Maxing out 401k - feeling stressed

[FiguringItOut]

For those who either did not contribute to 401k or contributed a small percentage and then started maxing it out, how did you feel when the new deduction amount was reflected on your paycheck?

I just got my paycheck with the deduction set to 20% of my pay to max at $18K if annualized.  I haven't contributed to 401k at all in the past 4 years.    Then in June I got a new job with $18K raise and decided to put all of it into 401k.  I also have set up my HSA to max (if annualized) and that will start with the August 15 paycheck. 

So my first two checks at the new job were without any deductions.  Then one paycheck with 10% 401k deduction - my initial contribution, and now check with 20% of 401k deduction.  It is $300 less then the last check.  The next check will be even smaller once HSA deduction starts.

I am honestly sitting here and hyperventilating.  The check looks so small.  I planned my budget for August and I am about $250 short as of right now with not many places to cut down, though I will try.  Also, I don't have a good grip on what my monthly expenses will be going forward - just moved to a new place and new neighborhood, only have one partial utility bill so far, haven't figured out groceries sales and such, plus still need stuff for the new place, etc.

I know that in worst case scenario, I can always reduce my 401k deductions.  But I don't want to.  I have emergency fund, but I don't want to use it.  It is sitting in my savings account and has nice round numbers in it and I like nice round numbers with zeros.

I'll be fine financially for the time being, I do have money if I need to pad my budget, but I am stressing about it nonetheless.  I can't be the only one who felt like this when first starting, right?

I plan on writing the case study in Ask a Mustachian forum, but want to wait few months to get a better grip on my expenses at the new place.  Right now it is just a slightly educated guess and not useful for future planning.

[therethere]

You will be fine. Congrats! I would forecast your taxes for the remainder of the year to make sure you aren't withholding too much or too little for 2015 based on your deductions. I have to change mine every paycheck to account for DH's tax withholding discrepancy. So my paycheck actually gets gradually smaller by $20 or so every two weeks....

Also, remember the last month rule for HSA. You can contribute the yearly max as long as you are on the same plan Dec 2016.

[schimt]

IMHO, in no way should your path to FI be stressful... you should cut back on the 401k. Allow your self to settle into the new place, focus on getting a handle on your spending (fixed costs like bills and fuel ect.), then if your savings is out pacing your spending, crank up the contribution amount.

The last thing you should do is stress yourself out, your will burn out and quite on this path. Like a diet or new gym routine, going too hard in the beginning most likely leads to failure, in contrast to making small lifestyle changes over time that will continue for 20-30 years, you will be much more successful. Sounds like you are in a good place with an emergency fund and focused on savings, so there is no reason to be EXTREME and not be able to sleep at night, that is just counter productive.

Good luck! and Use something like Mint.com to track your spending in your new place, then work on improving your savings/investing rate.

[Emilyngh]

For those who either did not contribute to 401k or contributed a small percentage and then started maxing it out, how did you feel when the new deduction amount was reflected on your paycheck?

I just got my paycheck with the deduction set to 20% of my pay to max at $18K if annualized.  I haven't contributed to 401k at all in the past 4 years.    Then in June I got a new job with $18K raise and decided to put all of it into 401k.  I also have set up my HSA to max (if annualized) and that will start with the August 15 paycheck. 

So my first two checks at the new job were without any deductions.  Then one paycheck with 10% 401k deduction - my initial contribution, and now check with 20% of 401k deduction.  It is $300 less then the last check.  The next check will be even smaller once HSA deduction starts.

I am honestly sitting here and hyperventilating.  The check looks so small.  I planned my budget for August and I am about $250 short as of right now with not many places to cut down, though I will try.  Also, I don't have a good grip on what my monthly expenses will be going forward - just moved to a new place and new neighborhood, only have one partial utility bill so far, haven't figured out groceries sales and such, plus still need stuff for the new place, etc.

I know that in worst case scenario, I can always reduce my 401k deductions.  But I don't want to.  I have emergency fund, but I don't want to use it.  It is sitting in my savings account and has nice round numbers in it and I like nice round numbers with zeros.

I'll be fine financially for the time being, I do have money if I need to pad my budget, but I am stressing about it nonetheless.  I can't be the only one who felt like this when first starting, right?

I plan on writing the case study in Ask a Mustachian forum, but want to wait few months to get a better grip on my expenses at the new place.  Right now it is just a slightly educated guess and not useful for future planning.

Yeah.... We had not been contributing at all to my 401k for 4 years while DH wasn't working (was a full time SAHD with our daughter) and because we were still on the Roth bandwagon for what we were saving.   This summer DH got a PT job and I brought in some extra income so to catch up dumping that in savings I set my 401k withdrawal to exactly 50% of my take home!

I ran the calculation regarding what we could save and then felt like it the result had to be wrong.   I redid it and redid it and redid it, but seeing my check (which had been our only income) cut in half just felt wrong.   I took the plunge and for two checks now I am getting 1/2 of what we had before and somehow it still feels wrong (like I'm going to wake up tomorrow and realize I made a horrible calculation error).   We saved 60% + of our income before we had DD, but we made a ton more money, saved all of DH's check plus a little of mine, and started that from the first day on the job, so somehow it didn't mentally seem as wrong as taking the modest amount we've been living on and feeling like it's cut in half (although it's not really b/c we have other small income sources now).

  It's just so abnormal in our society to save like this that I think it can weird us out as it goes against standards we've clearly internalized.   We look at our checks and at least part of us must emotionally buy into the idea that we can barely live on them, so seeing less can freak us out.   But, it's not wrong.   It's right.   It'll be fine.

[FiguringItOut]

Thanks therethere,

I can't do much with my taxes this year.  I am pretty sure I will be breaking even or getting a small refund, but not much I can do to affect the outcome right now.  I will be filing MFJ with my ex this year (separated, will file joint tax return, then sign final divorce in Jan of 2016).  He had a large bonus and severance pay in March/May of 2015 and had too much tax withheld (from those as expected).  Then he was unemployed for about 6 weeks, then he started working and right now I am not sure what he set his tax withholdings to. 

I am also at a new job, higher salary, but smaller check due to 401k/HSA withholdings as I posted above.  I think I am under withholding on tax if it was a normal tax year, but considering the overwithheld tax for my ex earlier in the year, it should break even overall.  We will figure out how to split any refunds and or payments so as they are fair for both of us.  And I do have savings to use if needed.

I will look at it again, though not sure it I will be changing anything right now with tax.  I plan to do a much better tax planning for 2016 since I will be filing head of household and only need to account for my income (no tax on child support payments). 

[RunHappy]

Contributing to your 401k shouldn't be stressful, however if you went a while without contributing then having smaller paychecks can be stressful.

I had planned to max out my 401k early this year, but doing that meant I took a 30% "pay cut" in my monthly checks.  That hurt, but I kept reminding myself that I really am paying my future self.

If you find that 20% is too much then you have two choices really 1) find areas to cut in your monthly budget to accommodate that payment to your future self 2) reduce your 401k contributions until you can get a better handle on your monthly budget.

It sounds like #2 would be best for you right now since you are going through a lot of changes and still do not know all the money you will need to live on monthly.  When you get a handle on it then you can start to up your contributions.

[KCM5]

I do this, too. I run the numbers, give myself a buffer, and still feel a bit stressed when we increase contributions. Now, I'm not losing sleep over it or anything. But it seems like you have had a lot of changes in the last few months, so that uncertainty combined with larger contributions makes sense. In a couple of months it will seem normal again.

[FiguringItOut]

IMHO, in no way should your path to FI be stressful... you should cut back on the 401k. Allow your self to settle into the new place, focus on getting a handle on your spending (fixed costs like bills and fuel ect.), then if your savings is out pacing your spending, crank up the contribution amount.

The last thing you should do is stress yourself out, your will burn out and quite on this path. Like a diet or new gym routine, going too hard in the beginning most likely leads to failure, in contrast to making small lifestyle changes over time that will continue for 20-30 years, you will be much more successful. Sounds like you are in a good place with an emergency fund and focused on savings, so there is no reason to be EXTREME and not be able to sleep at night, that is just counter productive.

Good luck! and Use something like Mint.com to track your spending in your new place, then work on improving your savings/investing rate.

Contributing to your 401k shouldn't be stressful, however if you went a while without contributing then having smaller paychecks can be stressful.

I had planned to max out my 401k early this year, but doing that meant I took a 30% "pay cut" in my monthly checks.  That hurt, but I kept reminding myself that I really am paying my future self.

If you find that 20% is too much then you have two choices really 1) find areas to cut in your monthly budget to accommodate that payment to your future self 2) reduce your 401k contributions until you can get a better handle on your monthly budget.

It sounds like #2 would be best for you right now since you are going through a lot of changes and still do not know all the money you will need to live on monthly.  When you get a handle on it then you can start to up your contributions.

Thank you runhappy and schmit.  I was feeling that I would be a total failure if I decreased the contribution now after I decided to commit to it.  I will run my numbers again for August and see if there is anything I can reduce.  I was planning to spend a bit to pamper myself a little between my birthday in two weeks and all these new changes going on.  I am still thinking about it, but I may reduce that amount.  Still thinking on that.

[FiguringItOut]

  It's just so abnormal in our society to save like this that I think it can weird us out as it goes against standards we've clearly internalized.   We look at our checks and at least part of us must emotionally buy into the idea that we can barely live on them, so seeing less can freak us out.   But, it's not wrong.   It's right.   It'll be fine.

I do this, too. I run the numbers, give myself a buffer, and still feel a bit stressed when we increase contributions. Now, I'm not losing sleep over it or anything. But it seems like you have had a lot of changes in the last few months, so that uncertainty combined with larger contributions makes sense. In a couple of months it will seem normal again.

I sure hope so.  Right now it is anything but right and normal.  I'll give a few days and will rework my august budget.  Then will see where I stand.

[forummm]

It sounds like you are stressing for no good reason. If you have to pull $250 out of the efund to make things work this month, that's OK. You can put that money back in January when you adjust the 401k back to $18k annualized. Good for you for maxing the 401k!

You can probably find a way to cut the $250 from your spending though. :)

[coppertop]

I increased my 401(k) contribution to the maximum ($24,000 this year as I am over 50) because I learned to my chagrin that if I do not do that, Uncle Sam will have his hand out on April 15 and I will have to pay the money out anyway. Either way, I don't have the use of my money; but at least if it's in the retirement account, it's still mine. 

[RWD]

I wish I had started maxing out my 401k sooner. I probably could have done it as soon as I started working. Instead I waited until we were saving $3k+/month in taxable accounts... So increasing my 401k contributions only reduced how much we were saving in taxable accounts and didn't strain our expenses budget at all.

[Philociraptor]

So 20% contributions = $18k/year? That means you're making $90k/year. There is NO WAY you should be stressing about making it when you're single and making double the median income for a family of 4 in the US.

(If I mathed wrong my bad)

[GatewayTwo]

Just made a similar change - from 3% (just enough to get the match) up to 11%.

The way I made it stress free was to gradually open up a "hole" in my budget.  When the hole got to about $500 each month, I froze it and went a few months (yeah, ok, it was a year) to see if I ever actually needed (as opposed to "needed") to use that money.  When we didn't need it, I had a conversation with Mrs. GatewayTwo, and we sent it over to the 401(K).  Now I'm starting the same process again, because I want to get it up to the max.

One thing to remember though, is that sending it to the 401(k) comes with a nice little bonus from Uncle Sam.  It reduces your taxable income, giving you a "bonus" percentage every month based on your marginal tax rate.  Thanks Mad FIentist!

(It's complicated, but you can figure it out on a spreadsheet.)

[James]

You are at a good spot. You are looking at the right things, cutting out spending.

Absolutely if you can't make it work then cut down the 401k contribution, but sometimes it's stress that helps us understand what it takes to implement our plan and meet a goal. If you have expenses that need to be cut then use this stress to do that, don't cut down the 401k contribution to get rid of stress unless that is the only way.

Don't second guess your plan, it sounds solid. It probably sounded nice in smooth in planning, and now that rubber is hitting road it is painful. But once you settle into the new plan it will work out, and you will be so glad to stuck it out when you meet your goal. If needed carefully use your EF to keep your ship going, and then once you are settled in figure out how to replenish it. Maybe pause your contributions for a month, but don't let yourself get into the habit of a large paycheck since that just feeds the beast. Allow yourself the satisfaction of being badass, cut spending as necessary, and tough it out. As long as you have the EF to touch if absolutely needed, allow yourself to feel the pain and cut yourself off from that money you are seeing flow to your 401k. Over time things will settle out and you will learn to live happily on whatever paycheck you are allowing yourself.

[FiguringItOut]

So 20% contributions = $18k/year? That means you're making $90k/year. There is NO WAY you should be stressing about making it when you're single and making double the median income for a family of 4 in the US.

(If I mathed wrong my bad)

A lot of this is true, however, things are not always what they seem when you live in NYC and paying $2,400 in rent every month. 

[Philociraptor]

So 20% contributions = $18k/year? That means you're making $90k/year. There is NO WAY you should be stressing about making it when you're single and making double the median income for a family of 4 in the US.

(If I mathed wrong my bad)

A lot of this is true, however, things are not always what they seem when you live in NYC and paying $2,400 in rent every month.

Should leave you around $1.8k/mo to play with after fed tax, state tax, FICA, and rent, no? I believe in you, you can make it work! I highly suggest bb11's journal, making it work in NYC on less than $60k salary: http://forum.mrmoneymustache.com/index.php?topic=35520

[FiguringItOut]

So 20% contributions = $18k/year? That means you're making $90k/year. There is NO WAY you should be stressing about making it when you're single and making double the median income for a family of 4 in the US.

(If I mathed wrong my bad)

A lot of this is true, however, things are not always what they seem when you live in NYC and paying $2,400 in rent every month.

Should leave you around $1.8k/mo to play with after fed tax, state tax, FICA, and rent, no? I believe in you, you can make it work! I highly suggest bb11's journal, making it work in NYC on less than $60k salary: http://forum.mrmoneymustache.com/index.php?topic=35520

I think it will be more like $1,400/mo once HSA and medical premiums start in August, but you get an idea.  Not a lot with two teens who need to be clothed and fed and my occasional need to get away for a long weekend. Will try it out though before changing my deductions.

[Philociraptor]

So 20% contributions = $18k/year? That means you're making $90k/year. There is NO WAY you should be stressing about making it when you're single and making double the median income for a family of 4 in the US.

(If I mathed wrong my bad)

A lot of this is true, however, things are not always what they seem when you live in NYC and paying $2,400 in rent every month.

Should leave you around $1.8k/mo to play with after fed tax, state tax, FICA, and rent, no? I believe in you, you can make it work! I highly suggest bb11's journal, making it work in NYC on less than $60k salary: http://forum.mrmoneymustache.com/index.php?topic=35520

I think it will be more like $1,400/mo once HSA and medical premiums start in August, but you get an idea.  Not a lot with two teens who need to be clothed and fed and my occasional need to get away for a long weekend. Will try it out though before changing my deductions.

Gotcha, that certainly does make things tighter! Maybe in a few years those teens can contribute a bit on their own, since many studies show that students working part time tend to stay out of trouble and get better grades. Best of luck!

[3Mer]

I can relate to your stressed feelings. I am maxing my 401K too for the first time.  Plus I tried maxing out both my HSA and then 10% to our company stock program.  Which works out (barely) on paper, but does not leave much room for unexpected expenses.  My emergency fund dwindled to the minimum, I had to back off a bit for the rest of the year.  keeping 401K at max but doing minimal to HSA and stocks so I can save up and rebuild my sinking funds.

It is stressful, but it is just self-imposed.  It's all about balance.

[FiguringItOut]

I can relate to your stressed feelings. I am maxing my 401K too for the first time.  Plus I tried maxing out both my HSA and then 10% to our company stock program.  Which works out (barely) on paper, but does not leave much room for unexpected expenses.  My emergency fund dwindled to the minimum, I had to back off a bit for the rest of the year.  keeping 401K at max but doing minimal to HSA and stocks so I can save up and rebuild my sinking funds.

It is stressful, but it is just self-imposed.  It's all about balance.

Best of luck to you, and to me. :)

This whole thing being self imposed is what really is stressing me the most.  Not only can I decrease the contributions, but also have child support payments coming in on top of my salary.  However, i decided not to touch child support unless it is a dire circumstance and I absolutely can't make the month without it.

It is partially the pride issue of making it on my own, and partially using child support as a savings pot.  Doesn't really make a difference in using the child support for expenses and saving from my own check.  But child support comes into a separate account, so easy to just leave it alone and not mess with it.  Automatic savings.  Self imposed, of course.

[GreenPen]

FiguringItOut, one thing I might recommend is setting up a Mint account (or something like that) and focusing on your Net Worth. This won't help with meeting monthly expenses, but it might help with the psychology of having a smaller paycheck. The more money you direct to your 401k, the more your net worth will change on pay day.

[FiguringItOut]

FiguringItOut, one thing I might recommend is setting up a Mint account (or something like that) and focusing on your Net Worth. This won't help with meeting monthly expenses, but it might help with the psychology of having a smaller paycheck. The more money you direct to your 401k, the more your net worth will change on pay day.

I"m not a fan of Mint, but I use YNAB.  I am trying to focus on NW, but right now I'm not seeing a big picture.  I am hoping to rework my august budget and then being able to take  a step back.  It just hit me this morning when the check showed up in the bank account.

This group is awesome.  Thanks you for all of your support!

[RangerOne]

Its just a mental thing really. If you would be saving the money anyway it should make no difference budget wise. But it always sucks giving your self a monthly pay decrease. If you get a profit share or bonus try dumping that all or most into the 401k. That way you can reduce your monthly contributions and effectively increase your monthly income. That way also more of your money gets invested sooner.

Market timers may tell you not to do this because if you dump a lump sum in your retirement and the market crashes the next day you lose all your money. Just ignore those people...

Otherwise 20% is a nasty chunk out of check if you were used to 0. I started my first year at 10%. Did my second at 15%. And finally this year I maxed it out with half a profit share check and 10% per check. If you increase steadily as your pay increases you should never see too high a drop in your paycheck. People with the same yearly pay can have very different monthly incomes if they are under-funding retirement or health. I promise you will get used to it.