Does everyone on DCUM max out retirement?

[Anonymous]

DW and I both just started maxing last year. We are late 30s, $320K HHI. We are expecting a baby later this year, but we have plenty of disposable income.

I max because it lowers my student loan payment and maximizes my forgiveness amount in a few years (I'm a Fed)

[Anonymous]

White collar employees planning on working forever are in for a rude awakening. A layoff or firing after 47 or so is probably the end for your career, and especially if you're used to making a lot of money. Plan for the worst; hope for the best.

[Anonymous]

Anonymous wrote:I have been maxing out since I was 21 in 1999 making only $26,000. I have only worked for nonprofits so I do not have a crazy high income. I also had 70k in college debt at the time-unheard of them. I am 41. Maxing out is the best financial decision I have ever made. I also paid for my kids’ childcare costs. There is no excuse for not maxing out. I stopped eating meat for years (expensive). Think of it as you can’t afford not to max out. Over years it makes a huge difference.

You were saving $18k a year when you earned $26k? And you also paid off college debt, and paid for kids' childcare? Can I ask how you did this?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have been maxing out since I was 21 in 1999 making only $26,000. I have only worked for nonprofits so I do not have a crazy high income. I also had 70k in college debt at the time-unheard of them. I am 41. Maxing out is the best financial decision I have ever made. I also paid for my kids’ childcare costs. There is no excuse for not maxing out. I stopped eating meat for years (expensive). Think of it as you can’t afford not to max out. Over years it makes a huge difference.

When people say that they are "maxing out," do they really mean that they are contributing the maximum amount allowed by the IRS, or do they mean that they are contributing the maximum to get their company match? For example, the PP above said they were maxing out in 1999 on a $26k salary. IRS limit at the time was $10k. Were they really contributing 38% of pay and living on the remaining $16k gross?

I wonder too. I’ve pointed out before that as a young person making 40 or 50k starting out, it’s unlikely to impossible to live on whatever your net would be after the true IRS max. People will say that they’re not trying hard enough. I believe you should do what you can starting young and people need to get off their high horse about this. Hopefully in retirement you’ll be living in a lower cost of living area with a paid off house so no one “needs” their pre-retirement salary or 3 million in the bank. How does literally 90% of the rest of the country live? They figure it out.

It’s not impossible because I did it. I lived in a crappy rental share in Arlington and drove a crappy car and didn’t take vacations. It’s not possible if you want to drive a nice, new car, and live in a place that’s luxury and go get coffee everything day and out to dinner at fancy restaurants every weekend.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I have been maxing out since I was 21 in 1999 making only $26,000. I have only worked for nonprofits so I do not have a crazy high income. I also had 70k in college debt at the time-unheard of them. I am 41. Maxing out is the best financial decision I have ever made. I also paid for my kids’ childcare costs. There is no excuse for not maxing out. I stopped eating meat for years (expensive). Think of it as you can’t afford not to max out. Over years it makes a huge difference.

You were saving $18k a year when you earned $26k? And you also paid off college debt, and paid for kids' childcare? Can I ask how you did this?

DP, but IRS max was only $10k in 1999. I'm still skeptical that her definition of "maxing out" is the same as mine though.

[Anonymous]

We earn about $200k HHI but that is fairly recent. We are in our mid 40s. My husband maxxes out, and has for the last few years - he is the higher earner in our household.

I've had a much more irregular income, and was also self employed for a few years. I just became eligible to participate in my org's 401k plan, and am trying to save about $12k in it - so, no, not maxxing out, but a lot relative to what I earn (about $60k). I still have student loans, which contributes to not being able to save more now. Also, just, we aren't big spenders - no yacht, an old car, not expensive clothes - but we also don't pinch pennies.

No pension coming our way. Here's hoping we can both work another 20-25 years - if we do, and manage to keep saving at this level, we should (knock wood!) be ok.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have been maxing out since I was 21 in 1999 making only $26,000. I have only worked for nonprofits so I do not have a crazy high income. I also had 70k in college debt at the time-unheard of them. I am 41. Maxing out is the best financial decision I have ever made. I also paid for my kids’ childcare costs. There is no excuse for not maxing out. I stopped eating meat for years (expensive). Think of it as you can’t afford not to max out. Over years it makes a huge difference.

When people say that they are "maxing out," do they really mean that they are contributing the maximum amount allowed by the IRS, or do they mean that they are contributing the maximum to get their company match? For example, the PP above said they were maxing out in 1999 on a $26k salary. IRS limit at the time was $10k. Were they really contributing 38% of pay and living on the remaining $16k gross?

I wonder too. I’ve pointed out before that as a young person making 40 or 50k starting out, it’s unlikely to impossible to live on whatever your net would be after the true IRS max. People will say that they’re not trying hard enough. I believe you should do what you can starting young and people need to get off their high horse about this. Hopefully in retirement you’ll be living in a lower cost of living area with a paid off house so no one “needs” their pre-retirement salary or 3 million in the bank. How does literally 90% of the rest of the country live? They figure it out.

It’s not impossible because I did it. I lived in a crappy rental share in Arlington and drove a crappy car and didn’t take vacations. It’s not possible if you want to drive a nice, new car, and live in a place that’s luxury and go get coffee everything day and out to dinner at fancy restaurants every weekend.

OK, at one point I was earning $60k in DC - and I lived in a group house in Columbia Heights where my rent was $700/month. I was paying $1k per month for student loans. I didn't have a car, forget a nice shiny one. Going to visit my parents a couple times a year - a Southwest flight away - ate up a few thousand dollars; my vacation budget. I did go out of town for a couple of weekends, staying in cheap-ish hotels, so I guess maybe that qualifies as a fancy vacation. Living like that it was still impossible to save 30 percent of my salary.

I'm not saying it's not worth trying to save. I'm telling you this is a crazy false dichotomy - either you're saving a third of your pre-tax income, or you must be jetting off to Paris every weekend and driving a Tesla.

[Anonymous]

no. we send 6%

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have been maxing out since I was 21 in 1999 making only $26,000. I have only worked for nonprofits so I do not have a crazy high income. I also had 70k in college debt at the time-unheard of them. I am 41. Maxing out is the best financial decision I have ever made. I also paid for my kids’ childcare costs. There is no excuse for not maxing out. I stopped eating meat for years (expensive). Think of it as you can’t afford not to max out. Over years it makes a huge difference.

When people say that they are "maxing out," do they really mean that they are contributing the maximum amount allowed by the IRS, or do they mean that they are contributing the maximum to get their company match? For example, the PP above said they were maxing out in 1999 on a $26k salary. IRS limit at the time was $10k. Were they really contributing 38% of pay and living on the remaining $16k gross?

I wonder too. I’ve pointed out before that as a young person making 40 or 50k starting out, it’s unlikely to impossible to live on whatever your net would be after the true IRS max. People will say that they’re not trying hard enough. I believe you should do what you can starting young and people need to get off their high horse about this. Hopefully in retirement you’ll be living in a lower cost of living area with a paid off house so no one “needs” their pre-retirement salary or 3 million in the bank. How does literally 90% of the rest of the country live? They figure it out.

It’s not impossible because I did it. I lived in a crappy rental share in Arlington and drove a crappy car and didn’t take vacations. It’s not possible if you want to drive a nice, new car, and live in a place that’s luxury and go get coffee everything day and out to dinner at fancy restaurants every weekend.

I’m really curious about your scenario. Can you break this down further? What was your annual salary at the time and what was the 401k limit? What did all your expenses look like?

If someone makes 50k a year now, I think it would be really really tough to contribute 18k. Once you take the 18k, health premiums and taxes you have what, 25k? Then let’s say you find a room in Arlington for $700 a month. Add a $100 for utilities. Now you’re at around 15k. If you have a car there is insurance, gas, parking costs. Or you could metro everywhere. Both could be say be $200 a month. Now we’re at 13k or $1,083 per month to live on. And you haven’t contributed anything to an emergency fund or even cash long-term savings. And hopefully you don’t have student loans.

I think the above is why most people don’t view it realistic to max out the full amount right out of college. Now if you live at home, stay on your parents insurance till 26, and they fully paid for your college, then I agree with you. It would be a lifestyle choice at that point to not max out. But most of us didn’t have our school fully paid for, living at home after school wasn’t an option, and Obamacare didn’t exist when we graduated. Other than free insurance, I think loans and no free housing are still applicable to young people today.

[Anonymous]

For folks who grew up in major cities who were lower income like myself it was actually easy to save right out of school.

I graduated with no student loans, I stayed home for college so already had my piece of junk college car and when I started my job out of colleges expenses did not go up at all.

I was not on my Mom's insurance but single insurance with cheapest plan even today is cheap at work.

My biggest monthly bill was my bar tab at that time. Pretty much was my biggest monthly bill till I was 34!

BTW only rich kids get student loans. Us poor kids just got govt aid for local shitty school and lived at home for college.

[Anonymous]

Anonymous wrote:White collar employees planning on working forever are in for a rude awakening. A layoff or firing after 47 or so is probably the end for your career, and especially if you're used to making a lot of money. Plan for the worst; hope for the best.

True true true. For myself, my husband, many cousins, friends, neighbors. People don't easily talk about this but dig a little deeper and you will see. We went from 300k to $200k and now both looking - DH is 50 and I am 46. Yeah.

[Anonymous]

OP, how can you expect any useful responses unless you mention ages and NW (incl. house, future pension, health coverage).

[Anonymous]

I didn’t hit the IRS max until my salary got above 150k. Had an employer match for a while but now my employer doesn’t match. I max 401k and HSA, wife still doesn’t fully max her 401k but we need to readjust and get it maxed. Paying for private school takes a big chunk out of budget.

[Anonymous]

Anonymous wrote:

Anonymous wrote:White collar employees planning on working forever are in for a rude awakening. A layoff or firing after 47 or so is probably the end for your career, and especially if you're used to making a lot of money. Plan for the worst; hope for the best.

True true true. For myself, my husband, many cousins, friends, neighbors. People don't easily talk about this but dig a little deeper and you will see. We went from 300k to $200k and now both looking - DH is 50 and I am 46. Yeah.

Many professionals have skills, qualifications and networks that will allow them to work independently post retirement. Thinking here of MDs, dentists, accountants, lawyers, consultants etc etc. In my family, even the blue collar guy who rose through the ranks of a union, does part-time consulting now at 72.

[Anonymous]

Anonymous wrote:

Anonymous wrote:White collar employees planning on working forever are in for a rude awakening. A layoff or firing after 47 or so is probably the end for your career, and especially if you're used to making a lot of money. Plan for the worst; hope for the best.

True true true. For myself, my husband, many cousins, friends, neighbors. People don't easily talk about this but dig a little deeper and you will see. We went from 300k to $200k and now both looking - DH is 50 and I am 46. Yeah.

I think the impact of this is vastly underestimated on this board but I suspect a lot of that has to do with these boards skewing younger. Go to a place like Bogleheads and there are plenty of stories of folks being underemployed in their 50s or forced into early retirement because they can't find another job.