Bumped my 401(k) to the max

[kendallf]

I just increased my TSP contributions to 15%, which should just about max me out to the IRS limit this year.  I had been contributing 5% for the past few years, which got me a 5% match. 

I've been making serious efforts to pare down our expenses in many categories since starting to read MMM a few months ago; it's helping.  I have more improvements to make later this year when I can switch health plans (I'm going to a HDHP) and when we move into a smaller place.  Then we can rent out our current house and begin some serious saving!

I'm a little scared of seeing that first reduced paycheck; we have the threat of sequestration coming later this year and my cash reserve is not huge, but I felt like I needed to act, and this should help remind me to keep my frugal habits going.

[lauren_knows]

Congrats on the 401k max.  There are a bunch of us on these forums that are either govie's or contractors, and I'm sure we're all anxiously awaiting news on the sequestration.  Being aware of the virtues that are taught on this site, I'm not quite as scared of the sequestration as I imagine some people are.

[unplugged]

What does sequestration mean in layman's term?

Your goals are very similar to ours. Great job with the 15%!!!!

[zinnie]

Good job! Did this not too long ago myself. It is weird seeing your paycheck go down suddenly...though if you use Mint or similar you can still see net worth go up as much as before.

[kendallf]

What does sequestration mean in layman's term?

Your goals are very similar to ours. Great job with the 15%!!!!

Fancy word for mandatory budget cuts.  If Congress continues to dither, most gov't civilians will have mandatory furloughs (days off without pay), beginning in late April.  They're currently predicting 1 day a week which would effectively be a 20% pay cut, for 22 weeks.

Thanks!

[SwordGuy]

What does sequestration mean in layman's term?

It means big budget cuts for US Govt departments.   Unpaid furloughs, layoffs, hiring and training freezes.

[lauren_knows]

What does sequestration mean in layman's term?

Your goals are very similar to ours. Great job with the 15%!!!!

Sequestration is the "automatic cuts" to the defense budget that happen on March 1st if congress doesn't get their shit together and come up with a plan on their own.  The sequestration is not a detailed plan, rather a broader across-the-board cut... which a lot of people seem to think is reckless.  This will include extended furloughs (govt employees will be forced to take 1 day/week off and not get paid). I'm not much of a government finance guy, but I think we could probably cut more than the sequestration is proposing, without much of a problem,  IF it was actually part of a detailed plan.

Also, to get a little more background, some people are speculating that congress is going to purposely let the sequestration happen to make some sort of point.

[Jack]

$17500 is 15% of your pay? I didn't realize Federal employees were paid that well!

[lauren_knows]

$17500 is 15% of your pay? I didn't realize Federal employees were paid that well!

Without too much digging, I found that OP is 46, and likely pretty far in down the GS-scale.  You can certainly make over $100k in the federal government, if you're there long enough.

[kendallf]

$17500 is 15% of your pay? I didn't realize Federal employees were paid that well!

It's actually a bit shy of the 17.5k limit.  Maybe I should go back and change my thread title to "**near** the max."   :-) 

I'm an engineer, and I've been around a while; our pay scales are public record.  Most gov't engineers who are not in direct supervisory roles are GS-12 or GS-13s.  FWIW, I started in 1992 making $29.5k and thought I was rich!   

[The_Dude]

Man whenever I hear about these furlough days I get really jealous.  I would gladly take a 20% pay cut for working 4 days a week instead of 5 but in my profession it is extremely rare to find part time employment for good pay.

[AJ]

Man whenever I hear about these furlough days I get really jealous.  I would gladly take a 20% pay cut for working 4 days a week instead of 5 but in my profession it is extremely rare to find part time employment for good pay.

This was my feeling as well. I know a 20% cut really sucks for people that don't want it (or, worse, can't afford it), but I would *totally* take that deal if it was offered to me. Grass is always greener, I suppose...

[sol]

I just increased my TSP contributions to 15%, which should just about max me out to the IRS limit this year.  I had been contributing 5% for the past few years, which got me a 5% match. 

My wife and I are both federal employees.  Maxing your TSP accounts is absolutely the best thing you can do.  Remember that there are a variety of ways to get that money back out penalty-free, if you know how to work the system.  Just in case you have a medical emergency or something.

I'm a little scared of seeing that first reduced paycheck;

Don't be scared, celebrate it!  Every dollar that your paycheck is reduced is another $1.28 increase to your net worth due to the tax deductibility of your TSP contributions, so take the long view and be happy.  And the TSP has some phenomenal investments to choose from, with automatic rebalancing and expense ratios that are the absolute lowest anywhere.  Way lower than Vanguard, even.  The TSP benefits are one of the only reasons I'm still a fed, instead of taking a higher paying job in the private sector where compensation would be based on my qualifications and abilities instead of my years of service.

[kendallf]

My wife and I are both federal employees.  Maxing your TSP accounts is absolutely the best thing you can do.  Remember that there are a variety of ways to get that money back out penalty-free, if you know how to work the system.  Just in case you have a medical emergency or something.

I'm a little scared of seeing that first reduced paycheck;

Don't be scared, celebrate it!  Every dollar that your paycheck is reduced is another $1.28 increase to your net worth due to the tax deductibility of your TSP contributions, so take the long view and be happy.  And the TSP has some phenomenal investments to choose from, with automatic rebalancing and expense ratios that are the absolute lowest anywhere.  Way lower than Vanguard, even.  The TSP benefits are one of the only reasons I'm still a fed, instead of taking a higher paying job in the private sector where compensation would be based on my qualifications and abilities instead of my years of service.

Yes, I've been contributing at least 5% since my first year.  If only I'd kept getting those 10%+ returns per year we all thought were going to continue forever back in the late 90s..   :-)   Better yet, if I'd gotten my savings in line earlier, I'd be a millionaire despite the market's big drop.  I have taken TSP loans for some stupid things as well.

No changing the past, and I am happy with how things are progressing.  I think we're probably in the highest tax bracket now we'll ever be in, thus my decision to put more $ into the TSP.

I have a variable rate mortgage on a piece of land that is worth much less than I owe, and I really, really want to pay it down so I'll have options should the interest rates climb, or if the HOA decides to drop an assessment on me.  That's the anchor that I wish I could cut.. but the rate is low right now so I'm just paying the normal payment. 

Thoughts on the priority, anyone?

[c]

Congrats. I upped my 401k contributions to the max. It's a bit shocking at first as the lower salary feels like a loss, but seeing the 401k balance grow helps :)

[unplugged]

Thanks for explaining sequestration. I hope that doesn't happen to you. I imagine this will slow so many government things down that already take forever.