How often have you heard you should take advantage of your 401k max contribution rate?
We hear it all the time!
Unfortunately 401k plans have been oversold as the suitable replacement for the disappearing pension.
The max contribution you can make intro your 401k is almost always far larger than any employer match. So the questions becomes: “what is the optimal way to save for retirement?”
Should you max out your 401k? That depends!!!
Do you want to retire early? If so, where will your early retirement withdrawals come from?
It is possible to make a separation from service distribution at or after age 55, but the request needs to be done correctly to avoid any 10% penalty.
Are you a high earner? If so, does making a max contribution to a tax deferred vehicle really make sense? Do you have faith that our government spending will get under control? Tax deferred vehicles have their place, but too much tax deferred money can set you up for a major tax headache in retirement.
Don’t forget, there is no separation from service distributions on IRAs!
Need help with early retirement planning? Let us help!
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retirement planning has been an important topic for decades, however, with changing times and fluctuating economies, it is important to think about retirement plans differently. One of the most effective strategies for retirement planning is 401k, which is also known as a defined-contribution plan. It is a retirement savings account that is created by employers to help their employees in saving for their retirement.
However, it is important to note that there are certain limitations of 401k – the most important being the 401k max contribution limit. This limit changes from time to time and is updated annually based on the tax laws of the United States.
The 401k max contribution limit for 2021 is $19,500. This means that an individual can contribute up to a maximum of $19,500 to their 401k account in a year. For individuals who are aged 50 and older, there is a catch-up contribution limit of $6,500, which means they can contribute up to $26,000 per year.
This contribution limit may seem limited at first, however, it is important to understand the benefits of 401k and how it can help in retirement planning. 401k contributions are pre-tax, which means that individuals can lower their taxable income by contributing to their 401k account. The investments made in the account also grow tax-free, which means that taxes have to be paid only when the money is withdrawn from the account in retirement.
Moreover, employers may also offer matching contributions, which makes 401k an attractive investment strategy. Many employers match a certain percentage of the employee’s contribution to their 401k account, which means that individuals can benefit from the compounding interest over a longer period of time.
To maximize the benefits of 401k, it is important to focus on strategies that can help individuals to save more efficiently. One of the most effective strategies is to enroll in an automatic contribution plan. This means that a certain percentage of an individual’s salary is automatically deducted and deposited into their 401k account each month.
Another strategy is to adjust the contribution amount annually so that individuals can take advantage of the 401k max contribution limit. A small increase in contribution each year can help individuals to make a significant impact on their retirement savings.
In conclusion, 401k is an effective retirement planning strategy, however, it is important to rethink conventional retirement planning and focus on strategies that can help to maximize the benefits of 401k. By understanding the contribution limits and taking advantage of the benefits of pre-tax contributions, matching contributions, and automatic contribution plans, individuals can secure their financial future and enjoy a comfortable retirement.
And social security is the best, remember majority of people are not wealth sociopath pigs
I hope you are not trying to convince us here, that 401K are better than pension. Pension always going to be superior bc nobody has time to things about these things other than wealthy pigs
What about Real estate in IRA? None of these pundits talk about it. There is your tax free income possibly ..
What about Roth 401k?
IUL——the missing retirement link!
Great video Matt! , did you receive my email with the illustration for my UiL?
If the employer doesn’t offer it then it doesn’t matter what we think or rethink. Pension liabilities crush businesses. On the question of stopping a 401 k I would say no as most people won’t save otherwise. Now if you already have 2 million then I can see the value.
Great video, I agree with everything you discussed. 401k = follow the herd. Need to think differently to be prosperous.
I currently have CVLI policies, wife’s 403b employer puts in 9% and Roth. A combination is key incase tax situations change over time, allowing the shift in which ever direction is best.
Roth 401k, Roth TSP > 401k, TSP