Sometimes, saving for retirement could be overdone and hurt your current financial needs. One has to remember that while there are a lot of tax advantages to contributing to a 401k plan, contributing too much could cost you more in the long run. It is important to first collect all possible matching supplied by your employer first. The amount to contribute more than that should be determined if this is ‘investing’ money. That is, if its money you do not need to buy things, saving for a down payment on a home, or may need it for certain things before you retire.
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LEARN MORE ABOUT: 401k Plans
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When it comes to retirement savings, one of the most common questions is “how much should I contribute to my 401k?” The answer to this question depends on a variety of factors, including your income, age, and financial goals. In this article, we will explore the factors to consider when determining how much to contribute to your 401k.
First and foremost, it’s important to understand the benefits of contributing to a 401k. This type of retirement account allows you to save pre-tax dollars, which means that your contributions reduce your taxable income. Additionally, many employers offer matching contributions, which can significantly boost your retirement savings. Plus, the money in your 401k grows tax-deferred, allowing you to maximize your investment returns.
Now that we understand the benefits of contributing to a 401k, let’s discuss how much you should contribute. The general rule of thumb is to save around 10-15% of your income for retirement. However, this guideline may not be applicable to everyone. If you’re in your 20s or early 30s, you may be able to get away with saving a smaller percentage of your income, as you have more time for your money to grow. On the other hand, if you’re in your 40s or 50s and haven’t yet started saving for retirement, you may need to save a higher percentage of your income to catch up.
Another factor to consider is your financial goals. If you want to retire early or live a more luxurious lifestyle in retirement, you may need to save a higher percentage of your income. On the other hand, if you plan to work well into your 60s or have lower expenses in retirement, you may be able to get away with saving a smaller percentage of your income.
It’s also important to consider your overall financial situation when determining how much to contribute to your 401k. If you have high-interest debt, it may be more beneficial to pay off this debt before increasing your 401k contributions. Additionally, if you have other financial goals, such as saving for a down payment on a house or funding your children’s education, you may need to prioritize these goals over saving for retirement.
Ultimately, the ideal contribution to your 401k will depend on your individual circumstances. It’s important to carefully evaluate your financial situation, goals, and priorities to determine the appropriate amount to save for retirement. If you’re unsure about how much to contribute to your 401k, consider seeking advice from a financial advisor who can help you create a personalized retirement savings plan.
In conclusion, the amount to contribute to a 401k is not one-size-fits-all. It’s important to consider your age, income, financial goals, and overall financial situation when determining how much to save for retirement. By carefully evaluating these factors, you can create a retirement savings plan that aligns with your individual circumstances and sets you up for a financially secure future.
Hello bud would u suggest match my employer match and rest to open a Roth IRA and do a Target date funds ? Or put maximum amount at your work account which is 19,500 then put the rest in Roth IRA if have the money. Please suggest your opinion and Thanks
Thank you so much for this very simple and easy explanation. It really helped my understanding of how much to put into my 401K
Good!
What if my company doesn't match, should I still put some into the 401k, or should I max out the $6,000 annually into my vanguard target retirement date fund? Thank you
My life isn’t going to start until I retire, I hate having to answer to the man every week. I don’t plan on having kids or getting married. I want to retire on a bare minimum salary, so I can be free from people, deadlines, gossip and societies BS.
I put everything tax free. Now it’s too much. $3.5 million. Now majority of my retirement will be in the highest tax bracket. I say go Roth.
Agreed. Always get the match. Beyond that, do Roth. If you are in a low tax bracket and will make more money in the future, the pre tax 401k isn't that good of a deal. Put as much as you can in Roth and the rest in a taxable brokerage account.
A few questions, if I’ve been contributing just 10% which is nowhere near the max 401k when am in my 30s-49 once I get to 50 can I increase to $26,000 so call catch up contribution. What if I Max out now can I still increase contribution when I hit 50s. Lastly can start an independent Roth IRA with my bank after I max out at my job 401k?
I’ve always just done the 6% to get the max employer match, but recently bumped it up to 10% and am looking to do more up to the ~$19k annual.
Can you not lump sum contribute to your 401K or 403b? It can only be contributed through your paycheck/salary right?
So my job gives me 5.5 percent? So I should contribute 6 percent or more ? I was always taught to give 10 to 15 percent
But I thought I suppose to put away 10 to 15 percent to your 401k no matter the percentage match?
I liked the video until he started to encourage people to put less than the max. You should put as much as you can into your 401k and just reduce your life style to match. I don't think you should starve yourself or anything but most people could put more into their 401k and still live life just fine.
What if you have your own s corporation and you have your own 401k doesn't it make sense to max that out? Are there alternatives to 401ks? And do they maximize the tax benefits?
I make about $85k a year my company only matches 4 % if I put in 9% in 401k it’s that the max allow ??
also another thing to remember. make sure you know how long you have to work for your employer in order for you to keep their contribution when you decide to leave the company.
The company Only mach up to 4 % I contribute 10 % 401 k and 10% 401 k Roth..it's the good ?
My job offers %50 matching. I know it’s not enough. Do I still go for it until I find a job that matches %100?
401k is a scam
my employer’s only matching 2% doesn’t matter how much u put in per check. 🙁
My employer now allows Roth contributions along with the normal before-tax contributions. They match up to 7% of your salary when you contribute a max of 6% or more. My question is should I switch to just do Roth contributions, or do half and half? Or say I do the 6% and get the 7% but only 2% of the total 13% is traditional and the other 11% is Roth? I have a Roth IRA on the side. Maybe I can take my Roth contributions and roll them over into my Roth IRA when I retire?
Stock maket will crash, cash out and re invest before too late
Don't forget the inflation rate of 3-5% per year…. soo your investment portfolio needs to average more than that on a yearly basis to come on top…. if not.. you're actually gonna lose money. Never match a 1/4… or a 1/3…. go for 1/2, or 1/1 or above… and make sure your portfolio is at above a 7% average based on it's history. That's my take anyway… this coming from a bum with no money LOL.