2019 I turn 50 - is there a reason NOT to do 401K catch up?

[Anonymous]

Starting in my late 20s, I have maxed out my 401K and now have a nice nest egg. Given the complete financial situation, we have a bunch of equity in our house and will have it paid off in 5 years, no other debt, decent 519 savings for my children and my DH is a Fed who gets really good health insurance.

I turn 50 next year and know that there is the option of increasing my 401K savings for catch up. I do not see a reason to catch up as I think we are in really good shape and would prefer to take that and use it for quality of life items at least the next few years (I want to take a few trips to places like Alaska, Grand Canyon, Canadian Rockies etc.)

Am I missing something?

[Anonymous]

Impossible to answer this question in a one-size-fits-all approach. We'd need a lot more information about your individual situation.

But life is about priorities. If your retirement savings are on track and you'd like to spend money traveling, sure, go ahead.

It isn't the most financially optimal thing to do, but there's more to life than a large 401k balance.

[Anonymous]

Catch up is only 6k pre tax which means more like 4K post tax. Enough for one trip per year.

[Anonymous]

would prefer to take that and use it for quality of life items at least the next few years

The option to put more money a retirement account in isn't changing your total gross income, so your total spending should be similar next year to what it is currently, assuming you're comfortable with what you have saved, what you are saving, and what you are spending.

If you are currently saving some money in regular accounts (nontax preferred), then next year you can redirect some of that to the retirement accounts. Or if you have more money in regular account than you think you need, then make the catch up contributions and spend out of that "extra" regular savings.

[Anonymous]

Depends on what you have/need. I am over 50 and started the extra contribution as soon as I could. Surely you are saving outside of 401ks so just think of it as diverting some of your regular savings to tax deferred savings. It's only $6,000 but does save at least $2000 in taxes.

[Anonymous]

Anonymous wrote:Depends on what you have/need. I am over 50 and started the extra contribution as soon as I could. Surely you are saving outside of 401ks so just think of it as diverting some of your regular savings to tax deferred savings. It's only $6,000 but does save at least $2000 in taxes.

I guess it is a question of how you define "saving" outside of 401K.
I get a small pension and my DH has a govt pension - and plans to retire with 30 years of service in 5 years. At that time he will be in mid 50s and be in a position for a 2nd career. The Federal pension will provide us with over $70K a year or retirement income. Our house will be paid off. Kids college paid for. The 401K (TSP) is our primary savings [outside of 6 months of emergency cash]

I cant see what the 6K extra will really do for us.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Depends on what you have/need. I am over 50 and started the extra contribution as soon as I could. Surely you are saving outside of 401ks so just think of it as diverting some of your regular savings to tax deferred savings. It's only $6,000 but does save at least $2000 in taxes.

I guess it is a question of how you define "saving" outside of 401K.
I get a small pension and my DH has a govt pension - and plans to retire with 30 years of service in 5 years. At that time he will be in mid 50s and be in a position for a 2nd career. The Federal pension will provide us with over $70K a year or retirement income. Our house will be paid off. Kids college paid for. The 401K (TSP) is our primary savings [outside of 6 months of emergency cash]

I cant see what the 6K extra will really do for us.

Yes, based on this it is reasonable for you to not to do a 401K catch up. HOWEVER, since you didn't provide this information in the initial question you asked, and based on this most recent update it sounds like you have already made up your mind - I think the whole point of your post was to humble brag, and not really to know the answer to the question.

[Anonymous]

Over 70k pension?? What grade is he? I am 15/10 with 35 yrs in, mine is only 60k or so.

[Anonymous]

Anonymous wrote:Over 70k pension?? What grade is he? I am 15/10 with 35 yrs in, mine is only 60k or so.

I thought it was 1.1% per year if over 30 years so that does seem unlikely unless it include TSP

[Anonymous]

Anonymous wrote:

Anonymous wrote:Over 70k pension?? What grade is he? I am 15/10 with 35 yrs in, mine is only 60k or so.

I thought it was 1.1% per year if over 30 years so that does seem unlikely unless it include TSP

1.1 kicks in when you retire at 62 or older

[Anonymous]

6k can be a lot. My brother turned 50 in 2010 and managed to put in an extra $54,000 in that time period. Given stock market since 2010 it is well over 100k. Money doubled every ten years in a 401k. It could be a lot.

[Anonymous]

Anonymous wrote:Over 70k pension?? What grade is he? I am 15/10 with 35 yrs in, mine is only 60k or so.

Financial agencies' pay grade for 15 is up to $253K/year, and the pension is better.

[Anonymous]

Anonymous wrote:Over 70k pension?? What grade is he? I am 15/10 with 35 yrs in, mine is only 60k or so.

Lots of federal employees are paid above 15/10. There's SES scale for supervisors. And then the financial regulators like SEC pay on a different higher pay scale top to bottom.

[Anonymous]

There are also some variations on pension formula for certain classes of employees, like law enforcement.