Why does the government cap us at $20,500 annual contribution to 401k? Why not let us give what we want?

Also, what do ya’ll do with your $ once you hit that cap? Just keep going or put it somewhere else?

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The reason is bc contributing gives you tax breaks and uncle sam will not let anything get in the way of getting paid

likesmart

Once you hit the cap your 401k won’t accept any more contributions so keep going isn’t really an option. But you can still contribute up to 6k into a traditional or Roth IRA

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Because rich people avoid paying taxes like the plague. If you made 1M year, you’d probably want to contribute 100k+ to the 401k, which would mean significantly less taxable income. You can still save, you can even back door Roth monies, you just can’t avoid paying taxes.

likesmart

Valid point. Let’s hope government eventually fixes that BS

Emergency fund. 401k. IRA. HSA. Brokerage. Invest to your hearts content.

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HSA is triple tax advantaged

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Taxation is theft.

likefunny

Down with roads!

likefunny

Going up to $22,500 in 2023

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must be nice to have anywhere near enough $$ to hit the cap

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Invest it in other ways such as updates to our home, stocks, etc.

Max out 401k -> Roth IRA -> HSA/FSA…

you’re running out of tax efficient investments…

Emergency fund (6 months expenses)…

make sure you have sufficient insurance (life, short term disability and long term disability)…

Now you’re into taxable investments. Consider talking with an advisor at this stage, there are a lot of considerations like risk tolerance, age, retirement goals, etc. Investments run the gambit from Stock ETFs to Crypto to Real Estate but they all come with unique pros and cons.

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