When were you able to max out your 401k, IRAs?

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azianbob
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When were you able to max out your 401k, IRAs?

Post by azianbob »

Just wondering when everyone was able to max out on the retirement accounts. I was initially only able to do the company match to the 401k when I started working, until I was 26 when I started to also max out my Roth IRA, then it took me until I was about 29 until I could max out the 401k as well.

When I got married at 32, the first year my wife did not work so I cut back the 401k to just the company match to pay for wedding honeymoon and bigger apartment and bills, then my wife got a job a year after so we have both been maxing everything (2 401ks, 2 Roth IRAs, 1 family HSA) since then.
Last edited by azianbob on Fri Mar 08, 2019 2:46 pm, edited 1 time in total.
Delawarean
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Re: When were you able to max out your 401k, IRAs?

Post by Delawarean »

I am 27 and I will be maxing my 401k and 2 Roth IRAs for the first time this year.

I probably could have maxed the 401k last year if I had been a bit more focused on saving.
sf_eca
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Re: When were you able to max out your 401k, IRAs?

Post by sf_eca »

I've contributed 5% to get the company match since i started working right out of college at 22, but had to pay off student loans and other debt. Did not start maxing out until 35, so got a fairly late start on that.
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leeks
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Re: When were you able to max out your 401k, IRAs?

Post by leeks »

We were in our early 30s.
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Watty
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Re: When were you able to max out your 401k, IRAs?

Post by Watty »

That is sort of a trick question since the contribution limits have gotten a lot larger over the years and 401k's only really became common about 20 years ago in the late 1990's so before then few people had access to a 401k.

I retired a few years ago and I was never able to max out my 401k and IRA because for a married couple that can be a LOT when you multiply the contribution limits by 2. For example today an over 50 couple could contribute;

1) 401k : $19,000 + $6,00 catch up times 2 = $50,000
2) IRA or Roth: $6,000 + $1,000 catch up times 2= $14,000

Which is not realistic unless you have a high income. I did just fine though.
Spirit Rider
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Re: When were you able to max out your 401k, IRAs?

Post by Spirit Rider »

It have always felt that the Boglehead "maxing out your retirement accounts" mantra from many quarters is a useless metric. There are many circumstances where it is overkill and many circumstances where it is woefully insufficient. This BH obsession on it is counter-productive and places unnecessary stress on forum members to conform.
Silverado
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Re: When were you able to max out your 401k, IRAs?

Post by Silverado »

At 22, but like watty said, trick question. That was while in military in 93. The only vehicle available was $2,000 IRA. So that was a pretty low bar.

Real answer to the spirit of the question was late thirties, so about a decade ago. Not sure looking back if that was actually the earliest 'possible' or just when 15-20% just naturally started getting us there.

Those early dollars in the IRA, which I converted to Roth while in grad school with very low income, are now sitting at $110,000 as of yesterday in Vanguard Total Stock. I think I only contributed for eight, maybe nine years to it. AND, it was with USPA-IRA for almost all that time, before I started getting smarter, so am pretty happy with it.
SGM
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Re: When were you able to max out your 401k, IRAs?

Post by SGM »

After receiving a masters degree I more than doubled my salary from my prior career so it was easy to maximize 401k and IRA contributions. This was especially valuable to me when I moved from a no tax state to a high tax state. Now all these earlier contributions are in Roth accounts with no RMDs in retirement. These accounts have done very well for us over the last 40 years.
FederalFIRE
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Re: When were you able to max out your 401k, IRAs?

Post by FederalFIRE »

This has as much (or more) to do with personal circumstances than it does age. My wife and I were maxing everything by 27 (401k and two IRAs), but we chose to not have kids early in our marriage, which is probably the biggest reason we could do that. We did live below our means, but to the outside it certainly didn't look that way as we bought two new cars in that time as well as a home.

So while it was age 27, I think the better answer for me is 5 years into marriage, 6 years into a dual-career household, and no kids.
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Re: When were you able to max out your 401k, IRAs?

Post by BanquetBeer »

From day 1: “Pay yourself first”. Have consistently lived way below my means with housing, transportation, and fashion.
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MillennialFinance19
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Re: When were you able to max out your 401k, IRAs?

Post by MillennialFinance19 »

I've been maxing out my Roth IRA since 2013 (age 26) and my 401k since 2017 (age 30). My wife started contributing the max to her Roth last year, however, has a large teacher pension so hasn't yet ramped up 457b contributions. I suspect she'll be contributing the max in the next 3-5 years.

I felt like my start was a little late, but after running the numbers and utilizing the eFIREsim calculator, I feel like we're right where we need to be.
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boglewill34
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Re: When were you able to max out your 401k, IRAs?

Post by boglewill34 »

Age 45 here, we will max wife’s IRA for 2018 next week (!) between Roth and tira. First ever max of any retirement vehicle. For 2019 we will both likely max our individually held IRAs and I should be able to fill about half my 457. Then when our very old tax debt is cleared we should have no problem filling my 457 and both IRAs in 2020. It would still leave a 403b for her, that’ll likely be last to use because the costs are higher.
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marti038
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Re: When were you able to max out your 401k, IRAs?

Post by marti038 »

Did it a couple of years in our late 20s, then we had kids. It's not that the kids are that expensive (well not directly) it had more to do with our decision for my wife to work much less and to move into a better school district which was also more expensive and taxed higher.

We should be there again in the next few years (I'm 37, she's 35), but I don't think I'd worry about it unless our contributions dropped below 15% of our income.

Anyone who is reading this shouldn't be concerned if you're not maxing out your tax advantaged contributions. Save what you can (I'd shoot for 15%), but mostly just save something.
stoptothink
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Re: When were you able to max out your 401k, IRAs?

Post by stoptothink »

The first year I was able to max both 401k and Roth IRA I was 25. Have probably maxed them out half of the last 12yrs; as I completed my PhD and cash-flowed ex-wife's dental school, there were a few years where it simply wasn't possible. 2019 will be the 3rd year in a row my (now) wife will have maxed them (she's 32). When we met 6yrs ago she was making ~$20k/yr and had no idea what a 401k or IRA was.

It's just assumed that everyone here maxes out all available tax-deferred space, but in the real world it is quite rare. The most recent data I saw suggested that 8-13% of those contributing to a 401k max them, so likely ~5% of the workforce. I'm sure that number dips a little bit when including IRAs.
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Re: When were you able to max out your 401k, IRAs?

Post by Grt2bOutdoors »

Early 30's. Prior to that, I would contribute 15% of gross income to retirement savings.
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Re: When were you able to max out your 401k, IRAs?

Post by BogleMelon »

I learned that maxing out "Tax-advantage" accounts, doesn't necessarily the same as maxing out retirement savings. I now maxing out 401K's+457B for wife + 2 Roth. However, I will start to partially (or even fully) consider the Roth's are for EF or big purchases tickets in case my bank account was depleted. I will accordingly start to become conservative and move out from stocks towards MM fund in my Roth's.
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28fe6
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Re: When were you able to max out your 401k, IRAs?

Post by 28fe6 »

I was ABLE to max out my accounts from the moment I got my first megacorp job out of school. I only actually started doing so the last two years (about ten years of wasted time). The saving grace is that I did pay quite a bit extra on my house during those years, so I have a lot more home equity than I otherwise would, but stock market gains would have been much higher than the 3.375% interest that I saved, not to mention the missed tax deferral.
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Re: When were you able to max out your 401k, IRAs?

Post by Dottie57 »

marti038 wrote: Fri Mar 08, 2019 10:14 am Did it a couple of years in our late 20s, then we had kids. It's not that the kids are that expensive (well not directly) it had more to do with our decision for my wife to work much less and to move into a better school district which was also more expensive and taxed higher.

We should be there again in the next few years (I'm 37, she's 35), but I don't think I'd worry about it unless our contributions dropped below 15% of our income.

Anyone who is reading this shouldn't be concerned if you're not maxing out your tax advantaged contributions. Save what you can (I'd shoot for 15%), but mostly just save something.
Agree with last paragraph. For first 10 years I was limited to 15% by the small company plan. I could not afford more either. The limit at my first year with a 401k was 9k. I have done.just fine with majority of years at 15% contribution plus a bit in Roth. When I hit 90k I started maxing it out.

As long as you keep contributing you will have more than if you don’t contribute.
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Re: When were you able to max out your 401k, IRAs?

Post by JBTX »

Spirit Rider wrote: Fri Mar 08, 2019 4:16 am It have always felt that the Boglehead "maxing out your retirement accounts" mantra from many quarters is a useless metric. There are many circumstances where it is overkill and many circumstances where it is woefully insufficient. This BH obsession on it is counter-productive and places unnecessary stress on forum members to conform.
I've usually tried to max retirement accounts but that has always been in the context of a company imposed 15% max and usually a non safe harbor plan that capped me at 10%. Sometimes Roths are available and sometimes not.

So yes for some it is unrealistic to max retirement accounts if they are not very high income and they have access to a plan that allows for statutory max, and maybe even mega backdoor Roths. But I'm not going to go as far as your post. I don't think there is anything better you can do than maximize, to whatever extent realtically possible, tax advantaged retirement accounts. It is forced a d segregated savings. I would not characterize it as an obsession or counter-productive. I think what is needed is a little more nuanced definition of "maximize".
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Re: When were you able to max out your 401k, IRAs?

Post by smitcat »

stoptothink wrote: Fri Mar 08, 2019 10:25 am The first year I was able to max both 401k and Roth IRA I was 25. Have probably maxed them out half of the last 12yrs; as I completed my PhD and cash-flowed ex-wife's dental school, there were a few years where it simply wasn't possible. 2019 will be the 3rd year in a row my (now) wife will have maxed them (she's 32). When we met 6yrs ago she was making ~$20k/yr and had no idea what a 401k or IRA was.

It's just assumed that everyone here maxes out all available tax-deferred space, but in the real world it is quite rare. The most recent data I saw suggested that 8-13% of those contributing to a 401k max them, so likely ~5% of the workforce. I'm sure that number dips a little bit when including IRAs.
And to add to your facts about 401K's only about 15% of employers offer a 401K.
Of those 15% of companies that have a 401K plan only 40% of employees participate in the first year and that drops to about 33% by year 2.
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Re: When were you able to max out your 401k, IRAs?

Post by Spirit Rider »

smitcat wrote: Fri Mar 08, 2019 11:51 am And to add to your facts about 401K's only about 15% of employers offer a 401K.
Of those 15% of companies that have a 401K plan only 40% of employees participate in the first year and that drops to about 33% by year 2.
That is misleading. Yes, only about 15% of employers offer 401k plans, but 80% of employees have access to a 401k plan. The latter is the far more important metric.
Ybsybs
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Re: When were you able to max out your 401k, IRAs?

Post by Ybsybs »

I maxed out my allowed IRA contribution for the first time as a junior in college. It took until my mid-twenties for me to max out my allowed 401k contribution.

There have been a few periods when I (and, after marriage, we) didn't max everything. For instance we maxed it all in 2017 but didn't in 2018 when my spouse had a five month period of unemployment.

For 2019, we are currently on a savings rate that'll leave around $1,500 of space unused in my spouse's 401k. As we continue to assess our financial choices relative to our financial goals, we may bump up the savings rate a bit more to fill that last bit, but we also might not.
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Re: When were you able to max out your 401k, IRAs?

Post by smitcat »

Spirit Rider wrote: Fri Mar 08, 2019 12:21 pm
smitcat wrote: Fri Mar 08, 2019 11:51 am And to add to your facts about 401K's only about 15% of employers offer a 401K.
Of those 15% of companies that have a 401K plan only 40% of employees participate in the first year and that drops to about 33% by year 2.
That is misleading. Yes, only about 15% of employers offer 401k plans, but 80% of employees have access to a 401k plan. The latter is the far more important metric.

That is a better statistic then ….but we have not had 401K available for many of our years.
If that is correct than about 80% have access to a 401K and 40% are first year participants then we have a first year participant rate of about a third.
That would be about 33% of folks participate in a 401K not approaching the data on how many of them may be maxing them out.
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Re: When were you able to max out your 401k, IRAs?

Post by mattshwink »

My wife and I started when we got married. I turned 30 that year, she turned 27. We are now 44 (45 later this year) and 41 (42 later this year). I did have one "blip" last year when I joined a small company that did not have a 401k (they just started it) and was a few thousand short of maxing my 401k. But every other year has been maxed and this one will be as well. Plan on maxing until requirement (including upping when we each turn 50).
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CyclingDuo
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Re: When were you able to max out your 401k, IRAs?

Post by CyclingDuo »

azianbob wrote: Thu Mar 07, 2019 9:21 pm Just wondering when everyone was able to max out on the retirement accounts. I was initially only able to do the company match to the 401k when I started working, until I was 26 when I started to also max out my Roth IRA, then it took me until I was about 29 until I could max out the 401k as well.

When I got married at 32, the first year my wife did not work so I cut back the 401k to just the company match to pay for wedding honeymoon and bigger apartment and bills, then my wife got a job a year after so we have both been maxing everything since then.
Long post here to say that there are many paths to achieve a successful retirement nest egg. Maxing out a 401k or IRA every year is not a requirement to reach those goals. We don't want to scare young investors and savers off who do not have the income to cover their expenses and max out an employer plan, let alone maxing out an IRA on top of that.

Is saving 10% enough? by Derek Tharp
https://www.marketwatch.com/story/is-sa ... 2018-01-04

There is an excellent paper by Michael Kitces and Derek Tharp here regarding savings rates: https://papers.ssrn.com/sol3/papers.cfm ... id=3003301

As Watty, marti038, Dottie57 and others bring up in the posts above, the right question(s) might be better centered more around the percentage of income that is being contributed and at what age a person is/was when they started saving. Maxing out your 401k and IRA is simply not possible for everyone as one's household income, expenses, and taxes dictate the cash flow and contribution rate. In other words, you have only so much salary to work with, so one has to be careful not to over-save to the detriment of the rest of the expenses. Higher salaried employees have the best chance to max things out, but even then - data shows that only 40% of higher salaried employees max out their plans.
https://www.fool.com/retirement/2018/06 ... f-par.aspx

That being said, maxing out is certainly not any sort of a requirement to accumulate enough wealth to retire successfully. The power of time and compounding is very beneficial in the first decade or two of working where household income and expenses may not be able to support young employees coming close to maxing out their plans. Yet, we can all agree that they should be saving something. We would hate to see young Bogleheads get hit with any sort of fear of failure because they are not able to max out a 401k/403b or IRA since it is so often mentioned on these forums and in financial planning blogs/articles. If one has the salary to be able to do it and still meet all household expenses - sure, do it! Data from Vanguard shows that only 13% of employees maxed out their plans.
https://pressroom.vanguard.com/nonindex ... 062018.pdf

However, don't get discouraged if your salary and expenses do not allow you to max out your plan!

Those that start early with a smaller percentage of income are handsomely rewarded and don't have to save as much principal as those who start saving later...

Image

Image

We both started saving for retirement in the our mid to late 20's at percentages shown in the graph below (10-15%), as well as aggressively paying off student loan debt from age 23 to 30 since the interest rates were double digit. We started maxing out our IRA's at age 28/31 as neither of us even had a 401k available with our jobs. So we used IRA's and taxable. We began saving for two college educations for our children at age 32/35 (UTMA). In fact, we saved from 1993-2018 for their education and the last tuition bill was paid in January of this year. Once May arrives, everyone will have graduated debt free with money leftover, so the goal of ours we set back in 1993 was achieved.

This graphic is more of a tell in terms of saving a percentage of income at respective ages and targeted retirement age...

Image

401k/403b Contribution limits history...

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https://www.financialsamurai.com/

tIRA Contribution limits history...

Image
https://dqydj.com/history-of-contributions-ira-limit/

Roth IRA Contribution limits history...

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https://www.investmenthunting.com/origins-roth-ira/

For a younger employee in the their 20's just starting out these days, maxing out both a 401k and an IRA would be $25,000. Assuming they may have some student loan debt, rent, car payments, food to eat - that's a tall order. And it will remain a tall order for the majority of employees in the US based on the data we have all seen of income levels, debt, expenses, percentage of employees who have access to a 401k plan and the percentage of employees contributing to a plan.
https://www.federalreserve.gov/econres/scfindex.htm

And, as Watty mentions, for those age 50+ the combined contribution limit for the employee is $25K for the 401k/403b and $7K for the IRA for a total of $32K.

If you had maxed out each year (choose your beginning year) and let it ride 100% in Vanguard S&P 500 (VFINX), the employees portion balance would be...

Image
https://retireby40.org/what-if-always-maxed-401k/

Neither of us even had a 401k plan available with our jobs until 2003 at which point we were ages 42/45 respectively. One came with a mandatory pension contribution, plus a voluntary 403b and a 457b plan (no match for either of the voluntary plans) and the other job came with a 403b including an employer match. At that time, we had two kids age 8 and 10 and our new jobs were both in education - so household cash flow didn't allow us to max things out as well as feed, house, and clothe our children. Our contributions slowly increased over the years, but it also meant that the very first time we were both able to finally max everything out including the catch up contributions was in 2017 at ages 55/58 once the nest was empty. We kept that up last year as well. We have adjusted our savings goal this year due to a change in employment, but will still manage to get a total of $49.7K in employer plans and Roth IRA's combined before factoring in the employer match. At this point, we are simply taking advantage of our final working years, the early empty nest years, and the catch up contributions to finish off the accumulation years as strong as we can.

Super long post, but let's not scare off those that are managing to save 10-15% of their income each month in their retirement plans. That's a lot of bang for the buck when one has the power of time and compounding.

CyclingDuo
Last edited by CyclingDuo on Fri Mar 08, 2019 11:50 pm, edited 2 times in total.
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SC Anteater
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Re: When were you able to max out your 401k, IRAs?

Post by SC Anteater »

Never.

Spouse can only contribute 6% plus catchup.

Last year was the only year I could have maxed it out and I needed the money for college expenses. This year I'm losing my 401k at the end of March and won't have one going forward.
cherijoh
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Re: When were you able to max out your 401k, IRAs?

Post by cherijoh »

Spirit Rider wrote: Fri Mar 08, 2019 12:21 pm
smitcat wrote: Fri Mar 08, 2019 11:51 am And to add to your facts about 401K's only about 15% of employers offer a 401K.
Of those 15% of companies that have a 401K plan only 40% of employees participate in the first year and that drops to about 33% by year 2.
That is misleading. Yes, only about 15% of employers offer 401k plans, but 80% of employees have access to a 401k plan. The latter is the far more important metric.
Good point.

I also have to question Smitcats 40% participation number. How dated is that data?

Many companies have started to automatically enroll new employees in 401k plans and then give them an option to opt out. This lets laziness and/or procrastination to work in your favor rather than against you. Participation rates in those plans are much higher I believe. I have worked for 2 different employers that offered great company matches - 1:1 up to a 5% employee contribution and both plans had over 95% participation numbers.
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Re: When were you able to max out your 401k, IRAs?

Post by basspond »

Early to mid 30s then at 50 or 51 did catchup too.
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David Jay
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Re: When were you able to max out your 401k, IRAs?

Post by David Jay »

Never.

But I did start early, made my first 401K contribution in 1987.
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Re: When were you able to max out your 401k, IRAs?

Post by TheHouse7 »

We did for the first time this year after tax return (31). I think the posts above about not focusing on the max is correct. We have an unreasonable goal to " save as much as we can" and I'm starting to feel the costs of a high savings rate. We are saving ~33% and I am thinking that is to high for our life style.
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Re: When were you able to max out your 401k, IRAs?

Post by greenback »

Almost did it last year at 24, but missed the 401k by ~$2000.

This year I set my bonus to max 401k contribution, I also received a substantial pay raise, so I should hopefully max out ROTH and 401k at 25 :sharebeer
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Watty
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Re: When were you able to max out your 401k, IRAs?

Post by Watty »

One thing that has not been mentioned is that as your retirement accounts get large your future contributions may be very small compared to how much the value of your accounts change each year.

Before I retired I had got a 3% 401k match with a 6% contribution so it always made sense to contribute that to get the combined 9%.

I forget what the numbers were but if I had been more agressive with my retirment savings I might have been able to add another 1 or 2 percent of my total nestegg which is not all that significant when you consider that the value of the accounts could change by 10% or more in a year just because of market swings.

For about the last five years I actually cut my 401k contributions back to be just enough to get the employer match so that I could start spending more on things like travel before I retired.
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Re: When were you able to max out your 401k, IRAs?

Post by smitcat »

cherijoh wrote: Fri Mar 08, 2019 1:16 pm
Spirit Rider wrote: Fri Mar 08, 2019 12:21 pm
smitcat wrote: Fri Mar 08, 2019 11:51 am And to add to your facts about 401K's only about 15% of employers offer a 401K.
Of those 15% of companies that have a 401K plan only 40% of employees participate in the first year and that drops to about 33% by year 2.
That is misleading. Yes, only about 15% of employers offer 401k plans, but 80% of employees have access to a 401k plan. The latter is the far more important metric.
Good point.

I also have to question Smitcats 40% participation number. How dated is that data?

Many companies have started to automatically enroll new employees in 401k plans and then give them an option to opt out. This lets laziness and/or procrastination to work in your favor rather than against you. Participation rates in those plans are much higher I believe. I have worked for 2 different employers that offered great company matches - 1:1 up to a 5% employee contribution and both plans had over 95% participation numbers.
I don't know about your companies but ours has a much lower participation rate then 40% and we match as well.
I have intimate knowledge of all of our past companies 401K plans and participation rates and none of them had reached 50%.
Perhaps you can find verification somewhere that any company plan is near 95% rate after the one and two year anniversary.
Of course if you are correct then all this data about how little folks have at 50 , 55 , 60, and 65 would likely be inaccurate as well.
smitcat
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Re: When were you able to max out your 401k, IRAs?

Post by smitcat »

smitcat wrote: Fri Mar 08, 2019 2:11 pm
cherijoh wrote: Fri Mar 08, 2019 1:16 pm
Spirit Rider wrote: Fri Mar 08, 2019 12:21 pm
smitcat wrote: Fri Mar 08, 2019 11:51 am And to add to your facts about 401K's only about 15% of employers offer a 401K.
Of those 15% of companies that have a 401K plan only 40% of employees participate in the first year and that drops to about 33% by year 2.
That is misleading. Yes, only about 15% of employers offer 401k plans, but 80% of employees have access to a 401k plan. The latter is the far more important metric.
Good point.

I also have to question Smitcats 40% participation number. How dated is that data?

Many companies have started to automatically enroll new employees in 401k plans and then give them an option to opt out. This lets laziness and/or procrastination to work in your favor rather than against you. Participation rates in those plans are much higher I believe. I have worked for 2 different employers that offered great company matches - 1:1 up to a 5% employee contribution and both plans had over 95% participation numbers.
I don't know about your companies but ours has a much lower participation rate then 40% and we match as well.
I have intimate knowledge of all of our past companies 401K plans and participation rates and none of them had reached 50%.
Perhaps you can find verification somewhere that any company plan is near 95% rate after the one and two year anniversary.
Of course if you are correct then all this data about how little folks have at 50 , 55 , 60, and 65 would likely be inaccurate as well.

Here is some data on how many folks max out there 401K plans if you believe the sources mentioned....
https://www.fool.com/retirement/2017/01 ... nd-in.aspx
Filetmerlot
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Re: When were you able to max out your 401k, IRAs?

Post by Filetmerlot »

We plan on this being our first year for maxing out all 4 and we are early 40s. Once the kids were out of day care and preschool we spent a little time paying off all our debt (student loans, HELOC, cars), and now we just have the mortgage. We usually saved about 15%-20% but decided recently to up our efforts and max out everything.
Spirit Rider
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Re: When were you able to max out your 401k, IRAs?

Post by Spirit Rider »

cherijoh wrote: Fri Mar 08, 2019 1:16 pm I also have to question Smitcats 40% participation number. How dated is that data?
The 40% poplulation rate probably came from the
Current Population Survey which ask employees if they participate in a retirement plan at work. Such surveys are notoriously unreliable. Some may think that only a pension is a retirement plan. Some self-employed may not think their plan is at "work". How many times have we had posts where they insist they are not an employer.

However, If you look at the Bureau of Labor Statistics National Compensation Survey, which is a survey of employers rather than of employees. The NCS data shows no real change in retirement plan participation in recent years. In 2018, the NCS shows that 81% of full-time employees were offered a retirement plan and 61% participated,
Many companies have started to automatically enroll new employees in 401k plans and then give them an option to opt out. This lets laziness and/or procrastination to work in your favor rather than against you. Participation rates in those plans are much higher I believe.
Unfortunately, reality has not matched the promise of automatic enrollment. The surveys of employees had large percentages saying "oh yeah I won't opt out". However, when it was actually introduced (I think 2010) the participation rate has only increased from 55% to 61% based on the NCS.

That is not surprising since the percentage of participants contributing enough to get the full employer match has been stuck at about 60%. If free money doesn't get enrollment and increased contribution rates, automatic enrollment won't either. As insane as it is I have seen people opt out of a plan that had a 100% match up to 6%.

However, I think the main point Smitcat was trying to make is correct, no matter the validity of the data,

Even using the BLS data, ~80% of employees have access to a retirement plan, ~60% of those participate and only ~60% get the full match. Which means ~80% * ~60% * ~60% < ~30% of all employees are even contributing 5% - 10% to employer retirement plans.

As I have always maintained, maximizing arbitrary contribution limits or not is an irrelevant metric. Having an adequate retirement savings rate of 15% - 20% for most people is what matters.
retire2022
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Re: When were you able to max out your 401k, IRAs?

Post by retire2022 »

Watty wrote: Fri Mar 08, 2019 1:07 am That is sort of a trick question since the contribution limits have gotten a lot larger over the years and 401k's only really became common about 20 years ago in the late 1990's so before then few people had access to a 401k.
https://en.m.wikipedia.org/wiki/401(k)

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3dream3
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Re: When were you able to max out your 401k, IRAs?

Post by 3dream3 »

Mid 30s for me. Prior to that, maybe just enough to get the match and did not even think about IRAs... all because I wanted to spend my money on frivolous things and hanging out every weekend with no regard to my future :oops:
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Clever_Username
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Re: When were you able to max out your 401k, IRAs?

Post by Clever_Username »

I (think I) did not have access to a 401(k) or equivalent in graduate school. I don't think I had access to one as a post-doc. My first job after post-doc, I maxed out my 401(k). That was CY 2012, and I was first eligible for that 401(k) late in the year. I had to max it over the course of ten paychecks to do it, and the HR rep seemed surprised and warned me that doing this would involve "losing" $1700/paycheck for the rest of the year. Somehow this didn't deter me.

I have managed to max out 401(k) / 403(b) every year since then.

Unfortunately, my IRAs are a different story. I somehow have ended up with both a traditional IRA and a rollover IRA. I figure a future employer plan might be able to accept the rollover IRA, but I don't think these plans generally can take a traditional IRA that cannot be traced to employer plans (anyone know about this), so I can't really do a backdoor Roth. For better or worse, I have had many years where I earn over the Roth limit. The end result is that I have very little Roth space relative to my portfolio (about 10% of my total portfolio as far as current dollar value; a little bit more since the tax people get a claim on the money in other tax shelters).

I think the only years I maxed out 401(k) (or equivalent) and Roth IRA are 2012-14 + 2017 (because of how bonus/overtime pay fell).
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
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Re: When were you able to max out your 401k, IRAs?

Post by Spirit Rider »

Clever_Username wrote: Fri Mar 08, 2019 4:33 pm Unfortunately, my IRAs are a different story. I somehow have ended up with both a traditional IRA and a rollover IRA. I figure a future employer plan might be able to accept the rollover IRA, but I don't think these plans generally can take a traditional IRA that cannot be traced to employer plans (anyone know about this), so I can't really do a backdoor Roth.
A 401k plan can only accept pre-tax rollovers from IRAs and the compliance burden used to be on the plan. This was the reasoning behind the Rollover IRA and why 401k plans would only accept rollovers from Rollover IRAs.

However. the IRS released guidance in 2014 providing a safe harbor for 401k plans. They have a safe harbor as long as the participant and the IRA custodian* certify that only pre-tax assets are in the rollover and the 401k plans corrects any invalid rollover when they become aware of it.

So many but not all 401k plans have updated their plan document to accept IRA rollovers that are properly certified even if they come from other than a Rollover IRA. You should contact the plan are determine if they accept any IRA rollovers and from what sources. You may be pleasantly surprised.

*The IRA custodian often has no way to verify if any co-mingling occured, so I don't know what purpose their signature is.
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Clever_Username
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Re: When were you able to max out your 401k, IRAs?

Post by Clever_Username »

Spirit Rider wrote: Fri Mar 08, 2019 5:06 pm
Clever_Username wrote: Fri Mar 08, 2019 4:33 pm Unfortunately, my IRAs are a different story. I somehow have ended up with both a traditional IRA and a rollover IRA. I figure a future employer plan might be able to accept the rollover IRA, but I don't think these plans generally can take a traditional IRA that cannot be traced to employer plans (anyone know about this), so I can't really do a backdoor Roth.
A 401k plan can only accept pre-tax rollovers from IRAs and the compliance burden used to be on the plan. This was the reasoning behind the Rollover IRA and why 401k plans would only accept rollovers from Rollover IRAs.

However. the IRS released guidance in 2014 providing a safe harbor for 401k plans. They have a safe harbor as long as the participant and the IRA custodian* certify that only pre-tax assets are in the rollover and the 401k plans corrects any invalid rollover when they become aware of it.

So many but not all 401k plans have updated their plan document to accept IRA rollovers that are properly certified even if they come from other than a Rollover IRA. You should contact the plan are determine if they accept any IRA rollovers and from what sources. You may be pleasantly surprised.

*The IRA custodian often has no way to verify if any co-mingling occured, so I don't know what purpose their signature is.
This is great news; pre-tax or just rollovers? For example, if my t-IRA includes both rollovers (an internship of mine I was eligible for 401(k) and contributed, then rolled over) and some traditional IRA contributions, would that be eligible?

I might be able to backdoor Roth this year after all if my 403(b) can accept such rollovers. And since it's at Vanguard, I even know who I can probably ask.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
ddurrett896
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Re: When were you able to max out your 401k, IRAs?

Post by ddurrett896 »

Maxing out Roth IRA since I stated working.

Maxing out 401K is a different story. At $19,000 + $6,000 Roth, your looking at $25,000. With a saving rate of 20%, you would need to make $125,000. That's a high salary where I live.
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Re: When were you able to max out your 401k, IRAs?

Post by azianbob »

Clever_Username wrote: Fri Mar 08, 2019 4:33 pm The end result is that I have very little Roth space relative to my portfolio (about 10% of my total portfolio as far as current dollar value; a little bit more since the tax people get a claim on the money in other tax shelters).
You could also just convert all of your IRAs to Roth IRAs and take the tax hit once, if you want to be able to do backdoor Roths each year.
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Re: When were you able to max out your 401k, IRAs?

Post by UpsetRaptor »

Spirit Rider wrote: Fri Mar 08, 2019 4:16 am It have always felt that the Boglehead "maxing out your retirement accounts" mantra from many quarters is a useless metric. There are many circumstances where it is overkill and many circumstances where it is woefully insufficient. This BH obsession on it is counter-productive and places unnecessary stress on forum members to conform.
+1. Well said Spirit.
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Re: When were you able to max out your 401k, IRAs?

Post by Clever_Username »

azianbob wrote: Fri Mar 08, 2019 5:51 pm
Clever_Username wrote: Fri Mar 08, 2019 4:33 pm The end result is that I have very little Roth space relative to my portfolio (about 10% of my total portfolio as far as current dollar value; a little bit more since the tax people get a claim on the money in other tax shelters).
You could also just convert all of your IRAs to Roth IRAs and take the tax hit once, if you want to be able to do backdoor Roths each year.
You are correct, but there is something like $63000 in the two combined, and my marginal brackets in 2019 are 32% (federal) / 9.x (state), so I don't view it as worth it.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
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Re: When were you able to max out your 401k, IRAs?

Post by fwellimort »

The day I got my first job. So I guess 21. I lucked out majoring in Computer Science at a top 3 school in the US.
I also contribute to after-401k and no, I am not able to max that out. I wish but I'm nowhere close to maxing that out.

I was fortunate in having the privilege to study in a school that has good career prospects in an in-demand field.
Don't think the average college grad starts with 6 figures. And no, I am not in California. Many of my friends are though and they have far higher paychecks than me (I actually have the lowest among my peers but I think that will change after a year as I gain the right experience to apply to other firms).
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Re: When were you able to max out your 401k, IRAs?

Post by azianbob »

Clever_Username wrote: Fri Mar 08, 2019 5:59 pm You are correct, but there is something like $63000 in the two combined, and my marginal brackets in 2019 are 32% (federal) / 9.x (state), so I don't view it as worth it.
Depends on how old you are and how much longer you expect to work. If you are willing to do a backdoor Roth IRA contribution, then that would effectively be taxed at 32% as well.

If you are close to 60, then yes it's probably better to hold the traditional IRAs and not do a backdoor and withdrawing the IRAs at lower tax rates.

If you are like 40 and anticipate working for more than 10 years, and your salary will just get higher, then paying 20k in tax now and letting the 63000 grow tax free for 20+ years would save you no? Especially when you consider now it frees you up to do a backdoor Roth every year as well.

Your 32% tax bracket now is pretty low IMO, it will probably be higher in retirement.
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Re: When were you able to max out your 401k, IRAs?

Post by Spirit Rider »

Clever_Username wrote: Fri Mar 08, 2019 5:35 pm This is great news; pre-tax or just rollovers? For example, if my t-IRA includes both rollovers (an internship of mine I was eligible for 401(k) and contributed, then rolled over) and some traditional IRA contributions, would that be eligible?

I might be able to backdoor Roth this year after all if my 403(b) can accept such rollovers. And since it's at Vanguard, I even know who I can probably ask.
A Rollover IRA is simply a type of traditional IRA. If a plan does not restrict rollovers, you can rollover all pre-tax balances in all traditional, SEP and SIMPLE IRAs.
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Clever_Username
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Re: When were you able to max out your 401k, IRAs?

Post by Clever_Username »

azianbob wrote: Fri Mar 08, 2019 6:20 pm
Clever_Username wrote: Fri Mar 08, 2019 5:59 pm You are correct, but there is something like $63000 in the two combined, and my marginal brackets in 2019 are 32% (federal) / 9.x (state), so I don't view it as worth it.
Depends on how old you are and how much longer you expect to work. If you are willing to do a backdoor Roth IRA contribution, then that would effectively be taxed at 32% as well.

If you are close to 60, then yes it's probably better to hold the traditional IRAs and not do a backdoor and withdrawing the IRAs at lower tax rates.

If you are like 40 and anticipate working for more than 10 years, and your salary will just get higher, then paying 20k in tax now and letting the 63000 grow tax free for 20+ years would save you no? Especially when you consider now it frees you up to do a backdoor Roth every year as well.

Your 32% tax bracket now is pretty low IMO, it will probably be higher in retirement.
I agree with all except the last paragraph: I think the 32% tax bracket (I'm barely in it) and the California state tax of 9.3% feels quite high. I don't foresee it being higher in retirement -- excluding housing costs, I spend about $15k/year, and I don't plan to stay in California for that part of my life (which spares me some of the high taxes here).

In any case, I'm mid-30s, unsure or unclear how many years left. But yeah, it might be a cost-saving metric over time. I will first find out (looks like on Monday) if I can roll them into my workplace plan, that'll solve a lot of things right away.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
Pigeye Brewster
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Re: When were you able to max out your 401k, IRAs?

Post by Pigeye Brewster »

CyclingDuo wrote: Fri Mar 08, 2019 12:51 pm IRA Contribution limits history...

Image
https://www.financialsamurai.com/
The heading on this chart says "Historical Roth IRA Contribution Limits" but Roth IRAs didn't become available until 1998. And catch up contributions didn't exist for any kind of IRA until 2002.
Last edited by Pigeye Brewster on Fri Mar 08, 2019 9:14 pm, edited 1 time in total.
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