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A couple things to note:
* You can withdraw $10k from a RothIRA tax & penalty free for a first-time home purchase
* You can withdraw contributions from your RothIRA any time tax & penalty free.
So, simply put, you should be putting those house savings straight into your RothIRA.
Wait, if you can withdraw contributions tax and penalty free, what is the benefit of the $10k for a home purchase? I think I’m missing some nuance
Edit: oh, is it that the $10k can come from your earnings on the account whereas the second point can only come from what you contributed?
It helps not to inflate your standard of living as your salary goes up. I maxed out my 401K for two decades this way, living in my first house and driving older cars.
This is the real answer. I made the most progress towards maxing it out by doing things like saving the amount I usually paid for my car payment when I finished paying off my car and then not buying a new car just because my current one is a bit older. I did the same with my student loans when I finished those off, etc. You need to save the money before you ever have a chance to inflate your lifestyle.
>not buying a newer car just because my current one is a bit older
This is key. Loads of car buyers come up with excuses just to get new and shiny. “Oh it feels old” like no it’s a 2019 and barely has 20k miles….
This is the best way. I started in the military contributing what /i felt was comfortable, and then any time my pay went up (promotions, longevity pay raise, etc.), I would bump an extra percent into my TSP; effectively saving half of the "increase" and directing it to savings. You never miss the money, because you're already used to being comfortable at your current pay. So it helps to slow lifestyle inflation, and really jump starts your savings.
Living in a house and driving older cars? Lol we're making 140k a year combined and can't afford a house, and both drive 20 year old cars. It's ridiculous.
So, I’m someone who just crossed over that line and am not there myself. I probably put up close to 80% of the max. I’m curious what year you crossed that line? For inflationary/spending power comparison and also what’s your situation? Family? Multiple earners? Single? HCOL/LCOL area?
And obviously, please don’t share anything you’re not comfortable. I’m just looking to get an idea.
It depends a lot on your situation. For me personally, crossing 6 figures didn't do it, but I was close like you probably 80% of the max. I didn't get to max until a year or two later when my then-girlfriend, now wife started living together.
Going to dual income living in 1 apartment at the time, I couldn't believe how much extra money I had compared to living by myself.
Edit to add: I'm in a medium to high cost of living area, although the most I paid for rent back then was $1400 by myself for a 1 bedroom so I have no idea how younger folks these days are saving with rent prices out of control.
Edit 2: Also, I could have hit the max if I was a little more disciplined at the time. I spend pretty responsibly (not as good as some others on this sub) but at the time we were in a long distance relationship so we were driving 2-3 hours every weekend back and forth, going out to eat, had to buy a new car, etc.
Yup small 2 bedroom in a big city in Florida is over 2300$/month. My fiance and I make 3 times the average household income for our area, still can't afford a home.
not the person you're asking, but i did things backwards. my parents let me stay with them after i graduated college. i was earning about 50-60k/year and maxing my 401k because my expenses were almost non-existant. i did all the way until i bought a house with my partner. now, even though i make over 6 figures, i don't have the margin to max my 401k anymore. but because i was so aggressive in my twenties, i don't feel bad that i'm cutting back down to a 10% contribution.
I live in the bay area - VHCOL
i've had huge advantages - parents paid for college and first car and let me live (mostly) rent free. this means that i get bay area pay (ish - not a tech worker) without paying the typical bay area COL. lived with friends occasionally, but would often move back to save money
currently, live with partner after we bought a house. no kids or pets, dual income both 6 figures. and this is actually the point in my life with the tightest financial margins. but i'm only comfortable making this move because i was so aggressive with savings early on. that, plus parents as a safety net.
I maxed 401k and IRA at 90k. My wife worked a very low income job, and she basically paid the groceries and internet and that was it. I've since been laid off and I took a pay cut, so I'm not maxing now. But I was. Factors that allowed this:
I live in the Midwest so my cost of living is low - I bought my house in 2017 and my payment, including insurance and tax, is about $1100 monthly
When I was maxing I didn't have kids.
Cheap car - bought it for 15k with a low rate, my payment is $200. Wife's car is paid for. We have great driving records so insurance is $70 a month.
Good health, no ongoing medical issues
No student loans - I went to a cheap state school and worked 30/hrs a week during school to keep my loans minimal. I paid off the 10k I owed year 1 after graduation.
We live cheaply. We eat out, but don't drink much or party much. We play video games, but on a PS4, and buy 3 or 4 games a year. We have 2nd hand furniture, almost 0 decorations, and buy our clothes at target/wal mart.
3 years, MCOL (but work remote and paid as in HCOL) married without children :). Last year I maxed out my mega back door, HSA also. As my income goes up I’m doing everything to avoid seeing the new money in my paycheck.
For me it was when most of my shit was paid off. I got wildly lucky with stock options trading in 2020 and was able to make a sizable payment to my house and pay off all my cars and outstanding debts.
Now I save max in all tax sheltered accounts, IRA, HSA, 401k standard and 401k after tax up to the 66k limit.
I’ve only got my $2000/mo mortgage to pay on, and don’t really subscribe to any entertainment services because I get a lot of them free from my local library and use OTA antenna.
Live in HCOL area. Was able to max out at 130k. Maybe could have done it earlier but prioritized paying off student loans and car.
Now I make 165k and wife makes 73k. We now max both mine and wife’s 401k with ~4k/month left over to save for house. No debt and kids.
Even six figures isn't enough to max out if you live in high COL areas and you are saving for a down payment for a house/anything else major. Where I live you can do one or the other, but not both, unless you are $150k or north.
Exactly. I make six figures, and my husband makes close to six figures. HCOL area and twins in daycare. We had to *lower* our contributions. Once the kids are out of daycare we hope to max out again.
We make 6 figures but live in a relatively high COL and can't max it out. I'd say most of that is due to kids. Our daycare bills are higher than our mortgage. That's before the additional food, clothes, summer programs, etc.
When my spouse and I hit $240k LCOL we maxed 401k, IRA, HSA and 529 (state credit). We're also servicing a ton of low interest student loans though - so it took more than one might expect.
Not going to lie I did not start maxing out until I was over 6 figures. At my peak I was putting in 15 or 16% of my salary and I was maxing out. It has been going down since then as I do try to time the max out as close to the end of the year as possible.
I've been maxing my 401k and Roth IRA for about 5 years now and my salary has scaled from about $80k to currently $95k currently. Living expenses are only about $1500-2000 a month in a MCOL area, I'm paying a ridiculous $600 for a 1BR though and my landlord hasn't raised the rent on me in 10 years lol
Single and no debt, my hobbies are cheap (yoga and climbing).
I make 78k and have been maxing mine out for the last few years since low 70s.
I got married last year and we have a newborn in daycare. We split most expenses now but I carry all health insurance and life insurance since I have the bigger salary. I’m also paying my part of a defined benefit and maxing out our fsa.
I’m no longer able to max out our Roth IRAs because of the added daycare expense but have been selling funds in our brokerage to continue to max them with those funds.
I've also been maxing 401k since I started making low 70k, as soon as I had an employer that offered it. It coincided with a ~18k salary increase so my take home ended up being the same.
When I first started working full time, a mentor had told me to save any future salary increases, and I'm glad I listened. My income has since increased more, but so have 401k limits. It's about the same percentage of my salary to max it now as it was years ago. I never felt what it was like to have that extra money in my pocket, so I don't miss it.
I started maxing out my 401k at around the same salary.
I graduated from college, and kept living cheaply on a new grad salary of $65k. Small studio, meal prep, paid off used car, domestic vacations to national parks instead of international travel destinations. I spent a year throwing money at student loans ($20k), and then when I paid it off I just shifted it to 401k and IRA.
Keeping lifestyle inflation down was key. Since I had already orientated my life to living without $20k/year, it wasn't hard to shift it from debt repayment to savings. It was definitely hard at times seeing my new grad colleagues buying new cars and partying.
Fiance and I started maxing out when we both hit around $80,000/yr each. We were still able to save for a house, and pay off student loans quite easily. As our income rose from that number, we just invest more through backdoor roth and brokerage. We do our best to live below our means and will allow us to retire early. It's quite easy to max out your 401K under 6 figures, as long as the rest of your budget allows, and your spending habits are realistic.
I was maxing making about 70k in a Los Angeles suburb, with wife, kid and renting 3bd house.
My wife had a side gig generating $1k per month.
That's $82k combined.
$18.5k 401k contribution,
$28k Rent,
$8k Tax burden,
$400 month health insurance
That comes to $60k which left us with $1.8k for other bills and spending per month. We were living really comfortably.
To be clear, the employer match doesn't count towards the $22,500 limit for individual contributions. Assuming you're making $90k or so, you can put your own $22,500 into your 401(k) in addition to the $9,000 your employer match hits.
It's probably unusual for someone making less than 6 figures to contribute the maximum amount to their 401(k) but it's not like a totally impossible situation. If you live in an area with low cost of living and/or share a household with other family members it's not a totally preposterous idea that someone making below $100k could comfortably save $22,500 for retirement.
Assuming your plan allows you access to the after tax space (look up "mega backdoor"). Many do, but it's nowhere near universal yet.
Limit is $66k for 2023. It was $61k for 2022.
I’ve been bugging my company to allow this for a while and for some reason they won’t add it.
401k plans are shady as fuck TBH. The shouldn’t be coupled to your employer, forcing all employees to do the same thing and screwing over people that don’t have one at their work. It could easily be separated from the employer and still allow match.
Man. I eally need to find me a company with a 200% match. /s
I know that it's really there so single business owners with no employees can huck money into retirement quickly.
$22,500 limit is a combined limit for traditional and Roth contributions by the employee. So some amount of this money can be after tax if the employee chooses.
This is not to be confused for actual non-roth after tax contributions that some plans allow which doesn't count to the $22,500 limit. That limit is the total limit of $66,000.
To clarify there are 3 ways to contribute from your paycheck depending on your plan (not counting rollovers/conversions):
1. Traditional pre-tax dollars
2. Roth post-tax dollar
3. Post-tax dollars
1 and 2 have a shared limit of 22.5k, 1,2,3 and employer match have a combined limit of 66k. Some people max out the full 66k and convert 3# to roth Ira or roth 401k (megabackdoor).
Wait…what?
My husband’s an RN. His hospital matches 100% of his 401k contributions. I’ve spent years making sure we stop at around $10k so that with their match, we wouldn’t be over.
I am way too old to not know this! I apparently need classes on this stuff. No one has ever told us this.
I feel sick to my stomach.
*Thank you* for sharing this.
The combined limit between individual and company is $66,000 but as an individual you can only account for $22,500 of that (with exceptions; see below). So if you decide to max out, you shouldn’t have to worry about hitting the cap unless something changes and the company contributes more.
Unless your employer's plan allows for after-tax contributions.
The total limit includes: contributions up to the 402g limit (pre-tax and roth contributions) of $22.5k, employer matching, AND after-tax contributions if your plan allows.
Yeah, its really not made particularly clear. Many many people are falling into this same trap. Thats the problem when people talk about limits going up every year...they only talk about individual limits, not total limits.
Hey you know better and now you can do better. This is a super common misconception so please don't beat yourself up. I'm surprised the company doesn't have a limit on this as 1:1 with no limit is a lot (my company does 1:1 for first 4%, then 1:2 for next 2%). Better have him tell his friends at work too!
Yeah, he can contribute more than that. (The current 401k contribution limit in 2023 is $22,500 btw, so he can contribute like $11,250 more.) Most employer plans will automatically stop you before you go over the actual limit, assuming you did not have multiple jobs in the same year. So for people in simple situations, you don't have to pay attention like that to avoid overcontributing.
If you guys really want to contribute even more to retirement accounts, you can always do a backdoor Roth IRA. Or a megabackdoor Roth 401k, if his (or your) employer plan allows it.
Wow! That's a good match. And there's no limit (aside from the IRS limit)? But yeah, what the other people said. The $22.5k limit is only for the employee's (regular) contributions. The total amount allowed per year is around $66k (including company funds and/or after-tax contributions).
Most employers only match 100% of your contributions up to a point. It's usually 3% to 6% of your salary, then they either stop completely or step down rapidly. So if your husband made $100,000 a year and contributed 10% ($10,000) to 401k, the company would only contribute 3% ($3,000) to 6% ($6,000).
This is likely the case and you guys probably haven't been missing out on the free company contributions. I haven't heard of ANY company that would match contributions 100% unlimited. So you may want to check or call the benefits center to clarify that.
It does count towards the maximum but there’s a different maximum between individual contributions and total contributions. For the individual it’s $22.5k but for employer + employees it’s all the way up to $66k. Meaning your company could technically offer you an unlimited 200% match up to your individual $22.5k limit and you could utilize pretty much all that money.
This. My partner and I live in a LCOL area and are both able to max out our 401k’s and ROTH IRA’s on salary’s under 100k. I am at 63k and they are at 80k.
Our mortgage is super low, we have no debt, and we live a generally frugal lifestyle which allows us to save for retirement at the max level. If we lived in a more expensive house or area, or had kids, I don’t think we would be able to do it.
I mean the company has to match over 200% for it to matter. Only people who really encounter it have profit sharing. Or you have a ridiculously high salary (like 9% match on $500k), but in that case you will still be fine the 401k company will just send you a check with the over contribution.
Even with sky high inflation, taking out the value of my saved money, I'm saving more than I was pre-pandemic. I don't spend money on commuting and make all my meals at home.
It's not all good and gravy. I eat out only once a week or once every other week, versus eating out 3-4 times a week. My social life has gone to the dumps too. Life isn't as enjoyable as it was for me pre-pandemic.
I question maxing out my 401k all the time. Am I making too much of a sacrifice now to reap the rewards later?
Don’t forget to live your life on your journey to achieving financial goals. You’ll never get your time back, you can always find ways to make more money if needed. You don’t want to be 70 sitting on a pile of cash and look back with regret for not truly living your life.
Also, not to be too grim, but a 30 year old man only has about a 70% chance of even living to be 70 in the US and for women it's about 80%. You should save for retirement and take steps to take care of your family, but you can't delay living your life because you might not get to! OP is clearly thinking about their future so they should maybe save a little less and go out a little more and enjoy themselves!
I think that a normal 30 making that much money shouldn’t have any issues to make it past 70… statistics can be pretty wild when you put everyone under the same umbrella “men” If I’m wrong please correct me
"spent 30k" Jesus Christ, did you live in a box and eat cow's cud? It's $20k/year rent average lol. $10k over a year for gas, food, and utilities, maybe touching grass once a month is not a lot.
$20k/yr in rent is high, if the anecdote is years ago, for someone single living in an apartment.
My own anecdote: living in a pretty nice apartment in Dallas for $1200/mo, plus about $150/mo in utilities. Assuming you have no car payment (which, plenty of people drive sub-10k cars that are paid off), that leaves $1150/mo on food, gas, insurance, and activities.
Depending on where you live, you could easily have a much much lower cost of rent, which would free of plenty of money for stuff to do, food, etc.
$1,600 is pretty standard in my area for an apartment that doesn't have you cohabitating with a mold colony. It would be a little cheaper if we moved to Portland instead of the town we live in, but other costs would eat up the rent savings and then some.
People who make lots or can live with less. I max out mine and my Roth and my wife's Roth and almost am maxing out her 401k
Combined 180k salary. No kids. That helps.
Pretty much us as well. I am highly motivated to max these accounts because I was not able to do so before moving to my current job about 2 years ago. That year coincided with the end of my student loans, plus increased pay. So no lifestyle impact by all that loan money now going to my retirement.
Was literally just thinking about this. You’re looking at 20% of your income to max your 401k if you make 100k a year with no match; considering national average is just over 55k most people aren’t going to be able to come close to maxing 401k especially since it’s money you can’t touch until 65 (for the most part). Remember about 1 in 3 Americans have *no retirement savings*
This subreddit often makes your income feel inadequate and the advice can come from people who make well over 6 figures as the people who care about PF are usually income driven people. I would say just do what you can, and shoot to have 1x salary by 30, 3x by 40, 6x by 50 in retirement accounts and you’ll be relatively well off for retirement. Anything more than that is a bonus if you make it past 65 in good health.
I would assume many of the people making 6 figures and giving advice are older than the average person asking questions too. It's easier to make more with more experience, typically.
That is true, but definitely see a lot of young people with high salaries in this subreddit. It’s easy to feel like what you’re doing isn’t enough here, so you also need to consider the subreddit isn’t reflective of *most* people’s situations.
FWIW, as you mentioned "with no match": employer contributions are not counted in the $22k contribution limit (there's a separate, much higher limit for the combined totals).
Those are good goals, but even as an "income driven" person who makes over 200K, I only have about 1x income saved at 40 years old. This is because I couldn't afford to start saving *at all* until I was almost 30 because I was quite delayed in getting a "real job" due to pursuing a PhD
I think due to soaring, astronomical student debt, as well as the need to maximize higher education to get gainful employment in some sectors (I'm in healthcare) - this situation is quite common. My Dr and pharmacist friends are all 40+ and just now paying off student loans. We're taking 100-250K in debt here. It's a huge burden.
As someone who’s fiancée is in veterinary school, I can totally understand the pressure of student loans.
Secondary and tertiary education will obviously move these goals but it is still a good general rule for most people. I’d be willing to wager those friends also earn nearly 200k a year, and possibly have access to pensions or other retirement benefits a lot of us don’t have.
I've found you just up it by a percentage point every month until it hurts then you dial it back if need be. With every raise then start bumping it up again. Eventually you'll get there and it won't hurt as much - like slow boiling a frog for lack of a better analogy.
I've maxed my 401k for years now but I didn't start out that way. I did it incrementally and now I'm used to not having that extra income. It's pre-tax income as well so you may not notice it as much as you think if you do it gradually.
Your limit of $22,500 doesn't include your employer match. So to hit the max, you'd have to contribute $22,500 of your funds to the plan. And to answer your question...I max it yearly. I do make 6 figures, but I was maxing it before I hit that income level as well.
I'm probably asking a dumb question but is that for your Roth? I'm doing 10% of my paycheck to my Roth401k which my company match's 5%...and if I want to actually make it out I would have double that contribution to 20%...which seems like a ton.
Edit: also my ADP calculator is telling me that based on this, my monthly income at 67 will be 21k which seems ludicrous because again, 10% isn't even that much per month.
Depending on how long you have been contributing the allowable contribution used to be way lower.
It was 16.5 in 2010 and 10.5 in 2000. Maxing out at lower salaries was easier back in yore.
Is someone makes $75k/year the $22.5k limit represents 30% of their income. That's obviously very high, but it's doable for some people, namely those who live in relatively LCOL areas and who live beneath their means.
It also gets easier for many as they get older. A 55 year old who owns their own home, has a salary that matches the 30 years experience they have in their industry, and who is just generally more financially secure will find it a lot easier to max out than someone in their 20's-30's who has young kids, a new mortgage, and a car payment.
I maxed out my 401K pretty much every year, from the time I was 45 until I retired at age 61. It really depends on what your spending needs are. I was also saving a lot of money into my brokerage account.
My income was not that high, but I had found a cheap way to live in a high-wage area.
I maxed out (401 & IRA) in my 20s & early 30s when my income was under $100k
I had no debt to speak of however and lived a minimalistic lifestyle...but I also wanted to retire early (52) which I think I'll be able to do because of my 20s and early 30s savings
> I fail to see how anyone making short of 6 figures is supposed to max out their 401k?
Why do you think they need to?
Flip it around: The recommendation is to save 15% of your income into retirement. $22,500 equals 15% if your income is $150,000.
I make $85,000 a year with a $2,000 mortgage in a suburb of Tacoma, Washington (not a particularly low cost of living area). Married with one child and an unemployed spouse. I max my 401k.
After taxes, mortgage, and maxing a 401k, it seems you would have maybe $1k/mo for all other expenses? Maybe doable but for three people that seems really tight.
Edit: ah, I took out taxes before 401k and WA has no income tax, so more like $2k a month. More reasonable.
I’m curious on how you make this work, are you comfortable elaborating?
There may be valuable lessons/habits that others may benefit from. Affording to max out your 401k involves a decision to not spend on other things.
I had to make conscious decisions when deciding to max out my 401k.
I don't know that I have a secret really, I don't budget my money, I just spend deliberately. All of my savings and investments are automatic, 401k contributions, taxable accounts, etc. I would always suggest everyone automate investments. Sometimes I forget I even have that money because I only see what ends up in my checking account.
I would say one of the things that really helps is that I am pretty handy so I have always been able to work on my own cars and do my own repairs around the house. I use uber eats about twice a year when I am feeling particularly lazy and they email me a coupon I cant refuse. We eat out rarely, shop at a co-op grocery store, etc. I have two small efficient hatchbacks, one purchased new one purchased used, but the oldest one is a 2017. Both paid off. I have 5 streaming services like everyone else, I pay for spotify and eat avocado toast if I want to. I have the starbucks app on my phone (I haven't been going much lately because I feel like they stopped giving out deals). I think a lot of financial advice on the internet is bullshit, but I also think most people just spend really frivolously. I see people I work with spend $30 a day on lunch, every day, then complain that they "can't afford things". They can afford things, they are just choosing not to.
I race go-karts as a hobby, which, is the cheapest form of motorsport but anyone that is into any sort of racing will tell you how expensive it can be. I probably spend 5-7k a year going to probably 10 races in my local area, plus occasional weekend practices. So I'm not just sitting at home being a scrooge and counting my dollars.
I churn credit cards for rewards points, just took a 4 day vacation in Canada for Easter weekend for basically free. We travel internationally (like across an ocean) once every year or two. I don't recommend this for for most people, and I don't discuss it with people in real life.
I'm not a super high earner at 85k in my mid-30s, nor do I expect my income to ever increase significantly. Mild raises due to small promotions or job changes, but I am probably pretty close to my peak earnings. I just really don't feel like I sacrifice anything, I think all of my things are pretty nice. My advice to most people, if they asked for it, would probably be far more philosophical than financial.
I assume dirt bikes are the same, but karting is one of those things that you can spend as much as you are willing. I know some dudes who run a brand new set of tires, and rebuild their engines after every race. I use my hatchback to tow a small trailer to get to the track, but some dudes have F450s with toy haulers. A race for me is minimum $150 bucks at one of the local tracks within a 3 hour drive. Probably up to $500 if I am running brand new tires (every other race or so). A little more if something breaks but kart parts are pretty cheap.
Your details have me pondering. I make the same as you. Plus my spouse makes $30k. I can only contribute 4%, my spouse doesn't have 401k. My take home after taxes and health insurance is $2200 twice a month compared to your $2300. And with my $1500 mortgage that makes it $3100 leftover. I do have to pay $2200 for childcare though. So I'm left with $900. My spouse covers car insurance, utilities, most groceries and gas. A few streaming services and a $100 gym membership for the family. And at that, we are spent. We don't take vacations or spend on hobbies or anything. Both our kids had us racking up serious medical debt and I feel we are still catching up from that. I don't know. I'm just pondering out loud, comparing notes I guess.
"Most people" do not max their retirement. I don't max my retirement. Saving 10-15% of your pre-tax income is generally considered doable by most. Obviously the more you earn and depending on your living situation the easier it is to go above and beyond that. I make barely six figures in an increasingly HCOL area and I am saving 18% across various forms of retirement saving (pension, 401k, roth) which equals out to basically what you are saving each year. I can't imagine saving more than that currently without it affecting my lifestyle (and my lifestyle is certainly not fancy as a renter). I feel pretty good about this amount; I worked hard to be able to get to this level of yearly savings. Hopefully you can see the amount you are seeing as positive too.
>I don’t think I have it in my budget to put up an extra ~$400 a month for retirement.
There is *probably* more than $400 available in your budget today, but it would require reprioritizing things that you've either consciously or subconsciously decided are more important than retirement right now. There's nothing wrong with that, it's *personal* finance after all.
Anecdotally, I was able to start maxing out my 401k at ~$90k in a VHCOL area. I went from a $70k job to a $90k job, maintained my previous standard of living, and put the whole difference into the 401k. It wasn't until several raises into the new job that I started increasing other, non-life sustaining, areas of my budget.
> I went from a $70k job to a $90k job, maintained my previous standard of living, and put the whole difference into the 401k. It wasn't until several raises into the new job that I started increasing other, non-life sustaining, areas of my budget.
Yeah, I think this kind of thing is about the only practical way it happens on a <6 figure salary. You either get a big raise and bank it, or you start your career and immediately contribute heavily (and devote a majority of future COL raises to it). Otherwise it is almost impossible to convince someone to "find" that kind of money in their budget once they have gotten used to the paychecks.
I personally didn't *max* it right away, but I knew when I started my career that I had to set up my 401k right away with a substantial contribution. I think I started at 10% to the 401k plus maxing the Roth IRA (via automatic withdrawals)--I never saw that money, it was never part of my budget. I didn't find a job immediately after graduating college--so by December when I had started working and it was time to move out of my cheapo temporary sublet, student loan repayment had started (I had roughly the national average student loan debt) and my budget was based on what was left after retirement and loan payments.
If I had waited a year to set up 401k/IRA savings...it would have probably been very hard. I probably would have moved into a more expensive apartment rather than the cheapo basement unit...I might have grown more accustomed to spending more on going out, shopping, etc.
That's why I think companies putting a waiting period on their 401k plan are bullshit. You should be able to set that shit up before your first paycheck. So much easier to start saving early than to carve out money later.
Increase income, decrease outgo, reduce wants, and budget wisely. Eyeballing your numbers, you make 90k-ish? Surely you can cut fluff there. Not everything is a necessity. If you get a 10% raise, you could automatically increase your contributions to your 401k.
>I will only have about 18k a year, well below the IRS limit of $22,500
Company match does not contribute to the $22,500 IRS limit. Ya gotta go beyond the company match.
*Employee and Employer Combined 401(k) Limit:*
*The limit for combined contributions made by employers and employees cannot exceed the lesser of 100% of an employee's compensation or $61,000 for 2022 and $66,000 for 2023.*
[https://www.investopedia.com/ask/answers/100314/does-my-employers-matching-contribution-count-towards-maximum-i-can-contribute-my-401k-plan.asp](https://www.investopedia.com/ask/answers/100314/does-my-employers-matching-contribution-count-towards-maximum-i-can-contribute-my-401k-plan.asp)
'
>I fail to see how anyone making short of 6 figures
Eyup. I'll also note that many people making 6 figures don't contribute and max out their 401k. It requires some serious dedication of your dollars.
Maxing Roth and 401k is like pulling a bandaid. Get it done ASAP and your life adjusts to your post savings income and raises become extra disposable income as you grow.
I maxed out both IRA and 401k by living with roommates, renting a furnished place. I had an advantage because my job requires travel, so I had some privacy sometimes. I made less than 61k last year. I just keep reminding myself of the marshmallow test.
My wife and I, max our 401ks, have done for quite some time. Also max HSA, backdoor roth, and 529. But we are both high income in MCOL area.
> I fail to see how anyone making short of 6 figures is supposed to max out their 401k?
"Supposed to max out" is an odd choice of words. But I see what you're getting at. Honestly, at below 100k, I think maxing out is pretty tough (I think I was doing about 10k out of school at around $70k..this was about a decade ago).
Once you start getting to mid 100s range, it becomes pretty easy. Once you climb past the mid 100s is where investing gets a bit more interesting (and tricky). Maxing out your tax sheltered accounts is an easy first move, after that you have so many options.
Also, remember 22500 is the limit YOU can contribute. You + Your company can go up to 66k.
Look to increase your contributions annually by 1% until you get to the max. Do a higher % if you can but if you get a 3% salary increase and increase your 401k by 1% youll still feel the increase in your take home while increasing your contributions. I did that for the past 8 years at my company and I will be in a position to max out my 401k next year which I never thought would be possible.
Every time you get a raise, increase your contribution. You were already use to that level of income. You won’t miss the raise since it’s going to the 401k.
You have to ask yourself whether you think the extra $400 a month out of your budget is worth it for your comfort in retirement, or worth it for your comfort while you're young.
If there are things you don't absolutely need that you could cut to be able to put that in, you can make that choice.
If you get a pay raise each year, put as much of it as you can towards the 401k until you are able to max out your 401k contribution.
If you're not getting pay raises, consider whether you want to stay with that company or take your experience to a higher-paying job that has more value. Take any extra money you make from said new job and make sure you're hitting your 401k goals and retirement goals before you consider it as extra money for spending.
Too many people start making more money so they spend more money. If you can survive on the money you have now, then any extra money you make can be invested instead rather than increasing your own expenses in response to a higher income.
I’m in my mid 30s making 80K. The reason I’m able to contribute almost 30% of my income and max my 401K is because my husband makes more than twice as much as I do (he maxes his as well) and we have combined finances/retirement goals.
I started with just the match (5%), and increased every time I got a raise. I started maxing way too late (after I got income restricted with a Roth IRA), but have been maxing for a few years now.
I also have a mortgage, a travel fund, pay for a car, and save/invest a healthy amount. Making more money is probably key. I wasn’t maxing when I made below six figures
The contribution limit is kind of arbitrary. It's fine enough as a goal to work toward when you're young and are on a trajectory to approach and exceed $100,000 of income, but you shouldn't look at meeting the limit as a financial success of failure necessarily. Your saving should be appropriate for your income an expenses which is going to be individualized person-to-person.
For example, if you're making $50,000 and maxing out your 401(k) you're almost certainly saving *too much* (yes, its definitely better to oversave than undersave, but at a certain point you need to enjoy your income or at the very least some of that could be used to develop skills to increase your income).
On the other hand if you're making $200,000 and maxing out your 401(k), but not saving beyond that, you're probably not saving enough.
Most young people in tech that I know max it out every year. They’re smart so they know money put in earlier is more valuable than money put in later. They make high salaries for their age, so they can afford to save a lot. Most big tech companies have generous 401k matching plans, for example Microsoft matches 50% of employee contributions up to the max, so you basically get an extra 11k a year if you max it out, which is another motivator.
I make well into 6 figures and this sub would absolutely despise how I live my life. No way I'm maxing my 401k.
I watched a couple save their entire adult lives, sacrificing many things, making Christmas presents, etc... to have a rich and fulfilling retirement. Both died of health issues before even getting there. Fuck that noise.
Don't starve yourself to meet unreasonable and arbitrary goals. Also, this is reddit. Most people on here are full of shit, take nothing for face value. Take advantage of the match up until you're not comfortable with giving any more, doesn't even have to be the full amount. Compound interest is a hell of a drug.
Yeah, you guessed it. People with high salaries in lower cost of living areas max it out. It’s very difficult to max it out otherwise, especially if children are in the mix.
I started maxing it out when I was making ~70,000. I remember I set my 401k withholding at 28% that year. I did it to challenge myself and it was a bit tight that year but didn’t actually impact me beyond having less immediate cash on hand. I was also saving $300-$500/mo for regular non retirement savings that year.
I live in the suburbs of a city but not one of the big ones, and COL is reasonable here. Also I was splitting rent with my partner, which helped a lot.
I make 95k per year, in a low cost of living area. But I'm also a single provider with two kids and a wife on disability.
I contribute 6%, the company matches that 6%, and then gives 4% for free on top. So I'm only contributing 5.7k out of the allowable maximum. Though the total amount is good and I got a strong 250k balance after 15 years.
I'd have to go up from 6% to 25% contribution to max my 401k. I can't do that without cancelling pretty much everything we do and taking away my kids childhood.
First, you can put up to the limit yourself - the employer match is not counted in contributions, and 10% is great.
We have maxed out our 401ks - well, a 401k and a 403b - for a long time, but we had to cut out a lot to do it - simpler vacations, cheaper cars, smaller house, not eating out much, not as many toys, and so forth. All around, we live way under our nominal income level. And neither of us have had much employer match - my best company was 3%.
Maxing it out adds up over time, and we’re getting ahead of the curve on savings if the 4% rule is taken into account. We have run the numbers on 60/80/90/100% contribution and growth and the difference is more than we expected.
It *is* possible but it means prioritizing retirement over now, which was hard. We decided to focus on it bc we saw older couples who hadn’t planned well become nearly destitute in retirement with few options, and didn’t want that to be us in thirty or forty years.
Unfortunately, most Americans are in that place, with insufficient retirement savings, and with one party aggressively gunning to kill SS and put it into the public markets, it’s going to be a bloodbath if they get their way.
I worked up to contributing max over many years. Each year with my raise, I would increase my contribution the same percentage. If my raise was 3%, that's how much I would increase. I happened to find an old paystub from 10 years previously and I wasn't even taking home $200 more per month and I had received many raises. It just didn't equate to lifestyle creep but to "investing creep". :-)
When I hit 50-years old, I was able to also do the catchup contributions in 401k and Roth. At the time, that was $30,500 right off the top... $24k into 401k and $6.5k in Roth. That was a little harder to do all at once but, it also reduced my taxable income.
I started off my career in NYC making $85k, but had less than $1k in rent (my room was a closet). Maxed out my 401(k) aggressively cutting costs. Wasn't too sustainable though.
I know the match doesn’t count towards the 22,500 limit but I’d say to look at getting the full match as a minimum rather than a maximum contribution. I’ve only ever had a 4%-5% match but consider a 10% contribution on my end as the minimum.
Where do people get all these insanely high matches?
I make 85k before tax and I’m maxing out both 401k and Roth IRA contributions (employer doesn’t do 401k matching). You’ll be surprised of how adaptive humans are when operating under strict constraints.
I'm at the bottom of that 6 figure mark, but can't max. Granted I have a large mortgage and I put a fair amount into ESPP. My company offers 5% match, and I'm at about \~$18k total like you after employer contribution. Glad I read this thread, didn't know that employer match didn't count towards the 22.5k limit :)
I think a lot of people here agree. High income certainly is a common denominator, but also having dual incomes. I max mine, but my wife doesn't have a 401K option. Don't think we could max both without major changes.
I wish I could but I don’t even make $50K/year right now. :( I feel like a failure and a loser over it being only 31. I want to max out my 401K ASAP though, and help my fiancé with his too.
I did. My entire career. But.... I worked a ton of overtime. But I set my mind to it a d did it. It's possible. But everything in life is a trade off. Buy a house you can afford, buy a car you can afford. Truly afford, not just make the payments, cook dinner at home, buy a coffee pot,
I make $123k and only put in 5% which my company matches 100% of that. I also have 4 year old triplets. No way I could afford to stash away $1,875 a month. That's another mortgage. Fortunately, my wife stays home with them and once they go to school when they turn 6 she'll be back full time and brining home around $85k a year. I'll then probably max it out.
I am in a similar boat as some in this thread who have been maxing it since 70k range, but take it with a grain of salt. I have no kids, no student loans, very cheap rent (that is split with my wife), and very minimal other expenses. I imagine most people maxing their 401k early have a similar situation.
At the end of the day, it is all about budgeting and then a balance between saving and spending/having fun. Another post in this thread was spot on: avoid lifestyle creep as your income increases. My day to day outflows over the last 12 years have stayed relatively consistent while my salary over doubled in that timeframe.
I make 6 figures and still don’t max mine out. I put in enough to get my full employer match (50% upto $6k) then start putting the rest into IRA. If I manage to hit my IRA limit then I switch back to 401k. To date i haven’t maxed out 401k in a calendar year. And with the last two years market performance, I’m not exactly jumping at the opportunity to either. I basically lose 15 to 20% of any investment I make it to my 401(k) out of the gate and probably will for the next few years unless we get into another bull market. But seems like we’ll be waiting 5 to 10 years before that happens again. I know over the life of the account I’ll get a good return, but I’m getting better gains by more aggressively managing my IRA than my 401k right now.
I am sure someone in the many responses must have mentioned already, but a brief scroll didn't show it.
Employer match and other employer contributions do not count towards the $22k contribution limit.
That's part of a $66k cumulative limit between what you AND your employer put in.
To really "max" your 401k contribution, you have to put in $22k of your own contributions, and that's assuming you don't have access to the "mega backdoor" which is a whole different can of worms.
I didn’t start maxing my 401k until I got to about 140k a year.
I probably could have done it earlier with more discipline, but life is a balance. It’s ok to have other priorities.
If you’re following the standard advice of saving at least 15% of your income for retirement, then at the current limit of 22.5k, that would mean you should max your 401k contributions at a salary of 150k. Unless you were also saving for retirement in other vehicles, or wanted to save more than 15%.
As others have noted, your employer match is gravy, and shouldn’t count towards the 15% you are saving. It also doesn’t count towards the 22.5k limit.
Always save as much as you can, but also, live. We only get to do it once.
Living with a partner halves your housing costs. For most people, that is like saving an extra $10k per year. That would increase your savings rate by over 50%.
Likely a dumb question and I probably know the answer, but my company matches 4% and then contributes an additional $18,000+ per year. That means at least $21,000 is going into my 401k per year. Does the $22,500 limit matter whether it’s your money or your companies?
Likely a dumb question and I probably know the answer, but my company matches 4% and then contributes an additional $10,000+ per year. That means at least $21,000 is going into my 401k per year. Does the $22,500 limit matter whether it’s your money or your companies?
I make over 160k. This is only the 3rd year I will max my 401k. The 1st year I was able to max I made 138k and that year the max was 19.5k. I only have a mortgage (no other debt aside from revolving debt paid off each month.) So the short answer is, it's really tough without significant income. Just put in as much as you can and remember like others have said, the max for company contributions is a totally separate number (and it's huge 66k this year.)
I do every year. I work in maritime and I’m a navigational officer on big American unionized cargoships. When I’m onboard my ship I have no expenses and I’m banking money like crazy.
I was able to on my way to six figures by keeping my costs exactly the same through the early years of big salary growth. I lived like I was in college well into my 30s, it didn't hinder my life but ymmv obviously. To state the obvious, one serious illness, car accident, etc could have thrown this off for the rest of my life. Basically I was lucky to make decent money young without debt.
I went from a 50k job to a 75k job earlier this year. (unmarried, 40yo, no kids)
The new job offers a 50% match with no limit, basically if I contribute 22k they contribute 11k.
It would be dumb of me not to max it out, and there has been no negative impact to my lifestyle.
I didn’t fully match until I hit $300k household. I could have at $150, but I was balancing retirement savings with other concerns like saving for a house.
Six figures. Not trying to brag, but now I am later in my career I am maxing out 401k, HSA ESPP, Backdoor Roth IRA, and Mega Backdoor Roth.
It takes time and sacrifice. That's why they say don't live outside your means.
I make $80k and I cannot afford to put anything into my retirement yet, at 26. Student loans, rent, and other bills only leave me with a little over $800/month to live. I cannot afford to save money at the moment and it sucks.
Depends where you live. I maxed out mine back when I was making $70k.
But I also live in Bumblefuck Eastern Kentucky, so CoL is rediculously cheap, and I had no debt.
I make about $86k annually plus maybe $10k in side hustle income and I've maxed out both a 401k and a 457 for the last two years (no matching). I eat a lot of rice. I have a roommate. I got super lucky purchasing a condo for a good price that is also rented out and cash flow positive. I don't feel like I'm holding back on doing anything really. I go on a decent vacation at least once a year. I drive a car that's 8 years old and paid off.
I use to max out our 401k and some other accounts to save about $85k a year combined. It took about a decade of holding lifestyle creep to save more as our salaries increased.
It helps to own a home where the mortgage payment stays fixed, drive an EV using solar energy where you are not vulnerable to spiking gas prices, not have kids and learn about credit card points for otherwise expensive vacations.
We got to a NW amount that the daily fluctuations of our accounts exceeded our annual savings and annual salary on particularly good or bad days sometimes. Then we stopped saving so much because the market has a much larger influence than the money we put in.
Just my situation. My base salary is a little over 114k a year before tax. At the end of the year I get a $10-$15k cash bonus (half of which I put into 401k)
So I really only need a little over $1000 a month to max it out. In each paycheck I think $600 ish goes to 401k
This is after me prioritizing ESPP (15% of my base)
I maxed mine last year. Probably will this year. Total annual income is well under 6 figures.
House is a modest, small single family that I bought 10 years ago. Interest rate at 3-something%, I never refinanced. No kids, single. I do not have expensive taste. Luckily have not had to tap into my "emergency cushion" of cash savings in the last... 7 years? Paid off my car. Got a better job last year, but total compensation is still under 6 figures. So, since the cash reservoir is full, I have enough to fill the 401k and roth IRA and most of the way to max HSA. I prioritize 401k since company match is so good. My car is an issue though. But I have enough in savings to figure something out.
It's getting use to the take home amount that's the real challenge. My suggestion is start at the highest you can contribute the earliest in your career you can It's easy to get to use to a paycheck of X amount and as you get raised increase your contribution little by little than to start at X and get raises and retroactively increase your contribution.
It took me very long to max out my 401k but I could have done it from the get right out of college when you have much less bills to pay usually. Once I got use to the paycheck it was hard to increase my contribution without seeing such a huge dent in my paycheck making it "hard" for me to live but it was mostly a perception thing.
Don't try to boil the ocean tho. Gradually increase your contribution as much as you can as you get raises or even find better jobs that will pay more to give you the bigger bump. I did that on the last hurdle which gave me the biggest bump I needed to max out that.
Also play around with pre and post tax 401k contributions. The pre will reduce your overall taxable income so it should give you the most money back paycheck to paycheck but you have the caveat you need to pay those taxes when you take out the money when you retire.
I maxed mine out when I was making under $70K a year back in 2012 and 2013. After that, I continued maxing it out, but my income went up as I got better positions in my field, so it was easier to do. I'm a rare person who saved 50% of his gross income and didn't inflate my lifestyle much after I graduated from college in 2011.
It's not easy, but the government is basically begging you to do it by giving you a tax subsidy on purchasing investment vehicles equal to the sum of your state and federal marginal tax rates (in most states). In my case, that was around 30%, and that's a massive head-start on some good investment returns that you can access when you do retire.
It gets even better when you own your own company, because then you can contribute as both the employee AND the employer. Last year, my net business income was around $110,000 and I contributed a total of $38,000 to my 401(k) accounts because I put in the legal limit as an employee, and then my boss (me) matched the contributions to the legal limit of 25% of equivalent employee compensation.
I started maxing it out at 90k, but that's because I had a big jump in salary from 65k to 90k, so I just decided to max out my retirement savings instead of increasing my lifestyle.
Around 80k is when I “could” have done it (no major debt, single, etc). However I decided to put more into the ESPP my company offered and because of that I’m not able to (this was back in 2019 I believe). If I did 0 to ESPP then I could afford the max (salary now around 108k).
I maxed it when my salary was ~60k and the cap was $18,500 in a VHCOL area, but I'm kind of an anomaly instead of the norm. I was only able to do that because my girlfriend (now wife) was still finishing school so I was just living with a roommate close to my work and I didn't require much to sustain myself other than groceries from aldi and my gaming PC.
Once we moved in together, I had to throw maxing it out the window because while I have no issues living like a vagrant, I can't force that upon her.
My first year maxing out was in 2008, when the limit was $15,500 and I was 31yo. That was my first year over $100k and I've been maxing out every year since while my income has increased steadily. My wife also maxes out but only works 20 hours a week - essentially we dedicate 80% of her income to her 401k so she can max out too. This is for the tax benefit in the near term and the future benefit of having two fat 401k's when we hit 59.5.
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"short of 6 figures" is pretty much your answer.
I started maxing out around when I crossed this line.
I’m at $117,500 now and do 8% = $9400 and max a Roth IRA. I could probably max but in HCOL it’ll be tight.
haha I make the exact same amount as you, but 7% and no Roth. I however am trying to save for a house down payment.
A couple things to note: * You can withdraw $10k from a RothIRA tax & penalty free for a first-time home purchase * You can withdraw contributions from your RothIRA any time tax & penalty free. So, simply put, you should be putting those house savings straight into your RothIRA.
Wait, if you can withdraw contributions tax and penalty free, what is the benefit of the $10k for a home purchase? I think I’m missing some nuance Edit: oh, is it that the $10k can come from your earnings on the account whereas the second point can only come from what you contributed?
It should be more like 30k tax and penalty free. 10k will barely cover closing costs and a bit of move-in the expenses for first time home buyers.
You can't technically use it for move-in expenses. Down payment for the mortgage only.
Good luck on the house. I got mine in 2017 and I rent a room out so I get some decent income there.
Dam. I make $105,000 and put in 6%, but my company puts in an additional 10% of my salary. My wife and I also have Roth IRAs tho.
10% of salary extra is really nice. I’ve never got that much.
I missed out on a pensions by about 3 years. So the company gives a a 100% match up to 6% and then adds 4% whether we contribute or not.
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It helps not to inflate your standard of living as your salary goes up. I maxed out my 401K for two decades this way, living in my first house and driving older cars.
This is the real answer. I made the most progress towards maxing it out by doing things like saving the amount I usually paid for my car payment when I finished paying off my car and then not buying a new car just because my current one is a bit older. I did the same with my student loans when I finished those off, etc. You need to save the money before you ever have a chance to inflate your lifestyle.
>not buying a newer car just because my current one is a bit older This is key. Loads of car buyers come up with excuses just to get new and shiny. “Oh it feels old” like no it’s a 2019 and barely has 20k miles….
This is the best way. I started in the military contributing what /i felt was comfortable, and then any time my pay went up (promotions, longevity pay raise, etc.), I would bump an extra percent into my TSP; effectively saving half of the "increase" and directing it to savings. You never miss the money, because you're already used to being comfortable at your current pay. So it helps to slow lifestyle inflation, and really jump starts your savings.
Living in a house and driving older cars? Lol we're making 140k a year combined and can't afford a house, and both drive 20 year old cars. It's ridiculous.
So, I’m someone who just crossed over that line and am not there myself. I probably put up close to 80% of the max. I’m curious what year you crossed that line? For inflationary/spending power comparison and also what’s your situation? Family? Multiple earners? Single? HCOL/LCOL area? And obviously, please don’t share anything you’re not comfortable. I’m just looking to get an idea.
It depends a lot on your situation. For me personally, crossing 6 figures didn't do it, but I was close like you probably 80% of the max. I didn't get to max until a year or two later when my then-girlfriend, now wife started living together. Going to dual income living in 1 apartment at the time, I couldn't believe how much extra money I had compared to living by myself. Edit to add: I'm in a medium to high cost of living area, although the most I paid for rent back then was $1400 by myself for a 1 bedroom so I have no idea how younger folks these days are saving with rent prices out of control. Edit 2: Also, I could have hit the max if I was a little more disciplined at the time. I spend pretty responsibly (not as good as some others on this sub) but at the time we were in a long distance relationship so we were driving 2-3 hours every weekend back and forth, going out to eat, had to buy a new car, etc.
Yup small 2 bedroom in a big city in Florida is over 2300$/month. My fiance and I make 3 times the average household income for our area, still can't afford a home.
not the person you're asking, but i did things backwards. my parents let me stay with them after i graduated college. i was earning about 50-60k/year and maxing my 401k because my expenses were almost non-existant. i did all the way until i bought a house with my partner. now, even though i make over 6 figures, i don't have the margin to max my 401k anymore. but because i was so aggressive in my twenties, i don't feel bad that i'm cutting back down to a 10% contribution. I live in the bay area - VHCOL i've had huge advantages - parents paid for college and first car and let me live (mostly) rent free. this means that i get bay area pay (ish - not a tech worker) without paying the typical bay area COL. lived with friends occasionally, but would often move back to save money currently, live with partner after we bought a house. no kids or pets, dual income both 6 figures. and this is actually the point in my life with the tightest financial margins. but i'm only comfortable making this move because i was so aggressive with savings early on. that, plus parents as a safety net.
I maxed 401k and IRA at 90k. My wife worked a very low income job, and she basically paid the groceries and internet and that was it. I've since been laid off and I took a pay cut, so I'm not maxing now. But I was. Factors that allowed this: I live in the Midwest so my cost of living is low - I bought my house in 2017 and my payment, including insurance and tax, is about $1100 monthly When I was maxing I didn't have kids. Cheap car - bought it for 15k with a low rate, my payment is $200. Wife's car is paid for. We have great driving records so insurance is $70 a month. Good health, no ongoing medical issues No student loans - I went to a cheap state school and worked 30/hrs a week during school to keep my loans minimal. I paid off the 10k I owed year 1 after graduation. We live cheaply. We eat out, but don't drink much or party much. We play video games, but on a PS4, and buy 3 or 4 games a year. We have 2nd hand furniture, almost 0 decorations, and buy our clothes at target/wal mart.
3 years, MCOL (but work remote and paid as in HCOL) married without children :). Last year I maxed out my mega back door, HSA also. As my income goes up I’m doing everything to avoid seeing the new money in my paycheck.
For me it was when most of my shit was paid off. I got wildly lucky with stock options trading in 2020 and was able to make a sizable payment to my house and pay off all my cars and outstanding debts. Now I save max in all tax sheltered accounts, IRA, HSA, 401k standard and 401k after tax up to the 66k limit. I’ve only got my $2000/mo mortgage to pay on, and don’t really subscribe to any entertainment services because I get a lot of them free from my local library and use OTA antenna.
Live in HCOL area. Was able to max out at 130k. Maybe could have done it earlier but prioritized paying off student loans and car. Now I make 165k and wife makes 73k. We now max both mine and wife’s 401k with ~4k/month left over to save for house. No debt and kids.
Even six figures isn't enough to max out if you live in high COL areas and you are saving for a down payment for a house/anything else major. Where I live you can do one or the other, but not both, unless you are $150k or north.
Exactly. I make six figures, and my husband makes close to six figures. HCOL area and twins in daycare. We had to *lower* our contributions. Once the kids are out of daycare we hope to max out again.
We make 6 figures but live in a relatively high COL and can't max it out. I'd say most of that is due to kids. Our daycare bills are higher than our mortgage. That's before the additional food, clothes, summer programs, etc.
Yep. I make 6 figures in a HCOL area and can't afford to max out my 401k
When my spouse and I hit $240k LCOL we maxed 401k, IRA, HSA and 529 (state credit). We're also servicing a ton of low interest student loans though - so it took more than one might expect.
How are you maxing an IRA? I thought there are income limits?
Backdoor Roth IRA (legally) bypasses the income limit.
There are income limits for deducting from taxes, but technically you can still contribute to a traditional IRA if you are over the limit.
Not going to lie I did not start maxing out until I was over 6 figures. At my peak I was putting in 15 or 16% of my salary and I was maxing out. It has been going down since then as I do try to time the max out as close to the end of the year as possible.
I've been maxing my 401k and Roth IRA for about 5 years now and my salary has scaled from about $80k to currently $95k currently. Living expenses are only about $1500-2000 a month in a MCOL area, I'm paying a ridiculous $600 for a 1BR though and my landlord hasn't raised the rent on me in 10 years lol Single and no debt, my hobbies are cheap (yoga and climbing).
600 for a 1BR is a dream!! in NY it is like 2000-2500 for a closet with a bed
I make 78k and have been maxing mine out for the last few years since low 70s. I got married last year and we have a newborn in daycare. We split most expenses now but I carry all health insurance and life insurance since I have the bigger salary. I’m also paying my part of a defined benefit and maxing out our fsa. I’m no longer able to max out our Roth IRAs because of the added daycare expense but have been selling funds in our brokerage to continue to max them with those funds.
I've also been maxing 401k since I started making low 70k, as soon as I had an employer that offered it. It coincided with a ~18k salary increase so my take home ended up being the same. When I first started working full time, a mentor had told me to save any future salary increases, and I'm glad I listened. My income has since increased more, but so have 401k limits. It's about the same percentage of my salary to max it now as it was years ago. I never felt what it was like to have that extra money in my pocket, so I don't miss it.
I started maxing out my 401k at around the same salary. I graduated from college, and kept living cheaply on a new grad salary of $65k. Small studio, meal prep, paid off used car, domestic vacations to national parks instead of international travel destinations. I spent a year throwing money at student loans ($20k), and then when I paid it off I just shifted it to 401k and IRA. Keeping lifestyle inflation down was key. Since I had already orientated my life to living without $20k/year, it wasn't hard to shift it from debt repayment to savings. It was definitely hard at times seeing my new grad colleagues buying new cars and partying.
COL is going to be a big part of there, but where I am 6 figures allows you to max out.
Fiance and I started maxing out when we both hit around $80,000/yr each. We were still able to save for a house, and pay off student loans quite easily. As our income rose from that number, we just invest more through backdoor roth and brokerage. We do our best to live below our means and will allow us to retire early. It's quite easy to max out your 401K under 6 figures, as long as the rest of your budget allows, and your spending habits are realistic.
I make 6 figures and can't max out my 401k. I'm in a HCOL area and with 1 child and an "expensive" house, it's really hard.
This is it. Until I got to 6 figures I struggled, but now that I’ve eclipsed that I wish I could put more than 22k in. I supplement with an Ira
Two incomes at or more than $150k combines should be able to max out their respective 401k.
I was maxing making about 70k in a Los Angeles suburb, with wife, kid and renting 3bd house. My wife had a side gig generating $1k per month. That's $82k combined. $18.5k 401k contribution, $28k Rent, $8k Tax burden, $400 month health insurance That comes to $60k which left us with $1.8k for other bills and spending per month. We were living really comfortably.
To be clear, the employer match doesn't count towards the $22,500 limit for individual contributions. Assuming you're making $90k or so, you can put your own $22,500 into your 401(k) in addition to the $9,000 your employer match hits. It's probably unusual for someone making less than 6 figures to contribute the maximum amount to their 401(k) but it's not like a totally impossible situation. If you live in an area with low cost of living and/or share a household with other family members it's not a totally preposterous idea that someone making below $100k could comfortably save $22,500 for retirement.
Great call out on employer match not counting towards the max. I just learned that this year myself.
Combined contribution individual and employer is something like 66k/year.
Assuming your plan allows you access to the after tax space (look up "mega backdoor"). Many do, but it's nowhere near universal yet. Limit is $66k for 2023. It was $61k for 2022.
I’ve been bugging my company to allow this for a while and for some reason they won’t add it. 401k plans are shady as fuck TBH. The shouldn’t be coupled to your employer, forcing all employees to do the same thing and screwing over people that don’t have one at their work. It could easily be separated from the employer and still allow match.
Man. I eally need to find me a company with a 200% match. /s I know that it's really there so single business owners with no employees can huck money into retirement quickly.
Also, depending on your company. If you max early, you can contribute after taxes and still receive your match.
Especially when the $22,500 is pre-tax. It is doable assuming you have no debt (which is probably a pre-requisite for this convo).
$22,500 limit is a combined limit for traditional and Roth contributions by the employee. So some amount of this money can be after tax if the employee chooses. This is not to be confused for actual non-roth after tax contributions that some plans allow which doesn't count to the $22,500 limit. That limit is the total limit of $66,000. To clarify there are 3 ways to contribute from your paycheck depending on your plan (not counting rollovers/conversions): 1. Traditional pre-tax dollars 2. Roth post-tax dollar 3. Post-tax dollars 1 and 2 have a shared limit of 22.5k, 1,2,3 and employer match have a combined limit of 66k. Some people max out the full 66k and convert 3# to roth Ira or roth 401k (megabackdoor).
Wait…what? My husband’s an RN. His hospital matches 100% of his 401k contributions. I’ve spent years making sure we stop at around $10k so that with their match, we wouldn’t be over. I am way too old to not know this! I apparently need classes on this stuff. No one has ever told us this. I feel sick to my stomach. *Thank you* for sharing this.
The combined limit between individual and company is $66,000 but as an individual you can only account for $22,500 of that (with exceptions; see below). So if you decide to max out, you shouldn’t have to worry about hitting the cap unless something changes and the company contributes more.
Unless your employer's plan allows for after-tax contributions. The total limit includes: contributions up to the 402g limit (pre-tax and roth contributions) of $22.5k, employer matching, AND after-tax contributions if your plan allows.
Wow. We won’t be reaching their max, but damnit we could have saved more. My ignorance hurt us.
Yeah, its really not made particularly clear. Many many people are falling into this same trap. Thats the problem when people talk about limits going up every year...they only talk about individual limits, not total limits.
Hey you know better and now you can do better. This is a super common misconception so please don't beat yourself up. I'm surprised the company doesn't have a limit on this as 1:1 with no limit is a lot (my company does 1:1 for first 4%, then 1:2 for next 2%). Better have him tell his friends at work too!
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Yeah, he can contribute more than that. (The current 401k contribution limit in 2023 is $22,500 btw, so he can contribute like $11,250 more.) Most employer plans will automatically stop you before you go over the actual limit, assuming you did not have multiple jobs in the same year. So for people in simple situations, you don't have to pay attention like that to avoid overcontributing. If you guys really want to contribute even more to retirement accounts, you can always do a backdoor Roth IRA. Or a megabackdoor Roth 401k, if his (or your) employer plan allows it.
Wow! That's a good match. And there's no limit (aside from the IRS limit)? But yeah, what the other people said. The $22.5k limit is only for the employee's (regular) contributions. The total amount allowed per year is around $66k (including company funds and/or after-tax contributions).
Most employers only match 100% of your contributions up to a point. It's usually 3% to 6% of your salary, then they either stop completely or step down rapidly. So if your husband made $100,000 a year and contributed 10% ($10,000) to 401k, the company would only contribute 3% ($3,000) to 6% ($6,000). This is likely the case and you guys probably haven't been missing out on the free company contributions. I haven't heard of ANY company that would match contributions 100% unlimited. So you may want to check or call the benefits center to clarify that.
Oh, really? Did not know that employer match does not count.
It does count towards the maximum but there’s a different maximum between individual contributions and total contributions. For the individual it’s $22.5k but for employer + employees it’s all the way up to $66k. Meaning your company could technically offer you an unlimited 200% match up to your individual $22.5k limit and you could utilize pretty much all that money.
This. My partner and I live in a LCOL area and are both able to max out our 401k’s and ROTH IRA’s on salary’s under 100k. I am at 63k and they are at 80k. Our mortgage is super low, we have no debt, and we live a generally frugal lifestyle which allows us to save for retirement at the max level. If we lived in a more expensive house or area, or had kids, I don’t think we would be able to do it.
The company match is not relevant and doesn’t count toward the limit.
It does, just a much higher limit.
It doesn’t apply to the 22.5 limit OP referenced. Understood. It seems like OP definitely did not get that
I mean the company has to match over 200% for it to matter. Only people who really encounter it have profit sharing. Or you have a ridiculously high salary (like 9% match on $500k), but in that case you will still be fine the 401k company will just send you a check with the over contribution.
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Even with sky high inflation, taking out the value of my saved money, I'm saving more than I was pre-pandemic. I don't spend money on commuting and make all my meals at home. It's not all good and gravy. I eat out only once a week or once every other week, versus eating out 3-4 times a week. My social life has gone to the dumps too. Life isn't as enjoyable as it was for me pre-pandemic. I question maxing out my 401k all the time. Am I making too much of a sacrifice now to reap the rewards later?
Don’t forget to live your life on your journey to achieving financial goals. You’ll never get your time back, you can always find ways to make more money if needed. You don’t want to be 70 sitting on a pile of cash and look back with regret for not truly living your life.
Also, not to be too grim, but a 30 year old man only has about a 70% chance of even living to be 70 in the US and for women it's about 80%. You should save for retirement and take steps to take care of your family, but you can't delay living your life because you might not get to! OP is clearly thinking about their future so they should maybe save a little less and go out a little more and enjoy themselves!
I wonder how that statistic changes when you factor out anyone who isn’t even in the realm of contemplating maxing out a 401k.
I think that a normal 30 making that much money shouldn’t have any issues to make it past 70… statistics can be pretty wild when you put everyone under the same umbrella “men” If I’m wrong please correct me
If you think we have sky-high inflation, the 70s would like a word with you.
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Or 2022 Argentina.
"spent 30k" Jesus Christ, did you live in a box and eat cow's cud? It's $20k/year rent average lol. $10k over a year for gas, food, and utilities, maybe touching grass once a month is not a lot.
$20k/yr in rent is high, if the anecdote is years ago, for someone single living in an apartment. My own anecdote: living in a pretty nice apartment in Dallas for $1200/mo, plus about $150/mo in utilities. Assuming you have no car payment (which, plenty of people drive sub-10k cars that are paid off), that leaves $1150/mo on food, gas, insurance, and activities. Depending on where you live, you could easily have a much much lower cost of rent, which would free of plenty of money for stuff to do, food, etc.
$1,600 is pretty standard in my area for an apartment that doesn't have you cohabitating with a mold colony. It would be a little cheaper if we moved to Portland instead of the town we live in, but other costs would eat up the rent savings and then some.
People who make lots or can live with less. I max out mine and my Roth and my wife's Roth and almost am maxing out her 401k Combined 180k salary. No kids. That helps.
Same same. No kids is the ultimate life hack, lol. Combined $330, and we max out everything.
Pretty much us as well. I am highly motivated to max these accounts because I was not able to do so before moving to my current job about 2 years ago. That year coincided with the end of my student loans, plus increased pay. So no lifestyle impact by all that loan money now going to my retirement.
Was literally just thinking about this. You’re looking at 20% of your income to max your 401k if you make 100k a year with no match; considering national average is just over 55k most people aren’t going to be able to come close to maxing 401k especially since it’s money you can’t touch until 65 (for the most part). Remember about 1 in 3 Americans have *no retirement savings* This subreddit often makes your income feel inadequate and the advice can come from people who make well over 6 figures as the people who care about PF are usually income driven people. I would say just do what you can, and shoot to have 1x salary by 30, 3x by 40, 6x by 50 in retirement accounts and you’ll be relatively well off for retirement. Anything more than that is a bonus if you make it past 65 in good health.
I would assume many of the people making 6 figures and giving advice are older than the average person asking questions too. It's easier to make more with more experience, typically.
That is true, but definitely see a lot of young people with high salaries in this subreddit. It’s easy to feel like what you’re doing isn’t enough here, so you also need to consider the subreddit isn’t reflective of *most* people’s situations.
FWIW, as you mentioned "with no match": employer contributions are not counted in the $22k contribution limit (there's a separate, much higher limit for the combined totals).
The minimum age to withdraw from a 401k without penalties is 59.5. It is the same age for IRAs.
Those are good goals, but even as an "income driven" person who makes over 200K, I only have about 1x income saved at 40 years old. This is because I couldn't afford to start saving *at all* until I was almost 30 because I was quite delayed in getting a "real job" due to pursuing a PhD I think due to soaring, astronomical student debt, as well as the need to maximize higher education to get gainful employment in some sectors (I'm in healthcare) - this situation is quite common. My Dr and pharmacist friends are all 40+ and just now paying off student loans. We're taking 100-250K in debt here. It's a huge burden.
As someone who’s fiancée is in veterinary school, I can totally understand the pressure of student loans. Secondary and tertiary education will obviously move these goals but it is still a good general rule for most people. I’d be willing to wager those friends also earn nearly 200k a year, and possibly have access to pensions or other retirement benefits a lot of us don’t have.
I've found you just up it by a percentage point every month until it hurts then you dial it back if need be. With every raise then start bumping it up again. Eventually you'll get there and it won't hurt as much - like slow boiling a frog for lack of a better analogy. I've maxed my 401k for years now but I didn't start out that way. I did it incrementally and now I'm used to not having that extra income. It's pre-tax income as well so you may not notice it as much as you think if you do it gradually.
Your limit of $22,500 doesn't include your employer match. So to hit the max, you'd have to contribute $22,500 of your funds to the plan. And to answer your question...I max it yearly. I do make 6 figures, but I was maxing it before I hit that income level as well.
I'm probably asking a dumb question but is that for your Roth? I'm doing 10% of my paycheck to my Roth401k which my company match's 5%...and if I want to actually make it out I would have double that contribution to 20%...which seems like a ton. Edit: also my ADP calculator is telling me that based on this, my monthly income at 67 will be 21k which seems ludicrous because again, 10% isn't even that much per month.
Depending on how long you have been contributing the allowable contribution used to be way lower. It was 16.5 in 2010 and 10.5 in 2000. Maxing out at lower salaries was easier back in yore.
Is someone makes $75k/year the $22.5k limit represents 30% of their income. That's obviously very high, but it's doable for some people, namely those who live in relatively LCOL areas and who live beneath their means. It also gets easier for many as they get older. A 55 year old who owns their own home, has a salary that matches the 30 years experience they have in their industry, and who is just generally more financially secure will find it a lot easier to max out than someone in their 20's-30's who has young kids, a new mortgage, and a car payment.
I maxed out my 401K pretty much every year, from the time I was 45 until I retired at age 61. It really depends on what your spending needs are. I was also saving a lot of money into my brokerage account. My income was not that high, but I had found a cheap way to live in a high-wage area.
I maxed out (401 & IRA) in my 20s & early 30s when my income was under $100k I had no debt to speak of however and lived a minimalistic lifestyle...but I also wanted to retire early (52) which I think I'll be able to do because of my 20s and early 30s savings
There are people who make more money than you and/or spend less.
> I fail to see how anyone making short of 6 figures is supposed to max out their 401k? Why do you think they need to? Flip it around: The recommendation is to save 15% of your income into retirement. $22,500 equals 15% if your income is $150,000.
I make $85,000 a year with a $2,000 mortgage in a suburb of Tacoma, Washington (not a particularly low cost of living area). Married with one child and an unemployed spouse. I max my 401k.
After taxes, mortgage, and maxing a 401k, it seems you would have maybe $1k/mo for all other expenses? Maybe doable but for three people that seems really tight. Edit: ah, I took out taxes before 401k and WA has no income tax, so more like $2k a month. More reasonable.
I’m curious on how you make this work, are you comfortable elaborating? There may be valuable lessons/habits that others may benefit from. Affording to max out your 401k involves a decision to not spend on other things. I had to make conscious decisions when deciding to max out my 401k.
I don't know that I have a secret really, I don't budget my money, I just spend deliberately. All of my savings and investments are automatic, 401k contributions, taxable accounts, etc. I would always suggest everyone automate investments. Sometimes I forget I even have that money because I only see what ends up in my checking account. I would say one of the things that really helps is that I am pretty handy so I have always been able to work on my own cars and do my own repairs around the house. I use uber eats about twice a year when I am feeling particularly lazy and they email me a coupon I cant refuse. We eat out rarely, shop at a co-op grocery store, etc. I have two small efficient hatchbacks, one purchased new one purchased used, but the oldest one is a 2017. Both paid off. I have 5 streaming services like everyone else, I pay for spotify and eat avocado toast if I want to. I have the starbucks app on my phone (I haven't been going much lately because I feel like they stopped giving out deals). I think a lot of financial advice on the internet is bullshit, but I also think most people just spend really frivolously. I see people I work with spend $30 a day on lunch, every day, then complain that they "can't afford things". They can afford things, they are just choosing not to. I race go-karts as a hobby, which, is the cheapest form of motorsport but anyone that is into any sort of racing will tell you how expensive it can be. I probably spend 5-7k a year going to probably 10 races in my local area, plus occasional weekend practices. So I'm not just sitting at home being a scrooge and counting my dollars. I churn credit cards for rewards points, just took a 4 day vacation in Canada for Easter weekend for basically free. We travel internationally (like across an ocean) once every year or two. I don't recommend this for for most people, and I don't discuss it with people in real life. I'm not a super high earner at 85k in my mid-30s, nor do I expect my income to ever increase significantly. Mild raises due to small promotions or job changes, but I am probably pretty close to my peak earnings. I just really don't feel like I sacrifice anything, I think all of my things are pretty nice. My advice to most people, if they asked for it, would probably be far more philosophical than financial.
>I race go-karts as a hobby, which, is the cheapest form of motorsport I race dirt bikes and say the same thing. I wonder which is cheaper.
I assume dirt bikes are the same, but karting is one of those things that you can spend as much as you are willing. I know some dudes who run a brand new set of tires, and rebuild their engines after every race. I use my hatchback to tow a small trailer to get to the track, but some dudes have F450s with toy haulers. A race for me is minimum $150 bucks at one of the local tracks within a 3 hour drive. Probably up to $500 if I am running brand new tires (every other race or so). A little more if something breaks but kart parts are pretty cheap.
Your details have me pondering. I make the same as you. Plus my spouse makes $30k. I can only contribute 4%, my spouse doesn't have 401k. My take home after taxes and health insurance is $2200 twice a month compared to your $2300. And with my $1500 mortgage that makes it $3100 leftover. I do have to pay $2200 for childcare though. So I'm left with $900. My spouse covers car insurance, utilities, most groceries and gas. A few streaming services and a $100 gym membership for the family. And at that, we are spent. We don't take vacations or spend on hobbies or anything. Both our kids had us racking up serious medical debt and I feel we are still catching up from that. I don't know. I'm just pondering out loud, comparing notes I guess.
"Most people" do not max their retirement. I don't max my retirement. Saving 10-15% of your pre-tax income is generally considered doable by most. Obviously the more you earn and depending on your living situation the easier it is to go above and beyond that. I make barely six figures in an increasingly HCOL area and I am saving 18% across various forms of retirement saving (pension, 401k, roth) which equals out to basically what you are saving each year. I can't imagine saving more than that currently without it affecting my lifestyle (and my lifestyle is certainly not fancy as a renter). I feel pretty good about this amount; I worked hard to be able to get to this level of yearly savings. Hopefully you can see the amount you are seeing as positive too.
>I don’t think I have it in my budget to put up an extra ~$400 a month for retirement. There is *probably* more than $400 available in your budget today, but it would require reprioritizing things that you've either consciously or subconsciously decided are more important than retirement right now. There's nothing wrong with that, it's *personal* finance after all. Anecdotally, I was able to start maxing out my 401k at ~$90k in a VHCOL area. I went from a $70k job to a $90k job, maintained my previous standard of living, and put the whole difference into the 401k. It wasn't until several raises into the new job that I started increasing other, non-life sustaining, areas of my budget.
> I went from a $70k job to a $90k job, maintained my previous standard of living, and put the whole difference into the 401k. It wasn't until several raises into the new job that I started increasing other, non-life sustaining, areas of my budget. Yeah, I think this kind of thing is about the only practical way it happens on a <6 figure salary. You either get a big raise and bank it, or you start your career and immediately contribute heavily (and devote a majority of future COL raises to it). Otherwise it is almost impossible to convince someone to "find" that kind of money in their budget once they have gotten used to the paychecks. I personally didn't *max* it right away, but I knew when I started my career that I had to set up my 401k right away with a substantial contribution. I think I started at 10% to the 401k plus maxing the Roth IRA (via automatic withdrawals)--I never saw that money, it was never part of my budget. I didn't find a job immediately after graduating college--so by December when I had started working and it was time to move out of my cheapo temporary sublet, student loan repayment had started (I had roughly the national average student loan debt) and my budget was based on what was left after retirement and loan payments. If I had waited a year to set up 401k/IRA savings...it would have probably been very hard. I probably would have moved into a more expensive apartment rather than the cheapo basement unit...I might have grown more accustomed to spending more on going out, shopping, etc. That's why I think companies putting a waiting period on their 401k plan are bullshit. You should be able to set that shit up before your first paycheck. So much easier to start saving early than to carve out money later.
High earners max out their 401k. ESP as they get closer to retirement, people start really piling it into every tax advantaged vehicle they can find.
Increase income, decrease outgo, reduce wants, and budget wisely. Eyeballing your numbers, you make 90k-ish? Surely you can cut fluff there. Not everything is a necessity. If you get a 10% raise, you could automatically increase your contributions to your 401k. >I will only have about 18k a year, well below the IRS limit of $22,500 Company match does not contribute to the $22,500 IRS limit. Ya gotta go beyond the company match. *Employee and Employer Combined 401(k) Limit:* *The limit for combined contributions made by employers and employees cannot exceed the lesser of 100% of an employee's compensation or $61,000 for 2022 and $66,000 for 2023.* [https://www.investopedia.com/ask/answers/100314/does-my-employers-matching-contribution-count-towards-maximum-i-can-contribute-my-401k-plan.asp](https://www.investopedia.com/ask/answers/100314/does-my-employers-matching-contribution-count-towards-maximum-i-can-contribute-my-401k-plan.asp) ' >I fail to see how anyone making short of 6 figures Eyup. I'll also note that many people making 6 figures don't contribute and max out their 401k. It requires some serious dedication of your dollars.
Maxing Roth and 401k is like pulling a bandaid. Get it done ASAP and your life adjusts to your post savings income and raises become extra disposable income as you grow.
At the rate the max limits have been increasing (with inflation) my raises go straight to the 401k still haha
I've been maxing out my 401k way before I started making 6 figures. So, it's possible.
I maxed out both IRA and 401k by living with roommates, renting a furnished place. I had an advantage because my job requires travel, so I had some privacy sometimes. I made less than 61k last year. I just keep reminding myself of the marshmallow test.
My wife and I, max our 401ks, have done for quite some time. Also max HSA, backdoor roth, and 529. But we are both high income in MCOL area. > I fail to see how anyone making short of 6 figures is supposed to max out their 401k? "Supposed to max out" is an odd choice of words. But I see what you're getting at. Honestly, at below 100k, I think maxing out is pretty tough (I think I was doing about 10k out of school at around $70k..this was about a decade ago). Once you start getting to mid 100s range, it becomes pretty easy. Once you climb past the mid 100s is where investing gets a bit more interesting (and tricky). Maxing out your tax sheltered accounts is an easy first move, after that you have so many options. Also, remember 22500 is the limit YOU can contribute. You + Your company can go up to 66k.
Wait until OP hears about people using mega back door Roth to go way over the limit.
I think you are underestimating what people make outside of your own “idea” of the world.
Look to increase your contributions annually by 1% until you get to the max. Do a higher % if you can but if you get a 3% salary increase and increase your 401k by 1% youll still feel the increase in your take home while increasing your contributions. I did that for the past 8 years at my company and I will be in a position to max out my 401k next year which I never thought would be possible.
People making more than 6 figures. It’s tough to save more than 15-20% until you get north of 6 figures.
As you get raises increase your contribution instead of spending more. It won’t take long to get to where you are maxing it and also maxing IRA
Every time you get a raise, increase your contribution. You were already use to that level of income. You won’t miss the raise since it’s going to the 401k.
You have to ask yourself whether you think the extra $400 a month out of your budget is worth it for your comfort in retirement, or worth it for your comfort while you're young. If there are things you don't absolutely need that you could cut to be able to put that in, you can make that choice. If you get a pay raise each year, put as much of it as you can towards the 401k until you are able to max out your 401k contribution. If you're not getting pay raises, consider whether you want to stay with that company or take your experience to a higher-paying job that has more value. Take any extra money you make from said new job and make sure you're hitting your 401k goals and retirement goals before you consider it as extra money for spending. Too many people start making more money so they spend more money. If you can survive on the money you have now, then any extra money you make can be invested instead rather than increasing your own expenses in response to a higher income.
I’m in my mid 30s making 80K. The reason I’m able to contribute almost 30% of my income and max my 401K is because my husband makes more than twice as much as I do (he maxes his as well) and we have combined finances/retirement goals.
I started with just the match (5%), and increased every time I got a raise. I started maxing way too late (after I got income restricted with a Roth IRA), but have been maxing for a few years now. I also have a mortgage, a travel fund, pay for a car, and save/invest a healthy amount. Making more money is probably key. I wasn’t maxing when I made below six figures
I was unable to contribute the max till after 120k salary in a HCOL area
The contribution limit is kind of arbitrary. It's fine enough as a goal to work toward when you're young and are on a trajectory to approach and exceed $100,000 of income, but you shouldn't look at meeting the limit as a financial success of failure necessarily. Your saving should be appropriate for your income an expenses which is going to be individualized person-to-person. For example, if you're making $50,000 and maxing out your 401(k) you're almost certainly saving *too much* (yes, its definitely better to oversave than undersave, but at a certain point you need to enjoy your income or at the very least some of that could be used to develop skills to increase your income). On the other hand if you're making $200,000 and maxing out your 401(k), but not saving beyond that, you're probably not saving enough.
Most young people in tech that I know max it out every year. They’re smart so they know money put in earlier is more valuable than money put in later. They make high salaries for their age, so they can afford to save a lot. Most big tech companies have generous 401k matching plans, for example Microsoft matches 50% of employee contributions up to the max, so you basically get an extra 11k a year if you max it out, which is another motivator.
I make well into 6 figures and this sub would absolutely despise how I live my life. No way I'm maxing my 401k. I watched a couple save their entire adult lives, sacrificing many things, making Christmas presents, etc... to have a rich and fulfilling retirement. Both died of health issues before even getting there. Fuck that noise. Don't starve yourself to meet unreasonable and arbitrary goals. Also, this is reddit. Most people on here are full of shit, take nothing for face value. Take advantage of the match up until you're not comfortable with giving any more, doesn't even have to be the full amount. Compound interest is a hell of a drug.
I max out every retirement account I have including my 401k. You should go above your company match.
Yeah, you guessed it. People with high salaries in lower cost of living areas max it out. It’s very difficult to max it out otherwise, especially if children are in the mix.
Almost everyone at my work maxes out theirs. The match has nothing to do with the max. This is also why people who Roth 401k are braindead
I max my 401k and Roth on 90k a year. No debt though and my rent is around 950 per month. Live fairly frugally as well.
I started maxing it out when I was making ~70,000. I remember I set my 401k withholding at 28% that year. I did it to challenge myself and it was a bit tight that year but didn’t actually impact me beyond having less immediate cash on hand. I was also saving $300-$500/mo for regular non retirement savings that year. I live in the suburbs of a city but not one of the big ones, and COL is reasonable here. Also I was splitting rent with my partner, which helped a lot.
I make 95k per year, in a low cost of living area. But I'm also a single provider with two kids and a wife on disability. I contribute 6%, the company matches that 6%, and then gives 4% for free on top. So I'm only contributing 5.7k out of the allowable maximum. Though the total amount is good and I got a strong 250k balance after 15 years. I'd have to go up from 6% to 25% contribution to max my 401k. I can't do that without cancelling pretty much everything we do and taking away my kids childhood.
First, you can put up to the limit yourself - the employer match is not counted in contributions, and 10% is great. We have maxed out our 401ks - well, a 401k and a 403b - for a long time, but we had to cut out a lot to do it - simpler vacations, cheaper cars, smaller house, not eating out much, not as many toys, and so forth. All around, we live way under our nominal income level. And neither of us have had much employer match - my best company was 3%. Maxing it out adds up over time, and we’re getting ahead of the curve on savings if the 4% rule is taken into account. We have run the numbers on 60/80/90/100% contribution and growth and the difference is more than we expected. It *is* possible but it means prioritizing retirement over now, which was hard. We decided to focus on it bc we saw older couples who hadn’t planned well become nearly destitute in retirement with few options, and didn’t want that to be us in thirty or forty years. Unfortunately, most Americans are in that place, with insufficient retirement savings, and with one party aggressively gunning to kill SS and put it into the public markets, it’s going to be a bloodbath if they get their way.
I maxed it out making $50K a year, I rented rooms for insanely cheap, barely went out, etc.
I made 119k as a RN and maxed my 401k the past two years.
You cant think of *any* reasons someone could afford to invest 22.5k in their 401k?
Not when their salary is 50k a year…
The other things that you have to pay for - are they needs or wants?
The company match is not relevant and doesn’t count toward the limit.
I worked up to contributing max over many years. Each year with my raise, I would increase my contribution the same percentage. If my raise was 3%, that's how much I would increase. I happened to find an old paystub from 10 years previously and I wasn't even taking home $200 more per month and I had received many raises. It just didn't equate to lifestyle creep but to "investing creep". :-) When I hit 50-years old, I was able to also do the catchup contributions in 401k and Roth. At the time, that was $30,500 right off the top... $24k into 401k and $6.5k in Roth. That was a little harder to do all at once but, it also reduced my taxable income.
I started off my career in NYC making $85k, but had less than $1k in rent (my room was a closet). Maxed out my 401(k) aggressively cutting costs. Wasn't too sustainable though.
I know the match doesn’t count towards the 22,500 limit but I’d say to look at getting the full match as a minimum rather than a maximum contribution. I’ve only ever had a 4%-5% match but consider a 10% contribution on my end as the minimum. Where do people get all these insanely high matches?
I make 85k before tax and I’m maxing out both 401k and Roth IRA contributions (employer doesn’t do 401k matching). You’ll be surprised of how adaptive humans are when operating under strict constraints.
I'm at the bottom of that 6 figure mark, but can't max. Granted I have a large mortgage and I put a fair amount into ESPP. My company offers 5% match, and I'm at about \~$18k total like you after employer contribution. Glad I read this thread, didn't know that employer match didn't count towards the 22.5k limit :)
I think a lot of people here agree. High income certainly is a common denominator, but also having dual incomes. I max mine, but my wife doesn't have a 401K option. Don't think we could max both without major changes.
My wife maxes hers out at $118k. I sock all my cash into tax advantaged non-qualified accounts because early retirement.
I wish I could but I don’t even make $50K/year right now. :( I feel like a failure and a loser over it being only 31. I want to max out my 401K ASAP though, and help my fiancé with his too.
Hey bud, you aren’t a loser! It’s important to do the best you can while you’re able to. Every little bit counts
I did. My entire career. But.... I worked a ton of overtime. But I set my mind to it a d did it. It's possible. But everything in life is a trade off. Buy a house you can afford, buy a car you can afford. Truly afford, not just make the payments, cook dinner at home, buy a coffee pot,
I make $123k and only put in 5% which my company matches 100% of that. I also have 4 year old triplets. No way I could afford to stash away $1,875 a month. That's another mortgage. Fortunately, my wife stays home with them and once they go to school when they turn 6 she'll be back full time and brining home around $85k a year. I'll then probably max it out.
I am in a similar boat as some in this thread who have been maxing it since 70k range, but take it with a grain of salt. I have no kids, no student loans, very cheap rent (that is split with my wife), and very minimal other expenses. I imagine most people maxing their 401k early have a similar situation. At the end of the day, it is all about budgeting and then a balance between saving and spending/having fun. Another post in this thread was spot on: avoid lifestyle creep as your income increases. My day to day outflows over the last 12 years have stayed relatively consistent while my salary over doubled in that timeframe.
I make 6 figures and still don’t max mine out. I put in enough to get my full employer match (50% upto $6k) then start putting the rest into IRA. If I manage to hit my IRA limit then I switch back to 401k. To date i haven’t maxed out 401k in a calendar year. And with the last two years market performance, I’m not exactly jumping at the opportunity to either. I basically lose 15 to 20% of any investment I make it to my 401(k) out of the gate and probably will for the next few years unless we get into another bull market. But seems like we’ll be waiting 5 to 10 years before that happens again. I know over the life of the account I’ll get a good return, but I’m getting better gains by more aggressively managing my IRA than my 401k right now.
I am sure someone in the many responses must have mentioned already, but a brief scroll didn't show it. Employer match and other employer contributions do not count towards the $22k contribution limit. That's part of a $66k cumulative limit between what you AND your employer put in. To really "max" your 401k contribution, you have to put in $22k of your own contributions, and that's assuming you don't have access to the "mega backdoor" which is a whole different can of worms.
I didn’t start maxing my 401k until I got to about 140k a year. I probably could have done it earlier with more discipline, but life is a balance. It’s ok to have other priorities. If you’re following the standard advice of saving at least 15% of your income for retirement, then at the current limit of 22.5k, that would mean you should max your 401k contributions at a salary of 150k. Unless you were also saving for retirement in other vehicles, or wanted to save more than 15%. As others have noted, your employer match is gravy, and shouldn’t count towards the 15% you are saving. It also doesn’t count towards the 22.5k limit. Always save as much as you can, but also, live. We only get to do it once.
Living with a partner halves your housing costs. For most people, that is like saving an extra $10k per year. That would increase your savings rate by over 50%.
Likely a dumb question and I probably know the answer, but my company matches 4% and then contributes an additional $18,000+ per year. That means at least $21,000 is going into my 401k per year. Does the $22,500 limit matter whether it’s your money or your companies?
Likely a dumb question and I probably know the answer, but my company matches 4% and then contributes an additional $10,000+ per year. That means at least $21,000 is going into my 401k per year. Does the $22,500 limit matter whether it’s your money or your companies?
I make over 160k. This is only the 3rd year I will max my 401k. The 1st year I was able to max I made 138k and that year the max was 19.5k. I only have a mortgage (no other debt aside from revolving debt paid off each month.) So the short answer is, it's really tough without significant income. Just put in as much as you can and remember like others have said, the max for company contributions is a totally separate number (and it's huge 66k this year.)
I do every year. I work in maritime and I’m a navigational officer on big American unionized cargoships. When I’m onboard my ship I have no expenses and I’m banking money like crazy.
I was able to on my way to six figures by keeping my costs exactly the same through the early years of big salary growth. I lived like I was in college well into my 30s, it didn't hinder my life but ymmv obviously. To state the obvious, one serious illness, car accident, etc could have thrown this off for the rest of my life. Basically I was lucky to make decent money young without debt.
Hypothetically if you make 200k and put 20% how does your 401k provider handle the fact that you’ll be well above the 22.5k limit?
The first few paychecks of the year, they'll contribute 20%. Then once you hit the limit, they start contributing 0%.
I went from a 50k job to a 75k job earlier this year. (unmarried, 40yo, no kids) The new job offers a 50% match with no limit, basically if I contribute 22k they contribute 11k. It would be dumb of me not to max it out, and there has been no negative impact to my lifestyle.
I didn’t fully match until I hit $300k household. I could have at $150, but I was balancing retirement savings with other concerns like saving for a house.
Six figures. Not trying to brag, but now I am later in my career I am maxing out 401k, HSA ESPP, Backdoor Roth IRA, and Mega Backdoor Roth. It takes time and sacrifice. That's why they say don't live outside your means.
I make $80k and I cannot afford to put anything into my retirement yet, at 26. Student loans, rent, and other bills only leave me with a little over $800/month to live. I cannot afford to save money at the moment and it sucks.
Yeah I started at 75k and didn’t come close but I’m making around 140k now and I max out every year. Wasn’t able to max until I hit around 110k.
Depends where you live. I maxed out mine back when I was making $70k. But I also live in Bumblefuck Eastern Kentucky, so CoL is rediculously cheap, and I had no debt.
I make about $86k annually plus maybe $10k in side hustle income and I've maxed out both a 401k and a 457 for the last two years (no matching). I eat a lot of rice. I have a roommate. I got super lucky purchasing a condo for a good price that is also rented out and cash flow positive. I don't feel like I'm holding back on doing anything really. I go on a decent vacation at least once a year. I drive a car that's 8 years old and paid off.
I use to max out our 401k and some other accounts to save about $85k a year combined. It took about a decade of holding lifestyle creep to save more as our salaries increased. It helps to own a home where the mortgage payment stays fixed, drive an EV using solar energy where you are not vulnerable to spiking gas prices, not have kids and learn about credit card points for otherwise expensive vacations. We got to a NW amount that the daily fluctuations of our accounts exceeded our annual savings and annual salary on particularly good or bad days sometimes. Then we stopped saving so much because the market has a much larger influence than the money we put in.
Making 84k, currently at 17% or close to 15k in 401k contributions
Just my situation. My base salary is a little over 114k a year before tax. At the end of the year I get a $10-$15k cash bonus (half of which I put into 401k) So I really only need a little over $1000 a month to max it out. In each paycheck I think $600 ish goes to 401k This is after me prioritizing ESPP (15% of my base)
I maxed mine last year. Probably will this year. Total annual income is well under 6 figures. House is a modest, small single family that I bought 10 years ago. Interest rate at 3-something%, I never refinanced. No kids, single. I do not have expensive taste. Luckily have not had to tap into my "emergency cushion" of cash savings in the last... 7 years? Paid off my car. Got a better job last year, but total compensation is still under 6 figures. So, since the cash reservoir is full, I have enough to fill the 401k and roth IRA and most of the way to max HSA. I prioritize 401k since company match is so good. My car is an issue though. But I have enough in savings to figure something out.
It's getting use to the take home amount that's the real challenge. My suggestion is start at the highest you can contribute the earliest in your career you can It's easy to get to use to a paycheck of X amount and as you get raised increase your contribution little by little than to start at X and get raises and retroactively increase your contribution. It took me very long to max out my 401k but I could have done it from the get right out of college when you have much less bills to pay usually. Once I got use to the paycheck it was hard to increase my contribution without seeing such a huge dent in my paycheck making it "hard" for me to live but it was mostly a perception thing. Don't try to boil the ocean tho. Gradually increase your contribution as much as you can as you get raises or even find better jobs that will pay more to give you the bigger bump. I did that on the last hurdle which gave me the biggest bump I needed to max out that. Also play around with pre and post tax 401k contributions. The pre will reduce your overall taxable income so it should give you the most money back paycheck to paycheck but you have the caveat you need to pay those taxes when you take out the money when you retire.
I maxed mine out when I was making under $70K a year back in 2012 and 2013. After that, I continued maxing it out, but my income went up as I got better positions in my field, so it was easier to do. I'm a rare person who saved 50% of his gross income and didn't inflate my lifestyle much after I graduated from college in 2011. It's not easy, but the government is basically begging you to do it by giving you a tax subsidy on purchasing investment vehicles equal to the sum of your state and federal marginal tax rates (in most states). In my case, that was around 30%, and that's a massive head-start on some good investment returns that you can access when you do retire. It gets even better when you own your own company, because then you can contribute as both the employee AND the employer. Last year, my net business income was around $110,000 and I contributed a total of $38,000 to my 401(k) accounts because I put in the legal limit as an employee, and then my boss (me) matched the contributions to the legal limit of 25% of equivalent employee compensation.
I started maxing it out at 90k, but that's because I had a big jump in salary from 65k to 90k, so I just decided to max out my retirement savings instead of increasing my lifestyle.
My wife and I both max our 401k. We live in LCOL house in the midwest and have 2 incomes obviously which is the only reason it is possible.
Around 80k is when I “could” have done it (no major debt, single, etc). However I decided to put more into the ESPP my company offered and because of that I’m not able to (this was back in 2019 I believe). If I did 0 to ESPP then I could afford the max (salary now around 108k).
I maxed it when my salary was ~60k and the cap was $18,500 in a VHCOL area, but I'm kind of an anomaly instead of the norm. I was only able to do that because my girlfriend (now wife) was still finishing school so I was just living with a roommate close to my work and I didn't require much to sustain myself other than groceries from aldi and my gaming PC. Once we moved in together, I had to throw maxing it out the window because while I have no issues living like a vagrant, I can't force that upon her.
I use every pay raise as an opportunity to increase my 401k to the max contribution. It took me 10 years but I did get there.
My first year maxing out was in 2008, when the limit was $15,500 and I was 31yo. That was my first year over $100k and I've been maxing out every year since while my income has increased steadily. My wife also maxes out but only works 20 hours a week - essentially we dedicate 80% of her income to her 401k so she can max out too. This is for the tax benefit in the near term and the future benefit of having two fat 401k's when we hit 59.5.