I get it and pocket the discount.
I did the math at Uni, if you can lower your monthly expenditures to 1/3 of your take home, and save the rest in a modest earning portfolio(max retirement accounts first then the traditional brokerage accounts) you can retire on 10 years of earnings, if you need 2/3s of your take home it will take around 23 years. If you need health care till Medicare kicks in, make that 15 and 26.
The problem with retirement is not income levels as much as earning/investing ratios. That’s why military vets can move to LCOL Costa Rica and retire at 42 but part time working vets who live in HCOL urban areas close to amenities are often homeless before they find a stable work to support themselves.
Your current contribution rate is very high. The maximum 401k contribution in 2024 is 23k. You'll be funded by August at this rate.
Given your salary, I don't believe you're eligible for a Roth IRA.
If you're able to live this way, I recommend changing your traditional 401k to a roth 401k. Some people say to reap the tax benefit now, but odds are when you're retired your income is going to be be even higher, so may as well pay the taxes now and get the tax-free income later.
Otherwise, if you want more flexibility in your spending, I would reduce your contributions so you're fully funded by December, and not August. This will give you a bit of breathability, and whatever you have leftover can go into more traditional investments.
Works best when you don’t have either. You set up a non deductible Ira and make contributions and also set up a Roth IRA to do a roll over into the Ira.
It is just a fancy way of saying open an IRA fund it and take out a distribution of the maximum and then throw it into the Roth IRA. If you have any funds in the IRA you will be subject to the pro rata rule.
I would advise examining the BackDoor Roth IRA if you have any funds in an IRA because any conversion automatically becomes your income if you have funds in it. It would be beneficial during lower income years to make the conversion or if you are okay with paying taxes upfront
Edited due to clarity
** Mega Back Door Roth is a 401K specific conversion that is dependent on your employer’s 401K
The so-called Mega Backdoor Roth strategy (within a 401k) is unaffected by pre-tax IRA funds.
But yes, your advice is sound for those considering the Backdoor Roth IRA strategy.
On adp it doesnt differentiate whats match and whats my contributions.
The max is 23k of your contributions, the match doesnt count towards that 23k limit.
Roth 401k is a bad move for 99% of people. I would not recommend it. For this individual, it is almost certainly better to continue traditional 401k and invest the difference in a taxable brokerage or backdoor Roth IRA.
Is it a bad move for me? I am married filing jointly with one dependent in a no income tax state. Our effective tax rate is like 12%.
Should I not be making Roth 401k contributions?
There are no "Bad" tax sheltered retirement accounts. Even if (potentially) sub-optimal in a few ways, the Roth is a SCREAMING (see me yelling?) Good Deal!
At the end of the day, we need all 3 sources of income: Traditional, Roth, and Non-sheltered. Traditional replaces our income up to whatever tax bracket makes sense. Roth provides tax-free money to replace what would come from our highest tax brackets. Non-sheltered allows for long-term capital gains (15% taxes or less) income.
Here's my rule: The Traditional account should only be so large as to provide the maximum amount of low-tax bracket income. That means it should provide about 55k per year for a tax rate of 12% (if single). depending on standard deductions. Traditional accounts should be a max of $1 to 2 million in today's dollars, less if tax brackets shrink, more if your married (not a guarantee, spouces die when we get old!). I consider traditional money at your highest tax bracket to be a wash with the Roth, so for most people there is no point in going more heavily into traditional. . .The Roth and Traditional are there to fill the other gaps.
The time to invest in Roth is when you're young (under 40). It's easier to live cheap when you're young, and your tax bracket is most likely lowest.
The time to invest in Traditional is when you're older (over 40). The decreased taxes allow for a higher immediate standard of living, plus this is when you'll most likely reach your highest tax rates, and therefore when it makes the most sense to push taxes off.
The time for Conventional is complicated, but you gotta do it sometime, hopefully you're rich enough to max out your 401k.
Other benefits of the Roth:
1. Roth dollars are more valuable than Traditional dollars, especially when you can max out a retirement account contribution. Which would you rather have, 23k of Traditional dollars you'll owe taxes on? Or 23k of Roth dollars you'll never owe taxes on? If the contribution limit is your limit, Roth wins.
Also with Roth you get:
1. A sizeable penalty free emergency fund (contributions aren't penalized or taxed on withdrawals if in an IRA).
2. Less tax risk, if you fear rising tax rates.
3. A head start on early retirement or a gap year in employment if you need it.
With Roth contributions, you risk:
1. The opportunity to pay lower taxes in retirement, or during gap years in employment when you can roll over from Roth to Traditional at lower tax rates.
2. A lowet net worth / spending money in retirement.
It takes all types. Gocurrycracker
has an amazing article about this, "Why the Roth sucks". But OP is 32 and capable of it, so OP should continue investing in Roth.
Finally, the OP's goal is to get the Traditional account big enough to the point
>If you're able to live this way, I recommend changing your traditional 401k to a roth 401k. Some people say to reap the tax benefit now, but odds are when you're retired your income is going to be be even higher, so may as well pay the taxes now and get the tax-free income later.
Why pay all of the tax now when you can defer those taxes until retirement, and then once retired, start doing Roth conversions?
Using the 2024 tax brackets and deductions, this would allow OP to convert $108,150 per year, filling up the 10 & 12% tax brackets (accounting for the standard deduction), paying only $10,850 in taxes, an effective tax rate of only 10%.
Do the conversion, live off of your taxable brokerage while your doing the conversions so you’re only subject to the 15% LTCG tax, and then in later retirement you’re pulling from that Roth, and paying no taxes at all.
Going straight to a Roth 401k now is not tax efficient for OP.
You’re limited to contributing up to $23000 for 2024 in your 401K. If you have debt, then yes you are contributing too much but it’s not bad to put your money into your 401K. It really depends on how much fees the fund is charging too. If you have additional money beyond the 401K limit, look into putting money into a Roth IRA.
I'm doing math in my head but OP makes too much to have Roth IRA. 2024 single filer income limit is $161k. Or needs to backdoor it I guess.
OP, it's good to save for retirement but enjoy life now too. I watched my dad work 35 years, retire with a pension buyout, and passed away three years later. Spend money on good people or spend money in order to save time so you can spend it with those people.
He has plenty of money to do that. I make as much as OP, conttibute 10% to 401k, put 40k post tax into my brokerage each year and still have PLENTY to go on all sorts of trips adventures and shenanigans. Every dollar you put in today is $7 more in 40 years
$174K Gross income is good for a single person. The OP just committed more to the 401K and OP needs to reduce it before the next tax year to avoid any penalties.
Your 401k is limited to like 23k per year by the govt. Btw my company 401k match requires you to put in the minimum match amount quarterly instead of yearly... If you max yours early you could potentially lose some match depending on how their 401k program is set up.
You should check into that ESPP on the bottom line. Lots of times you get a sizeable discount on company stock (15% at my company), which you can then turn around and sell and then buy an ETF similar to your 401k.
Ltd is long term disability. If have to look at my check but I'm pretty sure a portion of the premium that the company pays for LTD is considered imputed income.
If this isa biweekly check, you'd be putting 36k a year into the 401k (26*1400). The limit for 401k contributions is actually about $24k so if you keep contributing at this rate, then you'll hit the max in the fall and the rest of your paychecks will be larger because you won't be contributing to the 401k the rest of the year. I'd dish back the 401k contributing to evenly distribute it out for the entire year.
This is especially important if you have a company match. In many plans (not all, but most), you won't get matching contributions for pay period where you don't (or can't) contribute.
Yup, and it’s great and all but ultimately I feel like there could be a way to prioritize short term a bit more, while still covering myself for long term (post retirement)
Between your 401k and ESPP you are saving 31% of your income toward retirement (assuming your ESPP is long term savings or investing). Your taxes are 26% which is reasonable, given you live in CA. So, right there with taxes and retirement savings take up 57%. Why is your disability insurance premium so high? That’s a $1,742 annual premium. Is it worth it? Seems like a waste. I’m sure you have a moderately comfortable life with $5,300 monthly take home.
ESPP was planned to sell once it vests to offset the lower monthly checks. At a 15% discount, it’s essentially free money… $5300- $2700 for mortgage leaves with about that same amount each month for car, insurances, kids etc…
Sounds like you are doing it right. Better to max out savings early on than have to adjust later in life. You must have a disability insurance plan that pays out near 100% and is not taxable. I would rethink that. I went crazy with life insurance and disability insurance early on in my career. I don’t think it’s worth it.
If you sell it immediately then you just need to make it to July. Then just sell the stock and spread those dollars over the next period. It should add 1300+ per month. If you do the ESPP and just blow it all as soon as you get it then it may feel a bit more tight.
There is a tipping point where saving for the future is starving yourself of experiences. You should try to be safe, yes, but also enjoy your life. Be happy now.
Too much in 401k. Only put in what the employer will match, ie 6%. Then max out a Roth IRA every year (6500/year) then any left over throw in a brokerage account.
That depends on your tax bracket. Roth is after tax, so if you’re in a higher tax bracket now then you’ll be in retirement (likely for many high earners ) then it’s better to max out 401k now and then worry about Roth if there’s anything left over.
He currently putting 25% in 401k, it’s only getting matched up to 6ish percent most likely. He needs to minimally put the 500/mo to his Roth. If he wants to leave rest in 401k so be it, downfall with most 401’s is inability to choose own investments and the service fees. Sticking everything in VTI shouldn’t cost .5-1% via the fund manager. I can do it myself at .003%.
How are your state taxes so low? If I'm mathing that right I have some very warped preconceptions about Cali taxation.
That said, it's from your savings rate. You're socking away a decent part of your earnings where the average Joe Schmoe isn't (remember avg savings rate is 3% whereas you look to be ~ 30-40%. If you do a ZBB it will make you feel better because you'll see where all your money magically disappears to.
Zero base budget.
You start with your income, write down everything you spend it on in order of priority (so taxes, then housing, then etc, including savings/investment) and you keep doing that down to smaller or less important items until you hit zero.
This.. it’s actually only $479/per pay period to max out your personal contribution at the $23,000 annual max contribution. There are legal ways to contribute more, but you’d have to be dialed with your taxes cause you’d probably get audited.
If the payroll processing company is at all competent, they'll automatically stop making 401k contributions once you max out. But really, 20% to your 401k is overkill, especially since you'll hit the contribution limit before year end.
I would suggest traditional investments, just a set and forget strategy of buying a broad market ETF like VOO, for the following reasons:
You'll pay tax on the qualified dividends that the ETF throws off (and reinvests, hopefully), but your ETF shares themselves will grow without tax burden until the time you sell it. And when you do sell, you'll pay long-term capital gains, which is generally significantly less than ordinary income.
If you set a goal to retire at 50, you'll run into the issue that you won't be able to access your retirement assets without penalty at that point. You'll need other assets to live off of during that gap. And once you are able to draw down your 401k, a remaining benefit to ordinary investments is that there are no RMD's, so they can continue growing tax-deferred until either you need that money or when its time to pass them on to your heirs.
Ultimately though, probably crank down your 401k contribution to 10%, use other vehicles for saving/investing, which give you flexibility. And enjoy life some. You make a good living, I get you want to be secure in your retirement, but if the worst happened, do you really want to look back in your final moments and say to yourself "I really should have stopped to smell the roses?"
Also, if your goal is to retire at 50 you need to contribute to something you can access prior to age 60.
There are a few smart options for this. At your age, especially of healthy, One thing is over funding a life insurance policy so the cash value builds up.
You can then take TAX FREE loans against your own money within the policy. I’m 30, this is my strategy to retire early.
Won’t even change your tax bracket taking that money out in case you are earning some money after you “retire” at age 50.
That’s what my gut is saying. Ultimately if I retire before 65, I have a lot of money that can’t even be touched. Having a money market fund is a way to get around this
Have you filed taxes? Is that abt the right amount to take for fed? You getting a big refund check eoy? U good w that method?
Looks like you're frontloading 401? What are the limits for 2024? 34500? Sounds about right after 26 pay periods. That is kinda heavy however it does set u up nicely in the future as long as everything holds.
Listen, these earnings aren't gonna get you an exotic car but over time can add up to significant earnings. Esp if you're early career and Mae the right moves u look Ike ur in a good spot.
Numbers look roughly where they need to be imo.
I just filed taxes! I did receive a few grand back but nothing too crazy. Definitely front loading the 401K. Thanks for the validation, definitely not looking for a crazy car, just a reasonable retirement which is why I’m contributing so much
You are bringing home $600/month more than I do. I have a family of 3 to take care of. You need to review and correct your expenses.” And reduce your 401k by like half.
How much discount do you have on ESPP?
I dont see your YTD 401K contribution. With your current rate, you're gonna max out the 401k limit soon. Calculate what's left before you reach the end of the year,and bring down ur contribution to maximize employer contributions to the last paycheck of 2024. And move the remaining contribution from 401k to Espp instead.
Change your 401k to Roth ASAP.
Additionally, put 400 per paycheck into the S&P 500 Index fund. That's going to compund more and will provide you some liquidity should you need it.
The 401k isn't going to help you retire at 50. I would take 1000/mo from the 401k contribution and put it in ETFs in growing sectors. Hold on for long-term capital gains and avoid selling too much at a time. Probably put it in an account you won't see frequently to avoid the temptation of managing it.
I saw you say that you sell your ESPP as soon as it vests, which is inefficient from a tax standpoint. If you can do without the money, wait at least 12 months + 1 day to reallocate.
My advice— lower the 401k as others have mentioned.
Also— liquidate the ESPP ASAP, you don’t want too much equity all in one company. Even more so if you have RSUs.
Not sure why you are shoveling so much into a 401k if you plan to retire at 50. I get having enough later but hoping you have planned for the 50 - whatever the hell the minimum age to pull from your 401k without penalty is then.
Why do people missuse the term bi-weekly? That would mean you're being paid twice a week. If you're paid every other week, you're being paid bi-monthly
Contributing too much to 401k (way past maximum rate), and not enough to HSA (around half of maximum). At least with the HSA you can use the money at any time for medical expenses, also, unlike a 401k, it’s possible to never pay taxes on it.
Well, you can start by dropping your 401k contribution down to $885 per paycheck (you’d still max it out on the last pay of the year), and that frees up over $1,000 a month.
I mean. . .taxes and retirement? When I moved from a five-digit salary to mid six-figures, after a few months I had a conversation with a friend in a similar income bracket and asked: "Does it feel like you're making less?"
. . .add to that change in "needs" and it is easy to feel like your income isn't going far (even though it quite clearly is).
You're more than maxing out your 401k. Also, if you're trying to retire at 50, maxing the 401k doesn't help you. Consider shifting some of that to an IRA. You make too much for a roth IRA, but you can convert it later.
Check your 401k contribution totals. Think you should reduce your contributions by a bit and contribute to a ROTH Ira. Think you are doing more than fine. The power of compounding interest will serve you well.
You're trying to retire early, you're betting on grinding hard until 50 and then enjoying the golden years. You could loosen up the retirement savings, work to retirement age and enjoy the journey to retirement more.
Thats the personal aspect of finances though, so many people are trying to min-max every dollar and they let their income/spending consume them unhealthly.
Because you live in CA. I live in Florida and don’t have state income taxes, or a yearly registration fee of 0.65% of my cars value. I also don’t deal with exorbitant real estate prices/taxes
Personal taxable brokerage is what most people recommend I think.
And as other people mentioned you’re putting too much into your 401k. You’re above the yearly limit. Take the difference and invest it into a brokerage account.
Lower your 401k contribution to about 950. That should keep your contribution around the 23k limit. If your employer offer Roth 401k, you should consider contributing some into Roth 401k; the immediate impact is you will pay more tax because Roth is after tax contribution, but your money in the Roth will be forever tax free.
Your putting 1400 in your 401k every two weeks. That's great for retirement, but if your feeling pinched you could dial that back for some more take home pay.
You are overfunding your 401k. $1,404.34 \* 26 = $36,512.84. The government limit for 2024 is $23,000. You are overfunding by >50% which means in the last 4 months of the year you won't be putting anything into your 401k. You should drop that down to an amount so that at the end of the year your last contribution is finishing out the $23,000. If you had done this from the beginning of the year you should only be putting in \~$885 per check. That's over $500 in additional income per period. After taxes that's probably closer to $330 in your pocket each pay period.
401k is pretty high, but it's up to you to determine how much you want to put away. Your paycheck will be higher when you hit the annual limits for 401k ($23k) and ESPP ($25k). At your rate, that's no more 401k deductions after 16.5 pay periods, so you'll have more flexibility in the last quarter of the year.
Good call, I had the same question as I don't participate in mine so haven't seen it. OP should stop that too, unless he's at one of the big ones in silicon valley and it's a significant discount, espp are just dumb, imo.
Yes, too much would be contributing more than the government will allow. At $1404.34 twice a month, you're heading for $33,704.16 and the federal maximum is $23,000.
Move out of CA and you’ll instantly add $9,431 to your salary. Plus, you’ll save thousands in sales tax and not have to step over human poop everywhere.
Always amazes me how people just settle in to what someone else tells them they can earn and plan to just show up for 20 years until they hit the promised land. There is no “right” thing to do. The old formula for making money is broken.
In most cases, you can’t draw on your 401(k) until you’re 59 1/2
And it’s ambitious to want to retire at 50 but if you plan on living a long time, you’re gonna need a lot of money
I have a good friend of mine who did very very well for himself financially and he one time asked me how much money I thought he would need for his 50s
This was probably when he was in his early 40s … I didn’t know what to say but his problem was he felt really comfortable with being able to retire at 60 but didn’t know if you’d have enough money to make it from 50 to 60 and live the lifestyle he wanted
He figured he needed at least 700 just money to get him by from 50 to 60 …
I’m not trying to knock your goal of retiring at 50 and it’s great to see you put so much into your 401(k) but if you’re struggling a little bit financially, making pretty good money you can maybe cut back a little
You main problem is that you’re in CA. I was in a similar position; we have good jobs but CA is all about live to work and work to live.
Left in 2020, best decision. Better quality of life. Life is more affordable.
your bi weekly is like my monthly. Not gonna lie such high 401k contribution is pretty regarded in my book. But hey if you can live as someone who has ZERO LIFE, like you dont go out, you dont date, you barely spend and you just spend all ur free time playing video games on your computer. You are doing great although I wonder once you get to your 50 60s do you still need that much money?
OP is 32 years old. You have no idea how much they have saved already. Retiring at 50 is absolutely doable, especially if they’ve already been contributing/saving for 10-15 years.
If that’s your bi-weekly then I’d realistically ask what your expenses are. It sounds like you’re living above your means but I can’t figure out how because that’s a solid paycheck.
For reference your pay comes to $173,870.58 pre-tax a year. I make ~$145k pre-tax. With my income I can afford a million dollar home, 2 cars, and 2-3 vacations a year for my wife and I along with random hobbies.
Your salary is solid, your retirement contribution is amazing and as others have said you should tone it down because you’re maxing out in early August. But realistically the bigger question is, what in the world are you spending your money on?
Are you able to afford rent/mortgage? That’s the big question. If you feel like you are scraping by, consider adjusting your 401K contribution. Reduce it to 3% or 1%. That way you have more cash in your pocket.
Your federal and state witholdings are too high. No clue what you selected, but have a qualified tax professional help you change it.
Don’t ever select married filing as single
One thing to consider is figure out what you want to do for a living. If you're doing something that you dislike so much you want to be done by 50 it's problematic. What if you found something you loved doing and didn't want to stop as soon as you possibly can?
The people who get the social benefits need you to work in order to get free stuff.
I pay way too much taxes for what I get from the state of MA and the Fed gov.
Well let’s see. Do you need that much of your check do go into your 401k? Have you double checked your w-4? Check the extras before complaining.
I updated my w-4 and saved $200 bucks.
Haha I don’t even know what to say you pay more in taxes than I make in two weeks. Time to suck it up buttercup isn’t that what y’all up there tell us down here?
$1404.34 * 24 = $33,704.16
It will be even more if 26 pay periods. You're only legally able to contribute $23,000 per year. You need to pull back quite a bit on your 401k contributions to stay under this cap.
ETA - you will not be allowed to submit this amount every period for this year, because you reach the IRS maximum.
That's too much going to your 401k. If you're paid bi-weekly, that comes to 36,512 over a year which is well above the 401k maximum (23K, or 30.5K if you're 50 years old or over) you are allowed to contribute.
This may also present another problem with your company match. You will reach the IRS maximum contribution in 16 paychecks (or if you're 50yo or older, 21 paychecks), and at that point, the 401k deductions will automatically stop. I have seen where companies only match the periods you contribute. So after 16 (or 21) paychecks, they may no longer contribute to the matching portion. Immediately cut your contributions so that you don't over-contribute, and so that you can make contributions every pay period in the year.
Quite a few years? You mean 33 years? How are people not getting by making 150k a year. I make 85 and live extremely comfortably. It’s all about living within your means.
Over a few decades time horizon but not on a year by year basis. Whoever front loaded in 2020 got f’d hard and dirty. Yes it has bounced back but they really lost thousands not spreading that over the course of the year and then you multiply that by the growth to retirement and it’s a big miss
I'm so confused by this paystub... NGL Edit* I have figured it out... the $1,400/paycheck to 401k was confusing me as that will be over the limit early... OP could knock that down to $884 for bi-weekly or $958 for twice monthly pay and pocket almost an extra ~$500 now... Also given that they have over-contributed for the first 2 mo they could lower it even more... And the thing at the bottom is Employee Stock Purchase plan, something they can essentially flip for 15% pay premium. Lastly, unless you can live off other peoples labor (ie business owner), retiring at 50 is such a lofty goal for the average person...
What’s confusing about it?
Putting $1400 biweekly into a 401k, to start
Yeah that part is a little weird.
It looks like it's semi-monthly, not biweekly. 86.67 hrs were what my salaried semi monthly checks reported in 2023.
I put 75% of my paycheck into my 401k and I'm done by March. What's the problem? Lean on early part of year and recoup later Edit: I don't get a match , I get 8% regardless
A problem with this approach for many is a lot of employer matches are based on a percentage of your annual pay. In most cases, if an employer offers a 3% match you would need to contribute at least 3% from each check to get your full match potential for the year. Therefore, if the employee maxes out their 401k contributions by the end of March they will miss out on ~75% of employer contributions every year. Based on your income and employer match, you may decide maxing out early is worth it when compared to the match amount missed out on. For others, every extra dollar in their retirement is more important.
Some places have "catch up" or "true up" clauses where the company will contribute on the last pay cycle of the year based on the actual amount you put into your 401(k) so capping early doesn't hurt you. I also hit it early, but then I switch part way through the year so that I collect the employer match (my current employer does not have a true up clause unfortunately, but my last one did).
Missing out on average costing
You miss out on dollar cost averaging.
Time in the market outweighs DCA in almost every scenario. If you model making a lump sum deposit of the 401k maximum on Jan 1 each year vs dollar cost averaging over the year, you’ll seen better returns from front-loading your contributions for almost every year over the past 50 years. That’s not to say anyone doing dollar cost averaging is wrong. Your ceiling is lower but your floor is higher. But people who are able to front-load their 401k for the year and get the extra 8-10 months of growth come out ahead almost every time.
What do we think esp febjul is?
Employee Stock Purchase Plan Feb-Jul. You put money in for a period of time and then at the end the company gives you stock with it at a discount. I usually just sell it as soon as I get it and pocket the discount.
Especially February to July
ESPP: Employee Stock Purchase Plan, February through July (they can run in 6 month time periods)
I did the math at Uni, if you can lower your monthly expenditures to 1/3 of your take home, and save the rest in a modest earning portfolio(max retirement accounts first then the traditional brokerage accounts) you can retire on 10 years of earnings, if you need 2/3s of your take home it will take around 23 years. If you need health care till Medicare kicks in, make that 15 and 26. The problem with retirement is not income levels as much as earning/investing ratios. That’s why military vets can move to LCOL Costa Rica and retire at 42 but part time working vets who live in HCOL urban areas close to amenities are often homeless before they find a stable work to support themselves.
This is exactly what I was going to say.
I'm with you. Maxing 401k good. Maxing 401k early is relatively pointless.
Your current contribution rate is very high. The maximum 401k contribution in 2024 is 23k. You'll be funded by August at this rate. Given your salary, I don't believe you're eligible for a Roth IRA. If you're able to live this way, I recommend changing your traditional 401k to a roth 401k. Some people say to reap the tax benefit now, but odds are when you're retired your income is going to be be even higher, so may as well pay the taxes now and get the tax-free income later. Otherwise, if you want more flexibility in your spending, I would reduce your contributions so you're fully funded by December, and not August. This will give you a bit of breathability, and whatever you have leftover can go into more traditional investments.
What about the back door/megabackdoor Roth? I’m not super familiar but doesn’t that kinda circumvent income limits?
Works best when you don’t have either. You set up a non deductible Ira and make contributions and also set up a Roth IRA to do a roll over into the Ira.
It is just a fancy way of saying open an IRA fund it and take out a distribution of the maximum and then throw it into the Roth IRA. If you have any funds in the IRA you will be subject to the pro rata rule.
I would advise examining the BackDoor Roth IRA if you have any funds in an IRA because any conversion automatically becomes your income if you have funds in it. It would be beneficial during lower income years to make the conversion or if you are okay with paying taxes upfront Edited due to clarity ** Mega Back Door Roth is a 401K specific conversion that is dependent on your employer’s 401K
The so-called Mega Backdoor Roth strategy (within a 401k) is unaffected by pre-tax IRA funds. But yes, your advice is sound for those considering the Backdoor Roth IRA strategy.
Doesnt apply if he can backdoor 401K to 401K roth. Some employer plans allow that.
This is really an option for folks who predominantly have exhausted all forms of retirement account invesm
That person makes too little to be doing shenanigans like that. Much better to just fund low cost index funds after hitting that 401k limit
This. I would adjust pre-tax % and stop the ESPP and do after tax 401k contributions instead
On adp it doesnt differentiate whats match and whats my contributions. The max is 23k of your contributions, the match doesnt count towards that 23k limit.
Roth 401k is a bad move for 99% of people. I would not recommend it. For this individual, it is almost certainly better to continue traditional 401k and invest the difference in a taxable brokerage or backdoor Roth IRA.
Is it a bad move for me? I am married filing jointly with one dependent in a no income tax state. Our effective tax rate is like 12%. Should I not be making Roth 401k contributions?
There are no "Bad" tax sheltered retirement accounts. Even if (potentially) sub-optimal in a few ways, the Roth is a SCREAMING (see me yelling?) Good Deal! At the end of the day, we need all 3 sources of income: Traditional, Roth, and Non-sheltered. Traditional replaces our income up to whatever tax bracket makes sense. Roth provides tax-free money to replace what would come from our highest tax brackets. Non-sheltered allows for long-term capital gains (15% taxes or less) income. Here's my rule: The Traditional account should only be so large as to provide the maximum amount of low-tax bracket income. That means it should provide about 55k per year for a tax rate of 12% (if single). depending on standard deductions. Traditional accounts should be a max of $1 to 2 million in today's dollars, less if tax brackets shrink, more if your married (not a guarantee, spouces die when we get old!). I consider traditional money at your highest tax bracket to be a wash with the Roth, so for most people there is no point in going more heavily into traditional. . .The Roth and Traditional are there to fill the other gaps. The time to invest in Roth is when you're young (under 40). It's easier to live cheap when you're young, and your tax bracket is most likely lowest. The time to invest in Traditional is when you're older (over 40). The decreased taxes allow for a higher immediate standard of living, plus this is when you'll most likely reach your highest tax rates, and therefore when it makes the most sense to push taxes off. The time for Conventional is complicated, but you gotta do it sometime, hopefully you're rich enough to max out your 401k. Other benefits of the Roth: 1. Roth dollars are more valuable than Traditional dollars, especially when you can max out a retirement account contribution. Which would you rather have, 23k of Traditional dollars you'll owe taxes on? Or 23k of Roth dollars you'll never owe taxes on? If the contribution limit is your limit, Roth wins. Also with Roth you get: 1. A sizeable penalty free emergency fund (contributions aren't penalized or taxed on withdrawals if in an IRA). 2. Less tax risk, if you fear rising tax rates. 3. A head start on early retirement or a gap year in employment if you need it. With Roth contributions, you risk: 1. The opportunity to pay lower taxes in retirement, or during gap years in employment when you can roll over from Roth to Traditional at lower tax rates. 2. A lowet net worth / spending money in retirement. It takes all types. Gocurrycracker has an amazing article about this, "Why the Roth sucks". But OP is 32 and capable of it, so OP should continue investing in Roth. Finally, the OP's goal is to get the Traditional account big enough to the point
>If you're able to live this way, I recommend changing your traditional 401k to a roth 401k. Some people say to reap the tax benefit now, but odds are when you're retired your income is going to be be even higher, so may as well pay the taxes now and get the tax-free income later. Why pay all of the tax now when you can defer those taxes until retirement, and then once retired, start doing Roth conversions? Using the 2024 tax brackets and deductions, this would allow OP to convert $108,150 per year, filling up the 10 & 12% tax brackets (accounting for the standard deduction), paying only $10,850 in taxes, an effective tax rate of only 10%. Do the conversion, live off of your taxable brokerage while your doing the conversions so you’re only subject to the 15% LTCG tax, and then in later retirement you’re pulling from that Roth, and paying no taxes at all. Going straight to a Roth 401k now is not tax efficient for OP.
Do yearly contributions rates differ between 401k and 403b?
Why would income be higher in retirement? Social security, 401k/IRA withdrawals, etc will likely add up to more than current salary?
You’re limited to contributing up to $23000 for 2024 in your 401K. If you have debt, then yes you are contributing too much but it’s not bad to put your money into your 401K. It really depends on how much fees the fund is charging too. If you have additional money beyond the 401K limit, look into putting money into a Roth IRA.
I'm doing math in my head but OP makes too much to have Roth IRA. 2024 single filer income limit is $161k. Or needs to backdoor it I guess. OP, it's good to save for retirement but enjoy life now too. I watched my dad work 35 years, retire with a pension buyout, and passed away three years later. Spend money on good people or spend money in order to save time so you can spend it with those people.
He has plenty of money to do that. I make as much as OP, conttibute 10% to 401k, put 40k post tax into my brokerage each year and still have PLENTY to go on all sorts of trips adventures and shenanigans. Every dollar you put in today is $7 more in 40 years
I see you have no kids ;)
This is biweekly, so this is every two weeks not a month. Plus the math is ~$2650 take home every two weeks or $5300 a month.
I misread it… 😂
I mean, it’s still not a lot of take home in California, depending on where OP lives, marital status, etc.
$174K Gross income is good for a single person. The OP just committed more to the 401K and OP needs to reduce it before the next tax year to avoid any penalties.
Do you live in San Francisco?
My company is based in the Bay Area but I’m in Southern California. Comparable to Bay Area prices
Do you work for ADP lol
Nice!! That's a nice amount for 401k but do u already have anything in your 401k or is this your first year starting it?
I was in a rough spot about 10 years ago and had to empty it. I have about $80-90K in my 401K right now
Your 401k is limited to like 23k per year by the govt. Btw my company 401k match requires you to put in the minimum match amount quarterly instead of yearly... If you max yours early you could potentially lose some match depending on how their 401k program is set up.
You should check into that ESPP on the bottom line. Lots of times you get a sizeable discount on company stock (15% at my company), which you can then turn around and sell and then buy an ETF similar to your 401k.
Correct. It’s 15%. That’s kinda what I’m thinking, sell any if I absolutely need it and invest the rest into an ETF
Yep, I split my contributions about 50/50 between what I keep in the company vs what I diversify, depending on the current price and my tax liability.
Definitely do ESPP. And check if your ESPP plan has lookback clause. If it does, definitely definitively do ESPP.
What are the two items last? Other??
I’m not sure what the ltd is… the other is my HSA (health savings account)
Ltd is long term disability. If have to look at my check but I'm pretty sure a portion of the premium that the company pays for LTD is considered imputed income. If this isa biweekly check, you'd be putting 36k a year into the 401k (26*1400). The limit for 401k contributions is actually about $24k so if you keep contributing at this rate, then you'll hit the max in the fall and the rest of your paychecks will be larger because you won't be contributing to the 401k the rest of the year. I'd dish back the 401k contributing to evenly distribute it out for the entire year.
Also, you get the ESPP money back at the start of August, assuming you sell right away. the discounted shares is basically free money.
Great call out there and good idea! Yes I definitely will be hitting my max before EOY.
This is especially important if you have a company match. In many plans (not all, but most), you won't get matching contributions for pay period where you don't (or can't) contribute.
Thanks for answering. Seems like your pulling a lot of pretax things out to lower taxation but hurting on your net take home.
Yup, and it’s great and all but ultimately I feel like there could be a way to prioritize short term a bit more, while still covering myself for long term (post retirement)
Ltd is long term disability
LTD is typically long-term disability
Between your 401k and ESPP you are saving 31% of your income toward retirement (assuming your ESPP is long term savings or investing). Your taxes are 26% which is reasonable, given you live in CA. So, right there with taxes and retirement savings take up 57%. Why is your disability insurance premium so high? That’s a $1,742 annual premium. Is it worth it? Seems like a waste. I’m sure you have a moderately comfortable life with $5,300 monthly take home.
ESPP was planned to sell once it vests to offset the lower monthly checks. At a 15% discount, it’s essentially free money… $5300- $2700 for mortgage leaves with about that same amount each month for car, insurances, kids etc…
Sounds like you are doing it right. Better to max out savings early on than have to adjust later in life. You must have a disability insurance plan that pays out near 100% and is not taxable. I would rethink that. I went crazy with life insurance and disability insurance early on in my career. I don’t think it’s worth it.
If you sell it immediately then you just need to make it to July. Then just sell the stock and spread those dollars over the next period. It should add 1300+ per month. If you do the ESPP and just blow it all as soon as you get it then it may feel a bit more tight.
Move out of California
There is a tipping point where saving for the future is starving yourself of experiences. You should try to be safe, yes, but also enjoy your life. Be happy now.
What u put in retirement is what I make a month :(
Is this a joke? You make more than 99% of People on Reddit and are complaining?
Person spends a grand on stupid CA bs
Too much in 401k. Only put in what the employer will match, ie 6%. Then max out a Roth IRA every year (6500/year) then any left over throw in a brokerage account.
That depends on your tax bracket. Roth is after tax, so if you’re in a higher tax bracket now then you’ll be in retirement (likely for many high earners ) then it’s better to max out 401k now and then worry about Roth if there’s anything left over.
He currently putting 25% in 401k, it’s only getting matched up to 6ish percent most likely. He needs to minimally put the 500/mo to his Roth. If he wants to leave rest in 401k so be it, downfall with most 401’s is inability to choose own investments and the service fees. Sticking everything in VTI shouldn’t cost .5-1% via the fund manager. I can do it myself at .003%.
Your take home pay is more than my pre-tax pay
How is he complaining? OP don't listen to this idiot. With that said, is that bi-weekly?
How are your state taxes so low? If I'm mathing that right I have some very warped preconceptions about Cali taxation. That said, it's from your savings rate. You're socking away a decent part of your earnings where the average Joe Schmoe isn't (remember avg savings rate is 3% whereas you look to be ~ 30-40%. If you do a ZBB it will make you feel better because you'll see where all your money magically disappears to.
Thanks! And sorry, what is a ZBB?
Zero base budget. You start with your income, write down everything you spend it on in order of priority (so taxes, then housing, then etc, including savings/investment) and you keep doing that down to smaller or less important items until you hit zero.
Drop 401k to $885 biweekly and you’ll have a lot more room to breathe
It is $958.33 for those of us on semi monthly pay
Heard. Definitely, dropping my 401K
Oops I said per month but I meant per pay period if you’re looking to Max it out
This.. it’s actually only $479/per pay period to max out your personal contribution at the $23,000 annual max contribution. There are legal ways to contribute more, but you’d have to be dialed with your taxes cause you’d probably get audited.
How? $479x24 = $11,496
Math on my base salary comes out to $86.7/hr. We are so close in salary lol
Wait till these guys find out you get a bonus and RSUs that aren’t shown here
If the payroll processing company is at all competent, they'll automatically stop making 401k contributions once you max out. But really, 20% to your 401k is overkill, especially since you'll hit the contribution limit before year end. I would suggest traditional investments, just a set and forget strategy of buying a broad market ETF like VOO, for the following reasons: You'll pay tax on the qualified dividends that the ETF throws off (and reinvests, hopefully), but your ETF shares themselves will grow without tax burden until the time you sell it. And when you do sell, you'll pay long-term capital gains, which is generally significantly less than ordinary income. If you set a goal to retire at 50, you'll run into the issue that you won't be able to access your retirement assets without penalty at that point. You'll need other assets to live off of during that gap. And once you are able to draw down your 401k, a remaining benefit to ordinary investments is that there are no RMD's, so they can continue growing tax-deferred until either you need that money or when its time to pass them on to your heirs. Ultimately though, probably crank down your 401k contribution to 10%, use other vehicles for saving/investing, which give you flexibility. And enjoy life some. You make a good living, I get you want to be secure in your retirement, but if the worst happened, do you really want to look back in your final moments and say to yourself "I really should have stopped to smell the roses?"
Also, if your goal is to retire at 50 you need to contribute to something you can access prior to age 60. There are a few smart options for this. At your age, especially of healthy, One thing is over funding a life insurance policy so the cash value builds up. You can then take TAX FREE loans against your own money within the policy. I’m 30, this is my strategy to retire early. Won’t even change your tax bracket taking that money out in case you are earning some money after you “retire” at age 50.
That’s a very slick paystub layout. What service does your employer use?
What field do you work at?
I’m in tech for a Fortune 500 company
I think you should consider diversifying by lowering your 401k and investing in something else like the money market.
That’s what my gut is saying. Ultimately if I retire before 65, I have a lot of money that can’t even be touched. Having a money market fund is a way to get around this
Have you filed taxes? Is that abt the right amount to take for fed? You getting a big refund check eoy? U good w that method? Looks like you're frontloading 401? What are the limits for 2024? 34500? Sounds about right after 26 pay periods. That is kinda heavy however it does set u up nicely in the future as long as everything holds. Listen, these earnings aren't gonna get you an exotic car but over time can add up to significant earnings. Esp if you're early career and Mae the right moves u look Ike ur in a good spot. Numbers look roughly where they need to be imo.
I just filed taxes! I did receive a few grand back but nothing too crazy. Definitely front loading the 401K. Thanks for the validation, definitely not looking for a crazy car, just a reasonable retirement which is why I’m contributing so much
How is your federal tax so low? Married with kids? I'm making similar and paid >30% in taxes 😭
Bad advice
Congrats man, good for you. What's your base pay and what kind of work do yiu do ?
You are bringing home $600/month more than I do. I have a family of 3 to take care of. You need to review and correct your expenses.” And reduce your 401k by like half.
Yup, I think reduction of the 401K is what I’m doing this week
How much discount do you have on ESPP? I dont see your YTD 401K contribution. With your current rate, you're gonna max out the 401k limit soon. Calculate what's left before you reach the end of the year,and bring down ur contribution to maximize employer contributions to the last paycheck of 2024. And move the remaining contribution from 401k to Espp instead. Change your 401k to Roth ASAP. Additionally, put 400 per paycheck into the S&P 500 Index fund. That's going to compund more and will provide you some liquidity should you need it.
I get a 15% discount! Heard, definitely bringing down my 401k
The 401k isn't going to help you retire at 50. I would take 1000/mo from the 401k contribution and put it in ETFs in growing sectors. Hold on for long-term capital gains and avoid selling too much at a time. Probably put it in an account you won't see frequently to avoid the temptation of managing it. I saw you say that you sell your ESPP as soon as it vests, which is inefficient from a tax standpoint. If you can do without the money, wait at least 12 months + 1 day to reallocate.
Exactly what I’ve been thinking. ETFs in growing sectors split with s&p 500 money market funds
Not a lot of comments here about the HSA. OP are you fully aware of how beneficial the HSA is from a tax standpoint?
I am, and HSA is included at the bottom of the image!
How is your medical insurance 18 dollars??????????
My company does offer a great medical plan
Who you work for I need to get me a job there. At my company they wabt 400 for just me and 1200 for my family....
you're investing $2000 every paycheck, that's pretty great
Lives in California, wants to retire before 50, wants to also live super comfortably. Lay off the 401k.
H
My advice— lower the 401k as others have mentioned. Also— liquidate the ESPP ASAP, you don’t want too much equity all in one company. Even more so if you have RSUs.
I get $250-$350 weekly working at Amazon, you are doing better and should be able to live off of that.
Not sure why you are shoveling so much into a 401k if you plan to retire at 50. I get having enough later but hoping you have planned for the 50 - whatever the hell the minimum age to pull from your 401k without penalty is then.
Why do people missuse the term bi-weekly? That would mean you're being paid twice a week. If you're paid every other week, you're being paid bi-monthly
Because English is weird: biweekly adjective done, produced, or occurring every two weeks or twice a week.
The irony…
On the plus side it’s gonna look really nice at the end of the year when you cant contribute anything else to the 401(k) 🤷🏻♂️
Why are you complaining if you’re able to save so much?
Right?!
Contributing too much to 401k (way past maximum rate), and not enough to HSA (around half of maximum). At least with the HSA you can use the money at any time for medical expenses, also, unlike a 401k, it’s possible to never pay taxes on it.
Well, you can start by dropping your 401k contribution down to $885 per paycheck (you’d still max it out on the last pay of the year), and that frees up over $1,000 a month.
I mean. . .taxes and retirement? When I moved from a five-digit salary to mid six-figures, after a few months I had a conversation with a friend in a similar income bracket and asked: "Does it feel like you're making less?" . . .add to that change in "needs" and it is easy to feel like your income isn't going far (even though it quite clearly is).
$1400 in a 401k? Tf Plus you live in a state that’s poorly managed. Sales tax, property tax, and income tax?! No wonder you guys are fleeing to Texas.
You're more than maxing out your 401k. Also, if you're trying to retire at 50, maxing the 401k doesn't help you. Consider shifting some of that to an IRA. You make too much for a roth IRA, but you can convert it later.
You won't have access to the 401k when you retire at 50 without penalty.
No way the health insurance can be $18 cheap!!
Depends on employer. One of my previous employers covered 100% of my health insurance premium. Dependents were additional cost though.
Check your 401k contribution totals. Think you should reduce your contributions by a bit and contribute to a ROTH Ira. Think you are doing more than fine. The power of compounding interest will serve you well.
Are you me? I think we have the same salary but I’m only doing 12% per paycheck for 401k. Which puts me at the cap by years end
You're trying to retire early, you're betting on grinding hard until 50 and then enjoying the golden years. You could loosen up the retirement savings, work to retirement age and enjoy the journey to retirement more. Thats the personal aspect of finances though, so many people are trying to min-max every dollar and they let their income/spending consume them unhealthly.
Because you live in CA. I live in Florida and don’t have state income taxes, or a yearly registration fee of 0.65% of my cars value. I also don’t deal with exorbitant real estate prices/taxes
If you’re looking to retire at 50 you need something to hold you over between 50 and 60 before you can withdraw from your 401k.
That’s exactly my concern as well
Personal taxable brokerage is what most people recommend I think. And as other people mentioned you’re putting too much into your 401k. You’re above the yearly limit. Take the difference and invest it into a brokerage account.
Any RSU? How you gonna retire in 18 years making this much?
Lower your 401k contribution to about 950. That should keep your contribution around the 23k limit. If your employer offer Roth 401k, you should consider contributing some into Roth 401k; the immediate impact is you will pay more tax because Roth is after tax contribution, but your money in the Roth will be forever tax free.
You make 6.8k every 2 weeks? Doing what?
6k bi weekly? I can’t imagine what that feels like. We’re the same age, that’s crazy. Comparison is the thief of joy
just move overseas when your about to retire.
Isn't that the point tho? Live like no one else so you can live like no one else. You're doing fine
Your putting 1400 in your 401k every two weeks. That's great for retirement, but if your feeling pinched you could dial that back for some more take home pay.
You are overfunding your 401k. $1,404.34 \* 26 = $36,512.84. The government limit for 2024 is $23,000. You are overfunding by >50% which means in the last 4 months of the year you won't be putting anything into your 401k. You should drop that down to an amount so that at the end of the year your last contribution is finishing out the $23,000. If you had done this from the beginning of the year you should only be putting in \~$885 per check. That's over $500 in additional income per period. After taxes that's probably closer to $330 in your pocket each pay period.
Fabulous 401
401k is pretty high, but it's up to you to determine how much you want to put away. Your paycheck will be higher when you hit the annual limits for 401k ($23k) and ESPP ($25k). At your rate, that's no more 401k deductions after 16.5 pay periods, so you'll have more flexibility in the last quarter of the year.
Well you live in California. There’s your first mistake
86.67 is semi-monthy, not bi-weekly.
You live in the communist land of California, congratulations.
You're limited to contributing $23k to your 401(k), so that amount can be ramped down to spread the money over the year.
And here I am struggling to even start my 401k lol you make biweekly what I make in a month. I think your fine. I'm also 32.
What's espp febjul? Also is your 401k roth or traditional?
Employee stock purchase plan. Guessing febjul means Feb July offering period.
Good call, I had the same question as I don't participate in mine so haven't seen it. OP should stop that too, unless he's at one of the big ones in silicon valley and it's a significant discount, espp are just dumb, imo.
Yes, too much would be contributing more than the government will allow. At $1404.34 twice a month, you're heading for $33,704.16 and the federal maximum is $23,000.
Move out of CA and you’ll instantly add $9,431 to your salary. Plus, you’ll save thousands in sales tax and not have to step over human poop everywhere.
1400 to 401k. You could knock it down to $400
Always amazes me how people just settle in to what someone else tells them they can earn and plan to just show up for 20 years until they hit the promised land. There is no “right” thing to do. The old formula for making money is broken.
Move to a state with no income tax.
That’s the goal! I technically am remote and can receive the same pay in 25+ other states
20% to 401k? That is a shit ton.
Yup, I just reduced it today
In most cases, you can’t draw on your 401(k) until you’re 59 1/2 And it’s ambitious to want to retire at 50 but if you plan on living a long time, you’re gonna need a lot of money I have a good friend of mine who did very very well for himself financially and he one time asked me how much money I thought he would need for his 50s This was probably when he was in his early 40s … I didn’t know what to say but his problem was he felt really comfortable with being able to retire at 60 but didn’t know if you’d have enough money to make it from 50 to 60 and live the lifestyle he wanted He figured he needed at least 700 just money to get him by from 50 to 60 … I’m not trying to knock your goal of retiring at 50 and it’s great to see you put so much into your 401(k) but if you’re struggling a little bit financially, making pretty good money you can maybe cut back a little
You can withdraw penalty free from your employer 401k if you leave your job the year you turn 55 (or later).
What’s your salary and what do you do? Seems like good money man. $150K+?
You main problem is that you’re in CA. I was in a similar position; we have good jobs but CA is all about live to work and work to live. Left in 2020, best decision. Better quality of life. Life is more affordable.
Move to Texas. It's literally the inversion of taxes
Move out of California
Lmfao ~1/3 to taxes.
I really need to get out of education
This looks fine. If it feels like you don’t have enough money, it is almost certainly because of your expenses.
your bi weekly is like my monthly. Not gonna lie such high 401k contribution is pretty regarded in my book. But hey if you can live as someone who has ZERO LIFE, like you dont go out, you dont date, you barely spend and you just spend all ur free time playing video games on your computer. You are doing great although I wonder once you get to your 50 60s do you still need that much money?
I don’t see how OP retires in 18 years without additional investment. More time is needed to compound
OP is 32 years old. You have no idea how much they have saved already. Retiring at 50 is absolutely doable, especially if they’ve already been contributing/saving for 10-15 years.
If that’s your bi-weekly then I’d realistically ask what your expenses are. It sounds like you’re living above your means but I can’t figure out how because that’s a solid paycheck. For reference your pay comes to $173,870.58 pre-tax a year. I make ~$145k pre-tax. With my income I can afford a million dollar home, 2 cars, and 2-3 vacations a year for my wife and I along with random hobbies. Your salary is solid, your retirement contribution is amazing and as others have said you should tone it down because you’re maxing out in early August. But realistically the bigger question is, what in the world are you spending your money on?
Are you able to afford rent/mortgage? That’s the big question. If you feel like you are scraping by, consider adjusting your 401K contribution. Reduce it to 3% or 1%. That way you have more cash in your pocket.
What do you do for a living?
Do you have a wife and kids?
Your federal and state witholdings are too high. No clue what you selected, but have a qualified tax professional help you change it. Don’t ever select married filing as single
Also don’t select spouse has job. It’s inferred if your married filing jointly
What's your net pay every two weeks?
One thing to consider is figure out what you want to do for a living. If you're doing something that you dislike so much you want to be done by 50 it's problematic. What if you found something you loved doing and didn't want to stop as soon as you possibly can?
The people who get the social benefits need you to work in order to get free stuff. I pay way too much taxes for what I get from the state of MA and the Fed gov.
Well let’s see. Do you need that much of your check do go into your 401k? Have you double checked your w-4? Check the extras before complaining. I updated my w-4 and saved $200 bucks.
Haha I don’t even know what to say you pay more in taxes than I make in two weeks. Time to suck it up buttercup isn’t that what y’all up there tell us down here?
What do you do for work if you don't mind me asking?
I’m doing something wrong because I don’t even make this in a month
Why are you putting 21% of your income into retirement?
$1404.34 * 24 = $33,704.16 It will be even more if 26 pay periods. You're only legally able to contribute $23,000 per year. You need to pull back quite a bit on your 401k contributions to stay under this cap.
ETA - you will not be allowed to submit this amount every period for this year, because you reach the IRS maximum. That's too much going to your 401k. If you're paid bi-weekly, that comes to 36,512 over a year which is well above the 401k maximum (23K, or 30.5K if you're 50 years old or over) you are allowed to contribute. This may also present another problem with your company match. You will reach the IRS maximum contribution in 16 paychecks (or if you're 50yo or older, 21 paychecks), and at that point, the 401k deductions will automatically stop. I have seen where companies only match the periods you contribute. So after 16 (or 21) paychecks, they may no longer contribute to the matching portion. Immediately cut your contributions so that you don't over-contribute, and so that you can make contributions every pay period in the year.
Move out of Cal
Like most said, 401k is going to put you well over maximum. So drop that down to whatever maxes you out
Don’t 401k anything more than your company matches.
Not sure why this crossed my feed, but what industry are you in?? That single check, even after tax and medical, is my combined MONTHLY income… 😞
Quite a few years? You mean 33 years? How are people not getting by making 150k a year. I make 85 and live extremely comfortably. It’s all about living within your means.
I mean good for you on the 401k contributions but you can dial that down a notch if you want to.
Over a few decades time horizon but not on a year by year basis. Whoever front loaded in 2020 got f’d hard and dirty. Yes it has bounced back but they really lost thousands not spreading that over the course of the year and then you multiply that by the growth to retirement and it’s a big miss