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Hey everyone. I am a 2020 B.tech IT grad from VIT vellore. I have worked at DXC Technology for 15 months and quit in October. I gave 2 interview rounds at amex for Business analyst role and today got a call from the recruiter that she received mail from Amex that I’m selected and there would be a salary discussion probably this week. My question is, if she said that is it certain that I’ll be offered this role and if yes then is there a chance that my gap months can hamper my chances in hr round.American Express
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Mentor
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Starting salary $50k - after fica it’s $46k, maxing 401k brings you to $23k. After tax that’s $18-20k or $1.5k-$1.7k per month. How is that 10% liquidity if that’s your salary for the first couple years?
Saving something is always better than saving nothing.
AVP - “have you all just tried not being poor and young?”
Been there Twice!
Subject Expert
This thread is hilarious.
Who could fail to realize that only a small minority of people earn enough for maxing a 401k to be a light lift, right out of school, and those people mostly do it?
And yet here the OP is.
Subject Expert
Maybe if the OP had said something different it would have been better than what he actually said.
But not this. If all he means is "get your match," then where is all this language about 98% not doing it coming from? The vast majority of employees with access to a match do get it, and there is no demographic where the number is anywhere close to only 2%.
Let's amend this directive: "Kiddo, start contributing immediately to your 401k, as much as possible while meeting your other obligations".
Not everyone can contribute the max (23k?) straight out of school. However, it's a good idea to get started ASAP and let compounding do its work.
Exactly
You do realize the median salary in US is around 60k right ?
Coach
Please read my original post. And this time, focus on “roughly” and the intent of the post.
And planning not to address anymore argumentative and baseless posts.
If you start at 100k+ in MCOL/LCOL and don’t have any student loan debt or dependents (children/parents/family) it is absolutely doable. Most people don’t have that luxury.
Subject Expert
You keep saying 2%. But 13% of American adults are millionaires by the age of 45.
https://dqydj.com/net-worth-by-age-calculator/
Subject Expert
Getting away from the specific numbers this is just wrong conceptually.
The OP talks about giving up 10% liquidity and the idea that you can get 15% from it due to the tax advantage. That is a little dubious for a couple reasons, including the lower marginal tax brackets most people are in and the need to pay on withdrawal. But just run with it. So this couple spends 90% of their liquidity and gets 15% for the sacrifice, and thus saves one sixth of a year of expenses every year.
Assume they make 7% real, generous, and their income and spending do not rise.
How many times their expenses do they have in twenty years?
6.8 times.
Not earth shattering. Not FI. Not catapulting them into the 2%.
Good but not some kind of marvel.
I like the math exercise
Many Americans are living paycheck to paycheck. Most people can’t afford to max out their 401k because they need the money to survive.
Even if you’re a young professional, between school loans and rent, it takes time to make enough. It took me a good 12-15 years into my career to fully fund my 401k. I’m in HCOL.
Congrats for playing the long game! Many don't and it's to their disadvantage.
Mentor
@OP: so did you max your 401k from the first day of work?
Not bad.
This isn't necessarily bad advice, but math isn't the underlying reason. Saving via a 401(k) is a vehicle for tax deferral, not tax avoidance.
Early in our careers, most of us tend to be in lower tax brackets. So if we paid tax on our income early in our careers and then set our money aside to grow passively until retirement, we might actually end up paying less in lifetime taxes. Plus, the money we put into a non-retirement investment account is liquid, making it much easier to deploy in case of an emergency.
The real value of saving in a 401(k) early in one's career is developing the discipline of saving and, human nature being what it is, sequestering money specifically for retirement so we don't have an "emergency" and raid our accounts before then.
Anyway, AVP, for many people "simple math" doesn't quite justify maxing out on a 401(k).
(Note: I'm omitting certain forms of tax arbitrage that we can play with during our careers, like changing states, or adjusting savings/withdrawal strategy based on predicted or actual adjustments to Federal rates.)
Coach
@CFO, I agree with you—and as you rightly pointed out, the math isn’t the core message here.
A simple step taken early in one’s career can be a powerful driver of financial independence.
“Maxing the 401(k)” is just one of several vehicles that helps balance long-term wealth creation with near-term liquidity needs.
That said, it sometimes feels like the focus shifts more toward countering the idea than engaging with the underlying thought.
So retire at 40 with 0 accesses to the wealth you’ve accumulated tied up for another 20 years
Subject Expert
Roth conversion ladder and 72 (t) exist.
401k is the best savings vehicle for most people working towards FIRE
Yeah, I graduated college in 1996 and started working immediately.
1999 - dot.com collapse
2001 - post 9/11 recession
2008 - housing market collapse
Yeah, if you can keep things stable for the first 20 years and make sure to save and invest then it can go really well for you. Guess what though?
Exactly
Roth IRA if you are eligible.. Do what you can don’t be shamed into extending beyond your means. If you can only swing 3000 k that year all good…..
Stay at it make sure you hit those CAGRs. Most importantly learn and grow make your own decisions.
Sounds like a good plan, assuming is a household of one, or if a family household, all adults work, no parent staying home or children to care for.
Donald Trump my answer 32kyearly
Coach
Taxes and fast salary increase in the first 4-5 years of the corporate life. Let’s look into a very normalized scenario (the same is easily 50% higher for HCOL)
22 - start at 60k
25 - 90k
30 - 120 k
30-40 - average 150k
Between 22-25
- average 75k - post taxes 5k/month
- max 401k - post taxes 3.75k
- 25% liquidity impact
Between 30 - 40
- average 150k - post taxes 9k/month
- max 401k - post taxes 8k
- 11% liquidity impact
If not 100%, a closer to 100% is very reasonable target.
Coach
@MS1, I agree this advice won’t apply to everyone. There will always be a subset that cannot follow this savings track.
My point is that with some extra discipline, a much larger group—well beyond 2%—who can achieve financial stability much sooner than most people believe.
Yes, this unleashes the power of compounding!!
Get the point of the post and honestly agree with the intent.
We never know what life will throw at us and many people don't get a lot of financial education to grasp some of that.
The other thing is I know several people that I worked with over the years that busted their butt to retire early only to be dead 5 years later due to various things. So seeing that happen also can create some doubt in what if tomorrow never comes and you sacrificed all that for nothing.
I wish I would have listened to some back then but I also don't regret the life I lived when I was younger and all the places I went.
Set goals and chase them whatever that is.
We all will have the same ending so to say no matter what you choose.
I wasn't even close to being able to do this my first several years, however I did several increases throughout my career. I'm probably close to the top 2% but I'm 51 now.
It’s a good point. When working, I would always try to max it out. (Not 17k, more like 7k) Then in 5 years I’d get laid off during a recession and have to burn through it. Rinse and repeat. After 45 years I retired with only 150k in 401k and 3M in real estate. Damn good thing I bought real estate in the late 80s. Probably puts me in top 6% but not top 2%.