Maxxed out my 401K

[Frankies Girl]

I've been working through all the bits and pieces of my budget, my pay, and what should go where, and after some discussions with the husband, we're taking the plunge.

Just turned in the paperwork to put in the maximum contributions towards my 401K - $17,500 a year now. Considering we make well under 100K combined, I think that's a pretty nifty achievement.

Key to this is that we still wanted to live off of my paycheck alone, so that means for the foreseeable future, we'll be down to living on about 35% and saving around 65% total of our combined salaries (AGI). I think that is pretty badass (if we can pull it off). :D

[BC_Goldman]

Niiiiccceee!

[aj_yooper]

Good job!

[jly224]

Excellent work. I'm currently working my way through the remaining $24k in student loans and maxing out my 401k and Roth IRA will be my next step.

[olivia]

Awesome, congratulations!!!

[tomsang]

Congrats!  That is a great accomplishment.

[GreenGuava]

Great accomplishment.  It seems you've made some huge strides, investment-wise, since you joined the boards.  I'm very happy to hear of the successes.

[lauren_knows]

Awesome work. 

My wife and I always contributed a lot to our 401k's and maxed our Roth IRA's, but we never fully maxed out the 401k to the limit (usually we were doing like 10% + match).  Last year we had our first child, and my wife cut back to 60% FT.  We decided then, of all times, to max our 401ks. 

Psychologically, I thought it was much easier seeing the money drop into our checking account then manually investing it where I saw fit.  Now, our paychecks are quite small considering all the retirement monies coming out :)   But, it has been rewarding.

[OOBER]

I've been working through all the bits and pieces of my budget, my pay, and what should go where, and after some discussions with the husband, we're taking the plunge.

Just turned in the paperwork to put in the maximum contributions towards my 401K - $17,500 a year now. Considering we make well under 100K combined, I think that's a pretty nifty achievement.

Key to this is that we still wanted to live off of my paycheck alone, so that means for the foreseeable future, we'll be down to living on about 35% and saving around 65% total of our combined salaries (AGI). I think that is pretty badass (if we can pull it off). :D

That IS very badass. Good work.

One thing I have always wondered about this is what happens if you exceed the maximum?

For example, say you calculate 30% of your income should get you close to 17,500, what happens if it ends up being more? Do they just start plopping it into a money market, reducing withdrawals, etc.?

[lentilman]

Great job!

[cats]

That IS very badass. Good work.

One thing I have always wondered about this is what happens if you exceed the maximum?

For example, say you calculate 30% of your income should get you close to 17,500, what happens if it ends up being more? Do they just start plopping it into a money market, reducing withdrawals, etc.?

First off, congrats Frankie's Girl! That is a great amount to be stashing away.

Re: overcontribute, I'm sure it varies by plan, but mine (which is through Fidelity) actually does give you some options for what to do with excess money, so my understanding there is that the withdrawals will not reduce unless you go in and adjust them yourself.  But again, I'm sure it varies by employer/plan (for example, my employer will only let you contribute up to a certain percentage of your pay each pay period, while my boyfriend's HR will manage a contribution of 100% of a paycheck, so if he want to he can max out early on in the year...useful if you think you might get fired or quit mid-year!).

[kkbmustang]

I've been working through all the bits and pieces of my budget, my pay, and what should go where, and after some discussions with the husband, we're taking the plunge.

Just turned in the paperwork to put in the maximum contributions towards my 401K - $17,500 a year now. Considering we make well under 100K combined, I think that's a pretty nifty achievement.

Key to this is that we still wanted to live off of my paycheck alone, so that means for the foreseeable future, we'll be down to living on about 35% and saving around 65% total of our combined salaries (AGI). I think that is pretty badass (if we can pull it off). :D

That IS very badass. Good work.

One thing I have always wondered about this is what happens if you exceed the maximum?

For example, say you calculate 30% of your income should get you close to 17,500, what happens if it ends up being more? Do they just start plopping it into a money market, reducing withdrawals, etc.?

If you exceed the max deferral amount, they are called excess deferrals. The employer must return them to you within a certain period of time following the end of the plan year or the employer could be subject to an excise tax, IIRC.

[avonlea]

That's wonderful, Frankies Girl!

[seattlecyclone]

My employer and my wife's employer both keep track of how much you've contributed throughout the year and just stop deducting from your paycheck once you hit the limit. So we both figure out what percentage of our salary $17,500 is and round up to the nearest percent (since neither employer lets us specify fractional percentages to deduct). Then our take-home pay ends up being slightly higher in the last pay period of the year since that's when we hit the contribution limit.

Things can be a bit more complicated if you switch employers during the year. When I switched to my current job they said their system didn't have any way to keep track of how much I had already contributed that year while working for my previous employer, so I would have to keep track on my own to make sure that I didn't go over the limit.

[rocklebock]

Nice work! I've been raising my contributions month by month as I cut other expenses. I think I'll be comfortable raising it to the maximum by the end of the year, which is way faster than I expected. Even a couple years ago it was unimaginable to me that I'd be able to do this, or even want to do it in the first place.

[snuggler]

Congrats! It is such a great feeling to see it maxed out.

[chardog]

Congrats!

I always maxed mine as well as IRA and also had a pension.

Glad I made that decision early.  Worked for about 26 years and it allowed me to retire in April.

[KatieSSS]

Congrats! This is a goal I wish I could get to faster. But it is quite far down the list. #1 is pay off all debt, #2 is get e-fund from 3 months to 6 months of expenses. THEN the next one will be to up my 401k contribution. I'm not even close to the maximum in contributions - I would have to get paid a LOT more for that to happen!

[imustachemystash]

That's so awesome!  I bet you are looking forward to seeing how that will impact your taxes too.