"maxing out" TSP, 401, etc.

[Anonymous]

Anonymous wrote:What I meant was I contributed the most my employer let me which was 10%.

I know I could have by federal law contributed more but I would still say I maxed out at work.

It wasn't until I was in my mid-30's that I actually hit the federal max. I now call that extra money my Christmas bonus, because I hit the max in November and my paycheck goes up.

Make sure you're not leaving money on the table by doing this. My husband did it one year without realizing the consequences: his employer matched the first 4% of his contribution each pay period, but he maxed out at the end of October and couldn't contribute anything in Nov or Dec. He missed out on the employer's 4% match during those two months. It was a shock when he realized that the match maximum is calculated per pay period, not for the year overall - he didn't get any "credit" for the contributions he'd made over 4% in prior months. We've both adjusted our contributions to make sure we both hit our limits during the last paycheck.

To answer the OP's question, I'd assume that "maxing out" means the federal limit, e.g. $18K for this year for under-50-year-olds. If the workplace has a lower limit like 10%, I guess that would apply also.

[Anonymous]

Anonymous wrote:

Anonymous wrote:how do people afford to contribute 18k when at a fed gs12 or 13 salary?

Just do it. There are many ways to do - adjust your other money going out.

Correct...just do it.

I'm 29 and make $52k as a federal benefits & retirement counselor. I max out my TSP contribution yearly (last year $17.5k, now $18k), as well as a traditional IRA with $5,500. I also have a side-gig (~$10k/year) and contribute the maximum deductible amount from my 1099 earnings into an SEP-IRA ($2,400 last year). My effective federal income tax rate for 2014 was 7.3%...not too shabby. Both the traditional IRA and SEP-IRA contributions get transferred into TSP (can't beat the cost anywhere else, including Vanguard). I've done this yearly since 2010 and already have early retirement (45?) on my mind. And since I'm already maxing everything, every raise I get in the future is all mine (instead of bumping up my contribution % trying to play catch up). You have to make saving a goal, then a priority, and then just do it.

To put my expenses in perspective, I rent a shoebox-sized basement apartment in Arlington for $800/mo, have eaten enough oatmeal and rice in my 20s for five lifetimes, and still have my first car from high school that I drive practically everywhere in. I rarely drink (gigantic waste, especially at the bars), but have plenty of fun every weekend. And I still manage to sock away $1,000/mo into a Vanguard taxable account. Having zero debt makes it all possible. I also don't have a bunch of kids, cars, houses, boats, timeshares, etc., etc. that I can't afford.

CONTRIBUTE THE MAX. It hurts, I know personally, but it puts you on an actual track to retirement, not just hopes and dreams. If you're not maxing out your tax-advantaged retirement account space, you're only cheating yourself. Time is your greatest investing friend and compound interest is simply magic. Contributing the max gets you the up-front tax savings now, helps you accumulate a huge nest egg, and then gives you the choice of deciding exactly what your tax bracket and income will be in retirement. The fact that Uncle Sam has put a limit on what you can contribute, is a sure sign that it's a good deal. You can borrow for college, cars, and houses all throughout your lifetime, but you absolutely cannot borrow for your retirement.

At my agency, I get ecstatic when 20 & 30-somethings come into my office to talk about retirement planning and TSP. I have the chance to hopefully steer them onto the right path to earning a very comfortable retirement. With dedication and perseverance, you really do EARN it. When folks 55+ come in, a lot of times it's too late for me to be much help. When I see their $100k (or less!?!) TSP balances I wonder which type of dog food they'll enjoy the most in retirement. On the contrary, when the quiet GS-9 admin assistant in her 40s comes in for retirement planning and shares that she already has $500k+ in TSP, I can only tell her keep up the good work and don't stop whatever she's doing.

If I can make it happen on my pittance of a salary, you can too.

"The best time to plant a tree was 20 years ago. The second best time is today."

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:how do people afford to contribute 18k when at a fed gs12 or 13 salary?

Just do it. There are many ways to do - adjust your other money going out.

Correct...just do it.

I'm 29 and make $52k as a federal benefits & retirement counselor. I max out my TSP contribution yearly (last year $17.5k, now $18k), as well as a traditional IRA with $5,500. I also have a side-gig (~$10k/year) and contribute the maximum deductible amount from my 1099 earnings into an SEP-IRA ($2,400 last year). My effective federal income tax rate for 2014 was 7.3%...not too shabby. Both the traditional IRA and SEP-IRA contributions get transferred into TSP (can't beat the cost anywhere else, including Vanguard). I've done this yearly since 2010 and already have early retirement (45?) on my mind. And since I'm already maxing everything, every raise I get in the future is all mine (instead of bumping up my contribution % trying to play catch up). You have to make saving a goal, then a priority, and then just do it.

To put my expenses in perspective, I rent a shoebox-sized basement apartment in Arlington for $800/mo, have eaten enough oatmeal and rice in my 20s for five lifetimes, and still have my first car from high school that I drive practically everywhere in. I rarely drink (gigantic waste, especially at the bars), but have plenty of fun every weekend. And I still manage to sock away $1,000/mo into a Vanguard taxable account. Having zero debt makes it all possible. I also don't have a bunch of kids, cars, houses, boats, timeshares, etc., etc. that I can't afford.

CONTRIBUTE THE MAX. It hurts, I know personally, but it puts you on an actual track to retirement, not just hopes and dreams. If you're not maxing out your tax-advantaged retirement account space, you're only cheating yourself. Time is your greatest investing friend and compound interest is simply magic. Contributing the max gets you the up-front tax savings now, helps you accumulate a huge nest egg, and then gives you the choice of deciding exactly what your tax bracket and income will be in retirement. The fact that Uncle Sam has put a limit on what you can contribute, is a sure sign that it's a good deal. You can borrow for college, cars, and houses all throughout your lifetime, but you absolutely cannot borrow for your retirement.

At my agency, I get ecstatic when 20 & 30-somethings come into my office to talk about retirement planning and TSP. I have the chance to hopefully steer them onto the right path to earning a very comfortable retirement. With dedication and perseverance, you really do EARN it. When folks 55+ come in, a lot of times it's too late for me to be much help. When I see their $100k (or less!?!) TSP balances I wonder which type of dog food they'll enjoy the most in retirement. On the contrary, when the quiet GS-9 admin assistant in her 40s comes in for retirement planning and shares that she already has $500k+ in TSP, I can only tell her keep up the good work and don't stop whatever she's doing.

If I can make it happen on my pittance of a salary, you can too.

"The best time to plant a tree was 20 years ago. The second best time is today."

You sound like you're doing great.

But your sanctimonious attitude leaves a lot to be desired. By which I mean the dog food comment, and the dog food comment, and the assumption that all people your age and older might want to sacrifice kids and an adequate living space.

[Anonymous]

The dog food comment was a joke. The low balance TSP folks are either CSRS who couldn't care less about TSP or FERS who will still have a great basic benefit pension and SS to get them by just fine. They had a golden opportunity handed to them with the TSP and just didn't take advantage of it.

But the rest, I stand by. Adequate living space is just that...adequate. I really don't need more than a dry place to lay my head, an outlet to charge a phone, and a hot shower with the capital of the free world out beyond the doorstep. And I'd much rather toss away $800/mo on rent, rather than $2k. DC has real keeping up with the Joneses problem, which is evident all over DCUM or just a walk around town. If people really want to work until they're 80, they can go right ahead and do it. When folks get the idea that even maxing out a yearly 401k contribution is impossible, working 'til 80 becomes the back-up plan. I'm not eschewing kids either, but I'd rather have my ducks-in-a-row years ahead of time, instead of cobbling together a financial plan that includes them after they've arrived.

Ever been to a retirement luncheon for someone who's under 55? The beaming smile on their face lights up the room and they instantly look twenty years younger knowing that they've "won the game" after saving, investing and living below their means for so long...while still having a home, kids, and everything else a person would ever need. The best part is all the folks in the room who are staring daggers wondering "how'd they do it?" It's no secret.

Most common regret from those with underfunded 401ks?: "I wish I had saved more."
Most common regret from those with already huge 401k balances?: "I wish I had started earlier."

And I'll say it again, you can borrow for absolutely anything in this world, except retirement. Max out you 401k contribution now and your future self will thank you.

[Anonymous]

That's great PP, but not a lifestyle every one wants. I put as much as possible into TSP but I can't max out yet. My priority right now is having kids, growing my family...adds lots of expenses like day care which are must. What's great is that I still put a lot in and I will make up funds when my kids are older - and I can do what makes me happy like having kids versus a stacked TSP. To each his own!

[Anonymous]

Agree with PP. Raising happy, healthy children can be just as rewarding as saving gobs of money. I'd argue that keeping up with toddlers in your 50s could be tougher for some than catching up on retirement later in life. If you can't max a 401k, contribute as much as you can and don't sweat it. But having the available space in your budget to fund a 401k, but still not doing it is silly.

There's way too much 401k misinformation out there unfortunately. I was told on my first day of my current job "This is your 401k, put money into it" and that was it. It took finding bogleheads forums to finally help put all the pieces together for me that made actual sense. To hear my co-workers brag about their continuously revolving 401k loans as "free money" now makes me cringe a little.

[Anonymous]

Anonymous wrote:The dog food comment was a joke. The low balance TSP folks are either CSRS who couldn't care less about TSP or FERS who will still have a great basic benefit pension and SS to get them by just fine. They had a golden opportunity handed to them with the TSP and just didn't take advantage of it.

But the rest, I stand by. Adequate living space is just that...adequate. I really don't need more than a dry place to lay my head, an outlet to charge a phone, and a hot shower with the capital of the free world out beyond the doorstep. And I'd much rather toss away $800/mo on rent, rather than $2k. DC has real keeping up with the Joneses problem, which is evident all over DCUM or just a walk around town. If people really want to work until they're 80, they can go right ahead and do it. When folks get the idea that even maxing out a yearly 401k contribution is impossible, working 'til 80 becomes the back-up plan. I'm not eschewing kids either, but I'd rather have my ducks-in-a-row years ahead of time, instead of cobbling together a financial plan that includes them after they've arrived.

Ever been to a retirement luncheon for someone who's under 55? The beaming smile on their face lights up the room and they instantly look twenty years younger knowing that they've "won the game" after saving, investing and living below their means for so long...while still having a home, kids, and everything else a person would ever need. The best part is all the folks in the room who are staring daggers wondering "how'd they do it?" It's no secret.

Great job, PP! Agree with everything you said!! You're ahead of the game and more people need to learn these basic principles!!

Most common regret from those with underfunded 401ks?: "I wish I had saved more."
Most common regret from those with already huge 401k balances?: "I wish I had started earlier."

And I'll say it again, you can borrow for absolutely anything in this world, except retirement. Max out you 401k contribution now and your future self will thank you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:how do people afford to contribute 18k when at a fed gs12 or 13 salary?

Just do it. There are many ways to do - adjust your other money going out.

Correct...just do it.

I'm 29 and make $52k as a federal benefits & retirement counselor. I max out my TSP contribution yearly (last year $17.5k, now $18k), as well as a traditional IRA with $5,500. I also have a side-gig (~$10k/year) and contribute the maximum deductible amount from my 1099 earnings into an SEP-IRA ($2,400 last year). My effective federal income tax rate for 2014 was 7.3%...not too shabby. Both the traditional IRA and SEP-IRA contributions get transferred into TSP (can't beat the cost anywhere else, including Vanguard). I've done this yearly since 2010 and already have early retirement (45?) on my mind. And since I'm already maxing everything, every raise I get in the future is all mine (instead of bumping up my contribution % trying to play catch up). You have to make saving a goal, then a priority, and then just do it.

To put my expenses in perspective, I rent a shoebox-sized basement apartment in Arlington for $800/mo, have eaten enough oatmeal and rice in my 20s for five lifetimes, and still have my first car from high school that I drive practically everywhere in. I rarely drink (gigantic waste, especially at the bars), but have plenty of fun every weekend. And I still manage to sock away $1,000/mo into a Vanguard taxable account. Having zero debt makes it all possible. I also don't have a bunch of kids, cars, houses, boats, timeshares, etc., etc. that I can't afford.

CONTRIBUTE THE MAX. It hurts, I know personally, but it puts you on an actual track to retirement, not just hopes and dreams. If you're not maxing out your tax-advantaged retirement account space, you're only cheating yourself. Time is your greatest investing friend and compound interest is simply magic. Contributing the max gets you the up-front tax savings now, helps you accumulate a huge nest egg, and then gives you the choice of deciding exactly what your tax bracket and income will be in retirement. The fact that Uncle Sam has put a limit on what you can contribute, is a sure sign that it's a good deal. You can borrow for college, cars, and houses all throughout your lifetime, but you absolutely cannot borrow for your retirement.

At my agency, I get ecstatic when 20 & 30-somethings come into my office to talk about retirement planning and TSP. I have the chance to hopefully steer them onto the right path to earning a very comfortable retirement. With dedication and perseverance, you really do EARN it. When folks 55+ come in, a lot of times it's too late for me to be much help. When I see their $100k (or less!?!) TSP balances I wonder which type of dog food they'll enjoy the most in retirement. On the contrary, when the quiet GS-9 admin assistant in her 40s comes in for retirement planning and shares that she already has $500k+ in TSP, I can only tell her keep up the good work and don't stop whatever she's doing.

If I can make it happen on my pittance of a salary, you can too.

"The best time to plant a tree was 20 years ago. The second best time is today."

NP here. The poster above sounds very on-the-ball. But here's one question -- why do you settle for a job that pays $52,000 at age 29? It seems like you're quite capable, and I suspect you could apply for and get a job with a higher salary to allow you the occasional comfort.

[Anonymous]

DH and I each contribute 18k. We're in our 20s, making 180k

[Anonymous]

Anonymous wrote:Agree with PP. Raising happy, healthy children can be just as rewarding as saving gobs of money. I'd argue that keeping up with toddlers in your 50s could be tougher for some than catching up on retirement later in life. If you can't max a 401k, contribute as much as you can and don't sweat it. But having the available space in your budget to fund a 401k, but still not doing it is silly.

There's way too much 401k misinformation out there unfortunately. I was told on my first day of my current job "This is your 401k, put money into it" and that was it. It took finding bogleheads forums to finally help put all the pieces together for me that made actual sense. To hear my co-workers brag about their continuously revolving 401k loans as "free money" now makes me cringe a little.

what blogs?

[Anonymous]

I think it means every working adult is maxing out (so $18K/$24K for single parent or family with SAHP and $36K/$48K for a family with two working parents.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Quick survey!

I've seen a few posts lately by OP's claiming they are "maxing out" their contribution in order to get the employer match, or "maxing out" even with a HHI of 90k and family of 4.

It kinda makes me wonder what y'all think it actually means. I have recently worked in the field of retirement plans, so I already know

I am particularly interested in how the 90k poster makes that work.

Maxing out 18k pretax on a 90k income is easy.

When you have 2 kids? A mortgage? Transportation costs?

or student loans, trying to save for a downpayment, etc

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:how do people afford to contribute 18k when at a fed gs12 or 13 salary?

Just do it. There are many ways to do - adjust your other money going out.

Correct...just do it.

I'm 29 and make $52k as a federal benefits & retirement counselor. I max out my TSP contribution yearly (last year $17.5k, now $18k), as well as a traditional IRA with $5,500. I also have a side-gig (~$10k/year) and contribute the maximum deductible amount from my 1099 earnings into an SEP-IRA ($2,400 last year). My effective federal income tax rate for 2014 was 7.3%...not too shabby. Both the traditional IRA and SEP-IRA contributions get transferred into TSP (can't beat the cost anywhere else, including Vanguard). I've done this yearly since 2010 and already have early retirement (45?) on my mind. And since I'm already maxing everything, every raise I get in the future is all mine (instead of bumping up my contribution % trying to play catch up). You have to make saving a goal, then a priority, and then just do it.

To put my expenses in perspective, I rent a shoebox-sized basement apartment in Arlington for $800/mo, have eaten enough oatmeal and rice in my 20s for five lifetimes, and still have my first car from high school that I drive practically everywhere in. I rarely drink (gigantic waste, especially at the bars), but have plenty of fun every weekend. And I still manage to sock away $1,000/mo into a Vanguard taxable account. Having zero debt makes it all possible. I also don't have a bunch of kids, cars, houses, boats, timeshares, etc., etc. that I can't afford.

CONTRIBUTE THE MAX. It hurts, I know personally, but it puts you on an actual track to retirement, not just hopes and dreams. If you're not maxing out your tax-advantaged retirement account space, you're only cheating yourself. Time is your greatest investing friend and compound interest is simply magic. Contributing the max gets you the up-front tax savings now, helps you accumulate a huge nest egg, and then gives you the choice of deciding exactly what your tax bracket and income will be in retirement. The fact that Uncle Sam has put a limit on what you can contribute, is a sure sign that it's a good deal. You can borrow for college, cars, and houses all throughout your lifetime, but you absolutely cannot borrow for your retirement.

At my agency, I get ecstatic when 20 & 30-somethings come into my office to talk about retirement planning and TSP. I have the chance to hopefully steer them onto the right path to earning a very comfortable retirement. With dedication and perseverance, you really do EARN it. When folks 55+ come in, a lot of times it's too late for me to be much help. When I see their $100k (or less!?!) TSP balances I wonder which type of dog food they'll enjoy the most in retirement. On the contrary, when the quiet GS-9 admin assistant in her 40s comes in for retirement planning and shares that she already has $500k+ in TSP, I can only tell her keep up the good work and don't stop whatever she's doing.

If I can make it happen on my pittance of a salary, you can too.

"The best time to plant a tree was 20 years ago. The second best time is today."

i would like to hear more info about how you max out and what funds you use/roth or traditional, etc?

also- it is a lot easier to live extremely frugally and simply when solo. much harder to negotiate space constraints etc when married

[Anonymous]

Anonymous wrote:
NP here. The poster above sounds very on-the-ball. But here's one question -- why do you settle for a job that pays $52,000 at age 29? It seems like you're quite capable, and I suspect you could apply for and get a job with a higher salary to allow you the occasional comfort.

Only on DCUM is a salary that’s above the median U.S. HOUSEHOLD income considered “settling”...at 29, no less, sheesh. I’m pretty average and not a professional, and $52k is almost 3x what I was making in BFE rural America, so there are no complaints from me. And it just goes to show how far DC salaries are completely out of touch with reality. A stable fed day-job lets me pursue and hustle lots of other opportunities outside of 9a-6p M-F. Once a full deferred pension is locked up, then maybe I might think about leaving, or just simply retire and live on SEPP out of TSP.

Anonymous wrote:

i would like to hear more info about how you max out and what funds you use/roth or traditional, etc?

also- it is a lot easier to live extremely frugally and simply when solo. much harder to negotiate space constraints etc when married

I contribute the max $18k/yr…I really don't know what more to tell other than to just do it 'til it hurts. Put the max in each pay period and if you never see it in your bank account, maybe you won't miss it that much. I always make traditional contributions, never Roth...I want the tax break now, not in 30 years. I also try to front-load TSP as much as I can early in the calendar year. I prefer a traditional IRA as long as the contribution is deductible. When the deduction starts to get phased out due to the income limits (modified AGI >$61,000 in 2015), a Roth IRA is then the better option. Your mileage will vary because of all the broadening choices nowadays, but you can always mathematically break down what options will best suit your own personal/family situation.

TSP = 55% C, 15% S, 20% I, and 10% G for the far foreseeable future. I re-balance once yearly sometime in January, and also after an RBD (really bad day where the S&P fell more than 5%). If you absolutely cannot restrain yourself from fiddling with your TSP, don't forget these two truths: 1)Buy low, Sell high & 2)You've NEVER lost anything, unless you sell.

And yes, it is A LOT easier to live frugally as a singleton, and I'll admit that sticking to it is hard work. On the flip-side, I'd never even give a thought to asking/expecting an SO/spouse to go along with it for fear of being smothered in my sleep. Frugality is definitely not for everyone, and you might need to have a screw or two loose to give it a true best effort.

"It's not what you make, it's what you keep."

[Anonymous]

HHI 125k
One full time, one part time earner
Maxing out 401 (k) means 18k, plus maxing out 1 IRA at 5k.
I don't know why it would be surprising that it can be done?