For clarity, I'm not saying to "give up" another $5k/year.The company match stops at 5% of salary.Overall, you are doing great.
However, your perception of needing $1M by age 40 is flawed.IMHO this is just leaving money on the table...Well, my actual 401k contribution is just 10% of my base salary which is about $14.5k. The other $7k comes from company match. I thought of maxing it out but I figured I didn't want to go all in on a 401k, and decided to max out my roth instead.
By my quick estimates, maxing out your 401k would add $8,500/year to savings, lowering taxes by about $2,900 (across federal, state, and city) - so a "net" cost of under $5,000. And if your employer matches that contribution as well, that roughly $4,250 of "free money" you are giving up.
I don't see how saving $5,000 (net cost) into taxable is better than getting potentially an extra $12,750 into your 401k??
This wiki article gives great advice on how to prioritize your investments. https://www.bogleheads.org/wiki/Priorit ... nvestments
I mean, $5,000 is ~$420/month.. and at this point that money has value to me since I feel squeezed in a HCOL area. The added $8,500/year to retirement would be nice but I think given my trajectory I likely won't miss it 20-25 years from now when I retire. Maybe I will reassess though.
Thanks for the link I'll check it out.
I'm saying redirect $5k/year ($420/month) from some mix of HYSA and Taxable investments into your 401k. Doing so will provide an approximately 70% increase in the amount saved ($5,000 after taxes versus $8,500 before taxes).
It's generally advisable to max out your tax-advantaged accounts before worrying about contributing to taxable accounts. (Especially if you are just parking that money in a savings account losing to inflation.)
Statistics: Posted by SnowBog — Thu Jul 04, 2024 10:17 pm