Author Topic: Max out 401k?  (Read 4212 times)

cbr shadow

  • Bristles
  • ***
  • Posts: 468
Max out 401k?
« on: January 25, 2013, 01:14:42 PM »
Probably 95% of the people here know the answer to this question, but I do not..
After my wife and I hit our next financial goal (bringing ~$40k to the table to refinance and get rid of PMI), we would both like to max out our 401k's.  What's the best method of doing this?  Does employee match count towards the $17,000?

Lets use my salary as an example..
I make $47,875 before taxes
My company matches a full percent up to 4%, then .5% up to 6%.. so effectively they match 5% as long as you're putting in at least 6%.

Ideally I dont want to hit the max before the end of the year because I want to take advantage of the match every single paycheck, correct?

What percentage should I be putting towards retirement, and why?

simonsez

  • Pencil Stache
  • ****
  • Posts: 778
  • Age: 33
Re: Max out 401k?
« Reply #1 on: January 25, 2013, 01:18:14 PM »
2013 limit is 17.5 k.

No, matched money does not count toward the limit.

How you want to max it out is up to you.  Some might want equal payments of 17500/26 (if paid biweekly) while others might want to front load the first contributions in order for that money to have a slightly longer time to earn money (while still contributing the necessary amount on the later payments to receive the full match).

sol

  • Walrus Stache
  • *******
  • Posts: 8492
  • Age: 42
  • Location: Pacific Northwest
Re: Max out 401k?
« Reply #2 on: January 25, 2013, 01:26:33 PM »
Some employers match per paycheck, so you'd want to contribute 26 equal amounts. Which also happens to be the best strategy for dollar cost averaging.
« Last Edit: January 25, 2013, 01:36:20 PM by sol »

Patryn

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Max out 401k?
« Reply #3 on: January 25, 2013, 01:44:27 PM »
$17,500 / $47,875 = 36.55%.  If your company is like mine you can just set your withholding percentage to 37% and the last check will have a little less taken out so that you don't go over the $17,500.

Employer match doesn't count towards the limit.

cbr shadow

  • Bristles
  • ***
  • Posts: 468
Re: Max out 401k?
« Reply #4 on: January 25, 2013, 01:46:38 PM »
Thanks everyone that clears everything up!

forward

  • Stubble
  • **
  • Posts: 199
Re: Max out 401k?
« Reply #5 on: January 26, 2013, 01:05:19 PM »

I'll add the really bright side to that.  You put in $673 biweekly for a total of $17,500 per year.

Your employer puts in $92 biweekly for a total of $2393 per year.

So you are actually putting $19,893 (almost 20k) into your 401k every year.  That's awesome!

Plus you also essentially are giving yourself 6% more income!  Way to go!