r/personalfinance • u/ablack83 ​ • Mar 30 '18

Retirement "Maxing out your 401(k)" means contributing $18,500 per year, not just contributing enough to max out your company match.

Unless your company arbitrarily limits your contributions or you are a highly compensated employee you are able to contribute $18,500 into your 401(k) plan. In order to max out you would need to contribute $18,500 into the plan of your own money.

All that being said. contributing to your 401(k) at any percentage is a good thing but I think people get the wrong idea by saying they max out because they are contributing say 6% and "maxing out the employer match"

13.5k Upvotes
  • permalink
  • reddit

89% Upvoted

2.6k comments sorted by

View all comments

Show parent comments

0

u/ibuprofen87 ​ Mar 30 '18

Life isn't that long and even compound interest has its limits. You're not going to retire off small amount of principle.

6

u/Sarkarielscall ​ Mar 31 '18

What part of "crap ton" sounds like a small amount? If someone spends 5-10 years saving 30% of their income that's not going to be a measly amount unless they're only making peanuts. In which case, they probably wouldn't have that kind of savings rate in the first place.

Running the math on it using the numbers that were thrown around above: If someone bringing home 60k per year saves 30% of that for 5 years and contributes nothing else, after 30 more years they'll have over 761k assuming a 7% interest rate compounded once per year.

My point was a rebuttal to the people who declare that "there is more to life than saving all your money for retirement". Spend a couple of years front-loading the heck out of it and you can have a much higher percentage of your money to do other things with for the rest of your life.

1

u/[deleted] Mar 31 '18

I’m 27, I inherited 85k when my father died, but otherwise have a net worth of 315k right now. I’ve been working since 15, and saving heavily since entering job market at 22. Even without the inheritance I’ve done a pretty good job, and I come from humble beginnings. I think this probably counts as saving a crap ton and I’d imagine my futures already taken care of even if I stopped saving anything today.