When you all say “max out your 401K,” you’re actually putting in $20K annually?! How?? My salary is $95K. After taxes, take home pay is like $60K. 1/3 of my $$ should go to 401K? I’m so stressed. 😔

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This bowl is skewed to high earners who are all too happy to trumpet their success

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False. I maxed out my 401k when I was making $40k/year. It's called a budget

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Don't beat yourself up. You have the luxury of time. Every year when you get a raise, just add a few more percent to your annual amount you are investing at the same time your new raise hits. That way, you never feel it. It took quite a few years to get to maxed out, but I got there. You will too. Good luck!

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Yes, this is a great way to start saving more without feeling it! You didn't have that money the previous year, so you won't "miss" it in your new budget after a raise.

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Well your 401k is pre-tax, so you save money that way. And most people don’t get to maxing it out before they break $100k in salary.

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Exactly. Save what you can. You have a lot of career growth ahead of you. I was able to catch up in my 40s as my salary went up but my lifestyle stayed the same.

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Thank you for the advice, everyone! My parents are from a low income background, they didn’t start saving for retirement until very late (30s,40s). When I started working out of college (5 years ago), they told me I should save for retirement by matching my employer’s contribution. I moved to Washington DC to work at a nonprofit making $55K. I honestly didn’t know there was a max on 401Ks… I didn’t know that was a financial goal people had… I don’t know how to invest responsibly. I don’t have any investments outside of the matching my employer I’ve done. I recently gave up my nonprofit work to pursue a more stable financial future for my partner and I in consulting. I appreciate your support and will read up on how I can apply future funds (ie. Promotion, bonus) towards a goal like this.

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I just started maxing out my 401k at 35. I don't think it's the end of the world if you start late...just be frugal where you can (roommates, avoid dc brunches, pay down high interest loans first)

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Yes, that’s what people mean. As you pointed out, maybe not that feasible if your income is $95k/yr. No big deal! Make sure you get your full company match and increase your contributions over time. Obviously, if you are making $200k/yr it’s going to be easier to max out the contribution

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@OP I’m with you. After student loans, rent, car payment and then living expenses, I’d how people can max it out.

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Don’t worry about maxing at your salary. If you can, great. Everyone’s situation is different. Easy to do if you’re living at home, hard to do if you live in a HCOL city and want to maintain some sort of social life.

When your income grows, keep everything static and divert extra income to your 401k

FWIW, I don’t max out my 401k because I’m pursuing FIRE. I don’t need the money when I’m 59.5 bc I’m trying to retire in a few years

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C1 you should look into a Roth conversion ladder if you want to access your 401k retirement dollars before 59.5

It's a better approach for early retirement than using a non tax advantaged account.

If you're all real estate, then keep doing you!

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Yes, it depends on your values though. If you value your time more than things, it's better to save as much as possible. Even beyond the 401k max is a good goal to have. If you don't mind working, and are okay with a standard retirement age, you can save less and work longer.

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I pay dirt cheap rent and split it with my partner. I have the same base as you and put away $3,750 a month which includes maxing everything.

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That was what I did in my first couple years consulting. I'd highly recommend it, coming from college living it's pretty easy to keep the same frugal living another 1-3 years and it'll set you up for life.

To put some numbers to what my situation looked like. I believe I made 75-105k out of college, and paid ~1k/mo in rent living with a roommate in an older apartment in a more expensive city. Lived off another 1k for food, utilities, entertainment. Used public transportation and didn't own a car. Leaving me 50-80k extra. I also lived in a no income tax state which also helps a lot.

Doing all that it wasn't too hard to max out my megabackdoor Roth + HSA every year after the first (which I spent paying off student loans).

With investing 20k pre-tax + the standard deduction you really aren't paying much in taxes.

It's tight but worth it. And each raise feels massive since you're already maxed out on payroll deductions so all of the raise goes straight to your paycheck.

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Contribute at least 6% so you’re not leaving matching money on the table. Beyond that, so as much as you can within reason.

If you want my advice, traveling and having fun with friends is far more important in your 20s. I made under 100k a year until I was 28. Since then, I have gone up to 193k (promotion to manager and senior manager). I have about $500k NW. I’ve traveled all over Europe and South America. Never turned down a happy hour. Sure, I could be closer to a million, but at what cost?

Just be fiscally responsible. Don’t compare yourself to others. And make smart decisions (like Roth IRA before general investments)

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I’ve been with accenture all my life. I started at 70k. 82k at consultant. 108k at manager. 193k at senior manager.

Manager growth was 108 to 120 to 140.

I’d say that my net worth has gone from like 250k to 450k in the last 3 years.

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Don't stress over it. Just contribute an amount which won't unduly crimp your cash flow at this time. Your 401k is pre-tax which will lower your total taxes, and you'll pick up your company match. As your salary grows, you can up your total contribution to get to the max limit.

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First of all, I think you're overestimating your taxes. Is that what it actually says on your return for taxes owed?

I maxed my 401k when I was at your income, so anecdotally it's possible. Of course individual circumstances may vary a bit but I'm not that extraordinary.

I recommend you approach your finances from a savings first perspective. If you notice your checking account getting bigger, then dial up your automatic recurring savings.

likesmarthelpful

I did too when I was making $90k - it's possible.

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http://u.cubeupload.com/demonlesondledon/FIREFlowChart.png

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Woah, this is amazing! Thank you for sharing - I’m going to share with my friends and family as well.

No, most of us mean max out the contribution limit to get that tax benefit whichever way you choose to leverage it

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Thanks OP for asking the questions. I thought all the people are maxing it out based on the other postings. Good to know I am not the only one :)

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The very vast majority of Americans are not doing this because it is very hard to put away 20k and not miss it. If and when you get to a point where you can, you should. But until then, put in enough for a company match and save in other ways that fit your lifestyle.

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Same. I can't right now with rent, daycare, baby needs, and child's college. Don't be stressed. Just do whatever you can right now when you budget and put more when you're able to.

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I didn’t start maxing out when I reached $105k. Put as much as you can until you max. You’ll get there!

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I maxed out my 401k starting at an 85k annual salary. Live by the new 50/30/20 rule. 50% savings retirement and investments, 30 fixed costs including rent and 20% everything else

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Unless you die

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OP, I tried maxing mine out as well, live at home and at that time making $70k. Definitely stressful even living at home at that salary with other financial obligations. I did it for a few months before axing the idea and putting the money into a self directed brokerage account.

While it was nice seeing my designated retirement pool skyrocket, I also have short term financial goals that I need to save for and have access to the money for.

IMO nothing wrong with having a lower 401k contribution and keeping more in a brokerage account for some flexibility. As long as you’re smart about why and when you sell off stocks you’ll be fine. There are certainly cons to this approach but it has it’s pros as well.

Edit: for context - I did the minimum to get the match and every additional dollar was a ROTH 401k contribution, so the impact was slightly higher on my take home.

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