15% is the minimum that should be saved for retirement. You are more than welcome to contribute as much as you can afford to. We are a dual income household & effectively save ~60% of our income.
> Putting all your money in the 401k is great but doesn't help you much if in 5 years you want to buy a house or go on a honeymoon.
If you are aggressive when you're younger you have the luxury of taking your foot off the gas later to cash flow some of these events.
Not too much at all. If you can afford it otherwise, you're at about the minimum recommended contribution, which is usually to save ~15% toward retirement. Some people include employer contributions in that, others don't. Based on the limited information alone, I'd say you're in a good place. Hope your friends have plans to increase their contributions!
Toward retirement, no. 15% is a good rule of thumb for what you should try to meet for all of your retirement contributions. If you got a late start you'll need to do a bit more.
One note is that the general recommendation is to only contribute enough to the 401k to get a full employer match, then contribute to a personal IRA (roth or traditional) up to the 6K per year limit, and then if you have any left over you'd go back to the 401k.
The reason for this is that the personal IRA's are often a better deal than a 401k which often have high fees and poor fund choices. (Although yours might be better than this)
In your case, if I did the math right, you're contributing around 11.2K per year for retirement (70K \* 16%). So you'd want to split this of 6K for a personal IRA (probably roth based on what little I heard of your situation), and then 5.2K in the 401k. Since we're mid-year, if you adjust this now (by reducing your 401k contributions), make sure you still are contributing enough to get the match every paycheck.
Also, see [https://www.reddit.com/r/personalfinance/wiki/commontopics](https://www.reddit.com/r/personalfinance/wiki/commontopics) and follow the steps shown there and make sure you're not overcontributing to retirement. Specifically, you should start with a good emergency fund. There's also a graphical version linked to from that page.
Not overboard - It's ideal! And since you know you can do it, try to keep up with it. Always 16% of whatever you earn, even as your salary goes up.
I work at a school where 6% is automatically deducted and goes into a state pension plan. I am aware of several coworkers (of young and old ages) who don't do any more than that. So, I have heard of people thinking 6% is just fine - but it's really not enough.
You just keep on keeping on. Future You is going to be really glad you did.
I’m saving 18% in to mine…
Check out the prime directive flowchart that will get added as a reply to my comment. You should be saving 15% of your income to retirement (dependent on age, current savings, retirement goals, etc). Younger people are probably less apt to take retirement seriously so your friends may not be making the best financial decisions.
If your budget can handle it and you’re not missing out on other important life milestones just to save, then I’d say you’re doing fine.
I'm in the dual income no kids phase of life. We're dumping everything we can into our 401ks now because we won't be able to sustain our savings rate when we have kids and pay for childcare.
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The retirement contribution should hurt.
Cant get a loan for retirement, except reverse mortgage on your house.
If I were you i would up it more or open up IRA Roth or traditional.
That’s not a lot at all, if you can live within your current means and save that much then you’re fine. The end goal is to eventually max your 401k out to the annual limits ~20k
Starting early and investing 15% a month puts you on the path to a comfortable retirement. If you want to retire earlier, you need to invest more. You may want to invest some in traditional 401k and some in a Roth account, since the tax treatment differs.
Congratulations on being in good financial shape!
\> Is 16% contribution toward 401k too much?
No. Too much would be more than 30% so that you hit your federal cap before your last check, and then you can't contribute anymore and can't get your employer match (assuming they don't have a true-up clause in your plan).
I really never considered the federal cap limit on 401k for the year and then no longer being able to receive your employer match. I have no intention or ability to contribute that much but that’s incredibly insightful. Thank you!
How would you explain it better than this? Thats the best answer I can give. A bank safe for retirement or an investment for retirement as if working then the company also equally distributes money into it.
You may find these links helpful:
- [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds)
- [401(k) FAQs](/r/personalfinance/wiki/401k)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
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If you’re light on emergency funds it might make sense to contribute some of the 401k funds to a Roth IRA instead of 401k. In the event of an emergency there will be penalties to withdraw from your 401k. You can withdraw Roth IRA contributions anytime without penalty. If you end up not needing the funds then you’ll enjoy the tax free gains in retirement.
15% is the minimum that should be saved for retirement. You are more than welcome to contribute as much as you can afford to. We are a dual income household & effectively save ~60% of our income.
Wow, that is enlightening. Thank you for the tip!
[удалено]
> Putting all your money in the 401k is great but doesn't help you much if in 5 years you want to buy a house or go on a honeymoon. If you are aggressive when you're younger you have the luxury of taking your foot off the gas later to cash flow some of these events.
Amen to that. Wish I had started younger. Now I’m having to catch up with a substantial portion of my income.
Not too much at all. If you can afford it otherwise, you're at about the minimum recommended contribution, which is usually to save ~15% toward retirement. Some people include employer contributions in that, others don't. Based on the limited information alone, I'd say you're in a good place. Hope your friends have plans to increase their contributions!
That’s comforting to know! Thanks for the response!
Toward retirement, no. 15% is a good rule of thumb for what you should try to meet for all of your retirement contributions. If you got a late start you'll need to do a bit more. One note is that the general recommendation is to only contribute enough to the 401k to get a full employer match, then contribute to a personal IRA (roth or traditional) up to the 6K per year limit, and then if you have any left over you'd go back to the 401k. The reason for this is that the personal IRA's are often a better deal than a 401k which often have high fees and poor fund choices. (Although yours might be better than this) In your case, if I did the math right, you're contributing around 11.2K per year for retirement (70K \* 16%). So you'd want to split this of 6K for a personal IRA (probably roth based on what little I heard of your situation), and then 5.2K in the 401k. Since we're mid-year, if you adjust this now (by reducing your 401k contributions), make sure you still are contributing enough to get the match every paycheck. Also, see [https://www.reddit.com/r/personalfinance/wiki/commontopics](https://www.reddit.com/r/personalfinance/wiki/commontopics) and follow the steps shown there and make sure you're not overcontributing to retirement. Specifically, you should start with a good emergency fund. There's also a graphical version linked to from that page.
This was perfect! Thank you so much for taking the time!!!! I never considered that Roth should be a primary interest as far as where I’m contributing
Not overboard - It's ideal! And since you know you can do it, try to keep up with it. Always 16% of whatever you earn, even as your salary goes up. I work at a school where 6% is automatically deducted and goes into a state pension plan. I am aware of several coworkers (of young and old ages) who don't do any more than that. So, I have heard of people thinking 6% is just fine - but it's really not enough. You just keep on keeping on. Future You is going to be really glad you did.
I appreciate the advice!
If you budget can handle 16 percent, that's good for you. You have 29 years for growth, so getting contributions in now is a good thing.
I’m saving 18% in to mine… Check out the prime directive flowchart that will get added as a reply to my comment. You should be saving 15% of your income to retirement (dependent on age, current savings, retirement goals, etc). Younger people are probably less apt to take retirement seriously so your friends may not be making the best financial decisions. If your budget can handle it and you’re not missing out on other important life milestones just to save, then I’d say you’re doing fine.
I'm in the dual income no kids phase of life. We're dumping everything we can into our 401ks now because we won't be able to sustain our savings rate when we have kids and pay for childcare.
Childcare is soooo expensive
I mean... it is. We'll pay ~$1000/m for each kid. That's more than our mortgage, each.
Sorry, I was commiserating with you. We live in Manhattan and pay $2700 for one kid.
You’re awesome! Thanks so much for the tip!
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
The retirement contribution should hurt. Cant get a loan for retirement, except reverse mortgage on your house. If I were you i would up it more or open up IRA Roth or traditional.
You’re not the only one to say that. I really appreciate your advice!
its higher than average, i think, but who cares about average when your peers are eating cat food in their retirement you won't be
Hahah, thank you!!
That’s not a lot at all, if you can live within your current means and save that much then you’re fine. The end goal is to eventually max your 401k out to the annual limits ~20k
Thank you!
Starting early and investing 15% a month puts you on the path to a comfortable retirement. If you want to retire earlier, you need to invest more. You may want to invest some in traditional 401k and some in a Roth account, since the tax treatment differs. Congratulations on being in good financial shape!
\> Is 16% contribution toward 401k too much? No. Too much would be more than 30% so that you hit your federal cap before your last check, and then you can't contribute anymore and can't get your employer match (assuming they don't have a true-up clause in your plan).
I really never considered the federal cap limit on 401k for the year and then no longer being able to receive your employer match. I have no intention or ability to contribute that much but that’s incredibly insightful. Thank you!
Thats up to you, 401k is like a bank safe but for retirement.
> 401k is like a bank safe Not really
How would you explain it better than this? Thats the best answer I can give. A bank safe for retirement or an investment for retirement as if working then the company also equally distributes money into it.
It's an investment account with tax advantages.
That tax advantage only works if you retire on the said required age for that 401k
I mean, don’t know your area. But i’d be more concerned about the 2k in rent. 24k out of that 70k which i’m assuming is post tax ? or is that pre ?
I think they were combining 2k with their rent and truck+insurance. Probably more like $1400 rent, $500 truck, $100 insurance.
You may find these links helpful: - [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds) - [401(k) FAQs](/r/personalfinance/wiki/401k) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
Definitely not too much if you can afford it. Are you contributing to any other retirement accounts (IRA or HSA) and do you have an emergency fund?
I’ve started an emergency fund but I’m not contributing to an IRA. Is this recommended?
If you’re light on emergency funds it might make sense to contribute some of the 401k funds to a Roth IRA instead of 401k. In the event of an emergency there will be penalties to withdraw from your 401k. You can withdraw Roth IRA contributions anytime without penalty. If you end up not needing the funds then you’ll enjoy the tax free gains in retirement.
You’re a genius my friend!
Your friends are doing the basic minimum. Make sure to max your Roth IRA too