How do people have massive retirement accounts if it's a $19,500 (or whatever) limit per year?
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Anonymous
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At a less than 200k income:
DW’s 403b: 19.5k per year DH’s 403b: 19.5k per year ROTH IRA for both: 12k per year DH’s 457: 19.5k per year Plus matches, 3% and 7%. This comes to saving at least 70k per year, which adds up big time. |
Anonymous
Yep, and there’s $2 million left for your kids when you die. |
Anonymous
The PP is responsible for contributing to his pension- he funds 75% of it. In general, pensions are considered to be deferred payments- you accept a slightly lower income now in exchange for a guaranteed income after you retire, typically after a career that spans decades. I am also confused by why your wife would need connections to get a job as a public school teacher. Did you mean credentials? You generally need teaching credentials and to get ahead you also might need a masters degree. |
Anonymous
| I don’t think the employer match increases the 19,500 limit does it? If not why are people mentioning it? It’s irrelevant. But maybe I’m wrong. Maybe you can put in much more than 19,500 (plus any catch ups) due to a match. |
Anonymous
Does the match allow you to exceed the maximum? Someone needs to tell us that. |
Anonymous
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The $19,500 is the employee deferral maximum. The employer matches are a separate limit. See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits.
The reason people are mentioning the match is because that helps explain how people have massive amounts saved (the account balance includes their employee contribution plus their employer matches). That and compounding. |
Anonymous
| The overall limit is not $19500, it is $58,000 in 2021. $19,500 is the max for voluntary contribution. If your employer requires a % contribution it does not count against the $19,500. Your employer’s match does not count against the $19,500. I have never put in the ‘max’ $19,500 people like to reference all the time here but have been around $40-$50k in total contributions for the last several years |
Anonymous
Yes, they do. |
Anonymous
Yes; You + Match can equal up to 50K. So I get 19.5+18 (10% of base) = 37.5/year. My spouse is similar. My spouse gets 30K/year this way. 12 K in backdoor roths 7K in HSA So we net out about 85K in tax-sheltered/deferred savings. Seems pretty typical where I work, the Fidelity person i met with says he sees this situation pretty regularly at my workplace. (Higher Ed/Healthcare in the DMV) |
Anonymous
Yes, regular middle-class working stiffs are limited to $19,500 while high-earners with fancy employers get to shelter $58,000 of income from taxes. Really sensible public policy. |
Anonymous
Not in HC or Education, but spouse and I have maxed most of our careers (started late 20s as both came out of 4/5 yr grad school programs). Spouse has 11% matching with 403(b) and mandatory 5% salary contributions. I'm a fed who gets 8% match. So we hit our first $1M combined when I was almost 40 (roughly 13 years of investing). Now at 48, we have $3.3M. We were able to max out every year except during the height of our child care years when paying a nanny for two kids and PT preschool tuition. However, that was just for a little over a year. And spouse was still getting 11% with mandatory 5% contribution so that time wasn't completely $0 towards our retirement accounts. |
Anonymous
I have a 457 but I think they aren't that common so OP should factor that in if she doesn't have that option. |
Anonymous
NP. Yes, that confused me, too. Also, I find it funny that the poster is complaining about teachers having pensions. He likely moved into his neighborhood in NJ because of the great schools for his children to attend. As most people understand, great schools have great teachers and, in order to retain them, you have to offer them some compensation, either a higher salary or better benefits like a pension, because they also have to support themselves and their own families. Once the poster's kids graduated, I guess he didn't care about the great schools anymore? Those great schools also help keep his house value up and provide more equity for him, but I guess that doesn't matter to him since he will retire in a no tax state with poorly compensated teachers. |
Anonymous
| My company matched 11 percent of salary. I stayed with them 10 years and earned a fairly high salary so the account balance grew fast.. I know another company where a relative worked that matches even more. these are not the norm. But it’s one way that balances grow to millions in value. |