Current 401k contributions?

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Current 401k contributions?

Post by Frugalbear » Fri May 22, 2020 1:21 pm

Hi Everyone - I hope this post finds you all safe!

Have any of you made any adjustments to your 401k contributions?

Also, people who have used this vehicle and are now retired...any advice?

Yes, I understand everyone's situations are different, just looking to hear thoughts/views/actions people are or have taken.

Thank you!

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Re: Current 401k contributions?

Post by Hyperchicken » Fri May 22, 2020 2:15 pm

Adjustments compared to what?

I'm maxing out mine, and I slightly front-load it, but not too much, because I need to spread out the contributions to capture the full match. My plan seems to offer true-up match, but I am not eager to test how this works, I think I would only get my missing match next year, and I want it the same time I get my paycheck.

So small adjustments for that - other than that, no, 100% FXAIX (Fidelity S&P 500 fund with 0.015% ER).

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Re: Current 401k contributions?

Post by lakpr » Fri May 22, 2020 2:35 pm

I posted this in another thread, but sounds like it's something that @Frugalbear is looking for:
I had an epiphany, with this Covid-19 crisis. Prior to February, I was happily getting along, with 6 months expenses as emergency fund, and maximizing all my tax-advantaged space first. But suddenly this crisis hit, my portfolio took a 27% tumble (it recovered by now of course, with only 9% losses YTD), my employer's revenue for the first quarter took a 80% drop year-on-year compared to same period last year. If I were to be laid off (it is still a high possibility, even though as of this moment I have my job), the EF would have lasted me exactly that: 6 months beyond any unemployment benefits. With 33 million people looking for employment now, I doubt I would be fortunate to find a new job before the EF + unemployment benefits run out. I would have to tap into my retirement accounts. I am also turning 50 this year, at least 5 years younger than age 55 where I can tap the 401k funds based on Rule-of-55, and I doubt due to my age if I will be successful in landing a job.

In other words, suddenly the 6 month EF felt very inadequate. It needs to be at least 1 year, in my revised assessment. That felt like suddenly I found myself in a $30k to $35k in debt (additional 6 months expenses), with a 32% interest rate on the debt { 10% penalty assessed on premature withdrawals on retirement assets, plus 22% ordinary income tax rate }. If I were to come to this forum and say "Hey guys, I currently carry a $35k debt with an interest rate of 32%, but I have this $20k money to invest, which funds should I invest in?", I would be rightly laughed at first, then told to pay off the debt as fast and as furiously as possible before even thinking about investing.

Exactly the same principle. So my advice to self is to beef up the EF to 1 year. I reduced the 401k contributions to just capture the full match at work, every other dollar is being hoarded into my bank account until it hits the level of $60k (1 year expenses), before ramping up the 401k contributions. With our salary (we are in the 24% bracket), I think we can reach our goal by around September/October, then ramp up the 401k contributions to still reach the annual $19.5k maximum. My job, if I still have it by then, allows us to contribute up to 65% of our paycheck to 401k in one go.

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Re: Current 401k contributions?

Post by GaryA505 » Fri May 22, 2020 2:39 pm

Currently maxing out ($26K/yr), and contributing:
50% stock
50% money market

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Re: Current 401k contributions?

Post by whodidntante » Fri May 22, 2020 2:51 pm

Currently on track to hit the annual limit with my last paycheck of 2020. Just like last year and the year before that. Current asset allocation somewhere between 85/15 and 90/10 depending on which way the wind blows. It's like watching grass grow with occasional devastating forest fires.

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Re: Current 401k contributions?

Post by mega317 » Fri May 22, 2020 6:28 pm

Actually got a little bonus so putting some to an after tax.

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Re: Current 401k contributions?

Post by MathIsMyWayr » Fri May 22, 2020 6:29 pm

No idea for a change for the better. Maxed out pre-tax including catch-up and on the way to fill up after-tax soon (room left for company match for the year).

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Re: Current 401k contributions?

Post by JediMisty » Fri May 22, 2020 6:48 pm

I max out mine - 63k including the match. Front load it due to job insecurity, leaving enough to get the 5% match. This represents a huge chunk of my salary after taxes. Since I'm 62 I worry less about having cash on hand, so I'm only on my third year contributing this much.

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Re: Current 401k contributions?

Post by teen persuasion » Sat May 23, 2020 8:12 am

We adjust as conditions change.

DH gets a raise/bonus, I recalculate the percentage of his income we can defer to retirement.

I suddenly got access mid-year to a SIMPLE IRA (my first employer retirement account), I contributed 100% to it, and dropped DH's contributions by the same $ amount.

First of the year, dropped my contributions to 80% to max the SIMPLE IRA, increased DH's contributions by a corresponding $ amount.

If either of us had lost income, we'd readjust again, though obviously my take home is minimal ATM. Then again, if say I was receiving UI, we might increase DH's contributions, because I can't contribute to retirement from UI. Everything not necessary for expenses, goes to retirement accounts.

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Re: Current 401k contributions?

Post by JimmyD » Sat May 23, 2020 11:19 am

Maxing pre-tax contributions to both of ours and putting another 10% in the after tax portion of mine to take advantage of the mega backdoor Roth. Nearly everything is currently going into bond funds, but I change this often as the market fluctuates.

This is in addition to maxing two backdoor roths and a couple thousand in taxable monthly.

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Re: Current 401k contributions?

Post by ruralavalon » Sat May 23, 2020 11:52 am

Frugalbear wrote:
Fri May 22, 2020 1:21 pm
Hi Everyone - I hope this post finds you all safe!

Have any of you made any adjustments to your 401k contributions?

Also, people who have used this vehicle and are now retired...any advice?

Yes, I understand everyone's situations are different, just looking to hear thoughts/views/actions people are or have taken.

Thank you!
We are age 74, and retired. This is what we did. I didn't start seriously investing until my late 30s, with redoubled effort in my late 40s.

Once I started I made regular contributions to my 401k automatically every pay period. We set the contributions as high as practical given our monthly expenses.

My earnings varied wildly from month to month and year to year, so monthly contributions had to be constantly reassessed. (Tried to max every year, overshot one year :( .)

When receiving a bonus, or cash from an inheritance or asset sale we increased 401k contributions, and used IRAs and a taxable account too.

I invested every pay period and whenever we had extra money to invest. We did this thru both the 2000-2002 dotcom crash and the 2007-2009 real estate crash.

I made traditional 401k contributions. That worked out well for us. We are in a lower tax bracket in retirement. My required minimum distributions (RMDs) plus Social Security about equal our monthly living expenses with a bit extra.

Anyway Roth 401k contributions were not permitted until 2006, so Roth 401k contributions were not a real option.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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