72% 401K Contribution - My Wife Worries People Will Wonder!

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72% 401K Contribution - My Wife Worries People Will Wonder!

Postby Boglenaut » Fri Jul 26, 2013 5:31 am

My wife started a new job at the end of June. They have a good 401K plan that allows up to 75% of pay contribution to it. Because we were easily living on my salary, we decided to max her 401K out. Well, almost... she wanted to get some small paycheck so we set her to 72% :) It' still below 17.5K for the year. Tax-wise it made a lot of sense because our total will be in the range where the child credit will be phased out.

The hard part was convincing her not to worry what people will think. I told her no human will ever see it because it's all automated. And even if someone did see it, they'd just assume we were living on her spouse's paycheck (or she was independently wealthy and just working for fun!).

I max out my 401K as well, but it's a more normal percent. Hers will be more normal next year as well when she works the full year and it's spread out over more pay periods.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby G-Money » Fri Jul 26, 2013 6:28 am

Even if someone does see her take-home, so what? I wouldn't waste even a moment worrying about it.
Don't assume I know what I'm talking about.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby jaj2276 » Fri Jul 26, 2013 7:11 am

After getting married and looking into my wife's options, she had the ability to contribute to both a 401k and 457b. I was super excited and figured out how much we could contribute per paycheck given that she still has to pay for fica/medicare/pension/disability out of that paycheck. I left a little buffer in case I miscalculated so her take home pay is now just 10% of her gross. When we first set the limits (via their website), they contacted her to verify she really wanted pretty much her entire paycheck to go into the 401k and 457b accounts. She did and that's the last we've heard from them.

I would tell my wife that she should be proud/excited/happy that your family is able to do this. Nothing to be embarrassed/ashamed about even if someone did see it. In fact I *want* someone to see it because then I get to brag about how we have additional tax-deferred space!
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby mlipps » Fri Jul 26, 2013 7:39 am

Mine is also at 72%. We were trying to save cash for a down payment so we deferred some 401k contributions to the second half of the year. At my company, I have to call to change it...especially since I'm so young I've pondered a couple times what the person who changed it assumed about me, but it certainly didn't stop me from doing it. My biweekly paycheck is 149.01.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby 2stepsbehind » Fri Jul 26, 2013 7:41 am

I started a new job in mid October and did a high percentage in order to max out the contribution for the year as my previous position did not have access to a 401k plan. I can't imagine that anyone in HR will care beyond confirming that what she marked was what she intended. They allow up to 75%. That means they've deemed that percentage to be among the appropriate selections. Don't hold back--go for the full 75%. She won't miss the 3%.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Userdc » Fri Jul 26, 2013 8:17 am

75% is a very high limit, I don't think I've seen higher than 25% across the various jobs my wife or I has had over the years.

That tells me that they set it that high for a reason, and your wife is not the only person at her company who is using the same strategy you are.

Max that sucker out.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby MilkMoney » Fri Jul 26, 2013 8:25 am

My wife works W2 contract positions, so there is always uncertainty about contract length and how long she will have between jobs. She does a 75% contribution rate regularly to make sure we don't miss maxing out her contribution. Other than the occasional double-take from HR she has never received a single comment about it.

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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby MnD » Fri Jul 26, 2013 8:25 am

Even if it was disclosed beyond payroll, it would give management the message that the employee and/or household is financially savvy and has considerable other household financial resources. The person almost certainly is not living paycheck to paycheck and is not "desperate" for the job. That is a good power position to be in. You don't want your employer to think you're two paychecks from the homeless shelter.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby hillman » Fri Jul 26, 2013 8:27 am

Userdc wrote:Max that sucker out.


Context is such a great thing:
"Max the sucker out" when referring to a credit card --> :oops:
"Max the sucker out" when referring to a 401K --> :sharebeer :o :moneybag :dollar :beer

I'm with Userdc on this one. . . MAX THE SUCKER OUT!!

And congratulations on such a great financial situation. Sounds like you and yours are doing it right!
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Boglenaut » Fri Jul 26, 2013 9:11 am

2stepsbehind wrote:Don't hold back--go for the full 75%. She won't miss the 3%.


I just asked her. She refuses to get a bi-weekly check for less than $257, even though it'd make logical sense. :mrgreen:


I am lucky my plan allows both Roth and Traditional. Between that and IRA options, we can max everything out and not worry about getting too much in traditional (and huge future tax liability). Hers is traditional only.

I changed my W-4 to withhold more so at least what she gets won't be taxed much. She did have to take on some health insurance costs due to various penalties from my plan if we had her turn down coverage.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Calm Man » Fri Jul 26, 2013 9:22 am

Ankly, I would have a different concern. If she is under 50 years old, the maximum contrinbution is 17,500. If she puts in 72 percent, that means she has a gross annual salary of maybe 25k or so, which I wouldn't want people to know about !!!!!
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Boglenaut » Fri Jul 26, 2013 9:25 am

Calm Man wrote:Ankly, I would have a different concern. If she is under 50 years old, the maximum contrinbution is 17,500. If she puts in 72 percent, that means she has a gross annual salary of maybe 25k or so, which I wouldn't want people to know about !!!!!


She is only working a partial year, and it took them some time to process it before contributions began.

Next year, her percentage will be much lower because she will be constrained by the 17.5K cap.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby keystone » Fri Jul 26, 2013 9:30 am

As an accountant who has worked very closely with payroll at a variety of organizations, I can tell you that it is extremely unlikely that anyone involved in that process will have even the slightest care about how much or how little she is contributing beyond making sure the number is correct. You become desensitized to this type of information when you work with it. Not to mention, it is highly unethical for anyone involved in payroll to discuss such matters with outsiders.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby niceguy7376 » Fri Jul 26, 2013 9:31 am

My wife owns a small IT consulting firm and she provides SIMPLE IRA to employees with 3% match. During the first few years (late 2000s), she used to run her salary at 1K/month and have simple ira deduction of 900+. She used to get monthly pay of less than 50. Since our business requires to show profit to get future employees, her salary used to be low to maximise the K1.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby zed » Fri Jul 26, 2013 9:32 am

Is there an employer match? If so then there will be a cap on how much employer will kick in per paycheck. Maxing your contribution per paycheck might leave employer match dollars on the table and/or you might reach the 17.5 cap too soon with the same result.

Is DW 50+? If so add another 6k to the cap per the catchup option.

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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Boglenaut » Fri Jul 26, 2013 9:37 am

zed wrote:Is there an employer match? If so then there will be a cap on how much employer will kick in per paycheck. Maxing your contribution per paycheck might leave employer match dollars on the table and/or you might reach the 17.5 cap too soon with the same result.

Is DW 50+? If so add another 6k to the cap per the catchup option.

zed



We make sure all matches are collected. Even if we didn't, they have a "True-up" where if someone contributed enough overall, they still get match if some period did not. All the same, I make sure each check has enough for a full match right away.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby fizxman » Fri Jul 26, 2013 9:43 am

"My Wife Worries People Will Wonder!"

Yeah, they might wonder how awesome it would be to bank 75% of a paycheck. I know I am right now.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Carl53 » Fri Jul 26, 2013 9:45 am

My employer allows 86%. I did get an email from payroll when I first boosted the withholding to that level. I eventually reduced my additional federal and state withholdings, but some special rules kicked in the first couple of checks that reduced my withholdings and I got the whole 86% into the 401k.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Boglenaut » Fri Jul 26, 2013 9:46 am

I sent her a link to this thread so that she can see (at least in a Boglehead universe) this is a perfectly normal thing to do.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby nisiprius » Fri Jul 26, 2013 9:59 am

The only concern I would have would be if she thought she might be a "highly compensated employee" (HCE). I just Googled for the exact definition and found this:
Highly Compensated Employee - An individual who:

Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received,

or

For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2012), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.
I was once (just barely!) in that situation, the company had a stingy match, they didn't get enough participation, and the resulting calculations by IRS rules put a contribution cap for HCEs that was less than I'd contributed. It was not by any means a big problem, just a tax reporting nuisance--the excess contributions got mailed back to me as a check next year etc. etc.

It is an uncomfortable fact of life that the people in the payroll office know how much you make and all the numbers on your paycheck. It's just the way it is.

I think you should try to find out more about what your wife's concerns really are. Does she fear her employer will think they must be paying her too much if she only needs 1/4 of her salary? I don't mean you should oppose what your wife wants to do--it is, after all, her own salary and her own job.

I just think you should try to find out more about what your wife's concerns really are!
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby BL » Fri Jul 26, 2013 10:10 am

I once had an $0.08 paycheck after deducting catch-up 457 and extra withholdings on a part time job. I thought it was funny!
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Epsilon Delta » Fri Jul 26, 2013 10:29 am

Userdc wrote:75% is a very high limit, I don't think I've seen higher than 25% across the various jobs my wife or I has had over the years.

That tells me that they set it that high for a reason, and your wife is not the only person at her company who is using the same strategy you are.


Low caps can be an indicator of when the plan was started. Long ago there were statutory reasons for the cap. Nowadays the 75% cap is probably just to make sure they can withhold FICA etc.

When you put 72% in the 401(k) you are doing something out of the ordinary, and are more likely to run into odd corner cases that will require you to interact with payroll or HR. I wouldn't let that stop me, but I also wouldn't be surprised if I got a call from HR saying my united way donation, change in health insurance, purchase of company assets or whatever resulted in a negative paycheck and what do I want to do about it?
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby englishgirl » Fri Jul 26, 2013 10:44 am

I have a friend who does as close to 100% as he can possibly get at the start of the year (accounting for paying FICA and such things). It takes him 3-4 paychecks to maximize the 401k for the year (actually, maybe these days it might be more like 2-3 as he's been promoted since we last discussed his scheme), and he lives off savings/economizes while he does this, then he switches to 0% and restocks the savings accounts. I don't have the financial wherewithals to do such things, but it seems to me a similar strategy to wanting to make your entire IRA contribution early in January - he gets the money in the market as quickly as possible.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Sidney » Fri Jul 26, 2013 10:49 am

Before I retired I used to set mine at 90% (maximum allowed) until it maxed out. We had money in our taxable accounts so had no cash flow issues.
I always wanted to be a procrastinator.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Default User BR » Fri Jul 26, 2013 11:39 am

MyMegaCorp caps at 25% of paycheck, which is too bad. The plan automatically switches to after-tax contributions when the deferral limit is reached, and it allows in-service distribution of after-tax contributions. I could sock away a lot more in Roth if the limit were higher.


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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby caklim00 » Fri Jul 26, 2013 11:54 am

Its really no one else's business seeing her paycheck beyond those that are responsible for processing it.

My wife's employer caps hers at 75% of pay. We have hers set at 75% and she contributes to an HSA as well. She is part time (.5 FTE) and usually ends up with a $0 direct deposit.

Its kind of crazy to think that if she reduces her hours more (and loses the ability to contribute to an HSA as a result) our taxes are actually going to go up because 75% is the cap.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby ofcmetz » Fri Jul 26, 2013 1:12 pm

Tell your wife that there are a lot of other boglehead wives out there doing the same thing. Being able to contribute a high percentage and while still living life the way you have been is a very nice luxury.
Showing up at the donut shop at 5 am to get them hot out of the oil is an example of successful market timing.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby mrbry » Fri Jul 26, 2013 1:59 pm

englishgirl wrote:I have a friend who does as close to 100% as he can possibly get at the start of the year (accounting for paying FICA and such things). It takes him 3-4 paychecks to maximize the 401k for the year (actually, maybe these days it might be more like 2-3 as he's been promoted since we last discussed his scheme), and he lives off savings/economizes while he does this, then he switches to 0% and restocks the savings accounts. I don't have the financial wherewithals to do such things, but it seems to me a similar strategy to wanting to make your entire IRA contribution early in January - he gets the money in the market as quickly as possible.


I actually do the same. Employer allows 100% so I max out at the beginning of the year with 0 takehome pay. Been doing this for the last few years. Not too bad as long as you have the cash reserves.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Default User BR » Fri Jul 26, 2013 2:26 pm

If you're going to complete contributions early, make sure the plan does "true up" of matching.


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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby bsteiner » Fri Jul 26, 2013 2:37 pm

I know of a few similar cases.

One was someone who finished school in the spring and began working in the fall. Since she was young and in a low income tax bracket that year, she wanted to put her contributions into a Roth 401(k). Since she didn't begin working until the fall, she had to contribute a large percentage of her salary to the Roth 401(k) to take advantage of the full amount she could contribute. Since Roth 401(k) contributions aren't deductible, the employer limited the contributions to 50% of salary, which was sufficient.

The other was someone who spreads out her Thrift Savings Plan (for Federal employees, similar to a 401(k) plan) contributions evenly over the year. However, she forgot that, while regular contributions continue from year to year unless changed (and she didn't need to change it that year since the limit didn't change that year), you have to sign up separately each year for catch-up contributions. Near the end of the year she discovered she hadn't been making catch-up contributions. She had two paychecks remaining. She contributed her entire salary (net of all other deductions) as catch-up contributions, and came very close to the maximum catch-up amount. It took some effort to figure the effect on the withholding so as to come as close as possible to, but not exceeding, her paycheck.

No doubt there are others who are starting out toward the end of the year, who intend to retire early in the year, or who earn modest amounts, who can contribute the maximum amount, for example if they have other assets, or a spouse with sufficient income. Also, some people like to fund their 401(k) early in the year to have the money working in the 401(k) longer, or to make sure it's fully funded in case for some reason they leave their job before year-end.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby thenameishersch » Fri Jul 26, 2013 3:20 pm

My wife and I are allowed to route 80% of our bimonthly paychecks toward the 401k.
We usually change it to 80% the first few paychecks till we hit the 17k limit.

One such pay stub with a small amount, I joked to my wife "We don't have enough for our
mortgage payment!". My father-in-law was on the phone with her and he overheard this.
He now frequently asks my wife whether we need any help with budgeting. Sometimes I get
forwarded quality retirement related news articles from Forbes/WSJ.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby island » Fri Jul 26, 2013 3:46 pm

I wonder what she wonders people (what people?) will wonder?
I wonder why the hard stop at a $257 pay check? Is it the desire to have a little mad money she can call her own? I get that. If not I also say go for broke and max that sucker out!! :twisted:


BL wrote:I once had an $0.08 paycheck after deducting catch-up 457 and extra withholdings on a part time job. I thought it was funny!


We once only had $0.23 in the bank until the Mon after Christmas when we closed on our home and moved in on 12-23-88. That was not funny, at least not then!
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Easy Rhino » Fri Jul 26, 2013 4:11 pm

To reiterate, other people shouldn't really know what her take home is, except the payroll department, and they shouldn't care.

My employer lets be select 100%, but I'm not sure how that would work in practice, I'd probably get a call from payroll correcting me.

I've had really high percentages of my paycheck withheld, but just for a month or two as i was approaching year end to try to get closer to maxing my 401k.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby gkaplan » Fri Jul 26, 2013 4:16 pm

How can you contribute that much and not go over the $17,500 limit ($23,000, with a catch-up contribution)?
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Dianne » Fri Jul 26, 2013 5:12 pm

Some people get their incomes from a combination of employment and self-employment. For example, a freelance musician with a part-time job as a waiter. Or a consultant who maintains enough hours at his old firm to get the health benefits. Increasing the W-2 withholding is easier than making estimated tax payments, so people in this situation typically increase their day-job withholding by enough to cover the taxes on their self-employment income, and the results can sometimes be extreme. I remember one person telling me that he often received paychecks for less than $10 because his day-job hours varied quite a bit.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Boglenaut » Fri Jul 26, 2013 5:20 pm

island wrote: I wonder why the hard stop at a $257 pay check? Is it the desire to have a little mad money she can call her own?


That's exactly it. The limit was actually $250, but $257 was the closest we could get it.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Boglenaut » Fri Jul 26, 2013 5:24 pm

thenameishersch wrote:My wife and I are allowed to route 80% of our bimonthly paychecks toward the 401k.
We usually change it to 80% the first few paychecks till we hit the 17k limit.


Even if your employers has a "True Up" provision, I'd still make sure to hold back enough to have 10% or so for every pay period. If you change jobs after you max, and your new employers has a match, you'd miss out.

Of course, if you planned to work only the first part of the year, you'd be safe.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Beardog » Fri Jul 26, 2013 7:20 pm

My wife works for me. We are now over 50. Her salary this year will be $23K, with 100% contribution to her 401k.

With safe harbor, profit sharing, catch-up, etc., married small business owners over 50 years old who have their own 401k plans can tax defer up to about $100K per year, if both spouses work for the business....one of the the few remaining advantages of working for yourself.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby stemikger » Fri Jul 26, 2013 8:34 pm

Tell your wife to have no worries. Live your life your way and if people want to wonder or talk or think good or bad about you, that is not your choice. The older I get the more I see that some people are very shallow and others are the salt of the earth who don't care what others do or don't do.

And when all else fails, just remember in a 100 years from now no one would remember your name let alone your savings rate. Life is too short to let others opinions matter.
Last edited by stemikger on Sun Jul 28, 2013 2:06 pm, edited 4 times in total.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby thenameishersch » Fri Jul 26, 2013 9:38 pm

Even if your employers has a "True Up" provision, I'd still make sure to hold back enough to have 10% or so for every pay period. If you change jobs after you max, and your new employers has a match, you'd miss out.

Thanks for pointing this out, this is interesting.

Let say I work for employer A in 2013, reach the 17k 401k limit by June 2013.
I then quit and move to employer B with a better 401k match, and I want to take
advantage of this in the same year (2013).
Is it possible to recharacterize/move a portion old 401k (ex-employer) to a Roth IRA (through a backdoor)?
And then put in additional money through B's 401k?
Of course, I am assuming here that I have not used a backdoor Roth conversion for 2013.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby jlawrence01 » Fri Jul 26, 2013 10:32 pm

There are generally only 1-2 people who knows what people are withholding for 401(k) contributions and they are in payroll or accounting. In general, my goal was to max out on my contribution AND my catch-up provision before May 1st each year. Then if I was laid off or decided to move on, I would already have all the money saved already. That turned out well this year as I retired on May 16th.

=========================
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby birdy » Sat Jul 27, 2013 1:00 am

I am working as a PRN at one company. Since I only work a small number of hours per week, I asked HR if I could put 100% of my pay into the 401K. They said yes but the when I went to fill out the computer info, it would only go up to 99%. I get NO paycheck and in fact "forget" we even have a payday! Of course I watch the 401k amounts! I work other small part-time jobs where I have no other access to a 401k (I always max my yearly Roth though) so at least I can shelter a little bit. By the way, I am also the one who was talking about the crummy 401k choices I had and getting into a email conversation with the company over no Index fund choices!

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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby Bacchus01 » Sat Jul 27, 2013 1:10 am

Our plan limit is 75%.

Since I'm an HCE, the pre-tax limit is 11%.

At the beginning of the year I contribute 11% pre-tax and 64% post-tax. The post-tax I immediately roll over to a Roth IRA, thus super-funding my Roth. With employee contributions, I put $51K in the 401K/Roth this year.

It doesn't take long for the post-tax to max and the pre-tax and FICA max for me about June. From July on, it feels like I got an enormous raise as my check goes up 5X+ what it was prior.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby 2stepsbehind » Sat Jul 27, 2013 10:14 am

ofcmetz wrote:Tell your wife that there are a lot of other boglehead wives out there doing the same thing.


And boglehead husbands and single bogleheads
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby 2stepsbehind » Sat Jul 27, 2013 10:15 am

Boglenaut wrote:
island wrote: I wonder why the hard stop at a $257 pay check? Is it the desire to have a little mad money she can call her own?


That's exactly it. The limit was actually $250, but $257 was the closest we could get it.


Offer to make up the difference with your own paycheck
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby tipswatcher » Sat Jul 27, 2013 10:28 am

Tell your wife that there are a lot of other boglehead wives out there doing the same thing.


I am a Boglehead husband who recently converted from full time to part time. My 401(k) contribution is about 45%, reaching the maximum dollar limit. Unfortunately, my company no longer matches.

My wife still works full time (bless her soul) and also contributes the maximum, and her company matches 6%.

It's all about the maximum dollar amount, not the percentage.
TIPS: Perfect investment for imperfect times?
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby SDBoggled » Sat Jul 27, 2013 7:23 pm

Hi,

We did this accidentally more than a decade ago when my partner changed jobs and started 401k contributions mid-year and we wanted to reach maximum. Since then we have both selected to hit the max allowed in the first few months. Initially, it was enforced saving, now I just like to have the whole 401k available ASAP to invest on a market dip.

Certainly, don't worry about what other people may think :-)
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby JustinR » Sun Jul 28, 2013 4:05 am

Boglenaut wrote:My wife started a new job at the end of June. They have a good 401K plan that allows up to 75% of pay contribution to it. Because we were easily living on my salary, we decided to max her 401K out. Well, almost... she wanted to get some small paycheck so we set her to 72% :) It' still below 17.5K for the year. Tax-wise it made a lot of sense because our total will be in the range where the child credit will be phased out.

The hard part was convincing her not to worry what people will think. I told her no human will ever see it because it's all automated. And even if someone did see it, they'd just assume we were living on her spouse's paycheck (or she was independently wealthy and just working for fun!).

I max out my 401K as well, but it's a more normal percent. Hers will be more normal next year as well when she works the full year and it's spread out over more pay periods.


I don't get it. She's worried that people might think she's not living paycheck to paycheck? I know a lot of people do live paycheck to paycheck, but I'm pretty sure it's also normal to not be.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby mlipps » Sun Jul 28, 2013 2:04 pm

JustinR wrote:
Boglenaut wrote:My wife started a new job at the end of June. They have a good 401K plan that allows up to 75% of pay contribution to it. Because we were easily living on my salary, we decided to max her 401K out. Well, almost... she wanted to get some small paycheck so we set her to 72% :) It' still below 17.5K for the year. Tax-wise it made a lot of sense because our total will be in the range where the child credit will be phased out.

The hard part was convincing her not to worry what people will think. I told her no human will ever see it because it's all automated. And even if someone did see it, they'd just assume we were living on her spouse's paycheck (or she was independently wealthy and just working for fun!).

I max out my 401K as well, but it's a more normal percent. Hers will be more normal next year as well when she works the full year and it's spread out over more pay periods.


I don't get it. She's worried that people might think she's not living paycheck to paycheck? I know a lot of people do live paycheck to paycheck, but I'm pretty sure it's also normal to not be.


I'm probably younger than Boglenaut's wife, but it crossed my mind that someone might assume my 72% contribution is due to parental support/an inheritance, rather than my husband & I working hard & living frugally.
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Re: 72% 401K Contribution - My Wife Worries People Will Wond

Postby stan1 » Sun Jul 28, 2013 2:17 pm

Sounds like you could spend some more time educating your wife on your family finances. Even if she doesn't want to know the details she should understand the benefits of contributing to a 401K.
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