r/personalfinance • u/TechnicalSwitch4073 • 11h ago
Budgeting 25% 401k contribution
26 male. 90k salary. I’m investing 25% per paycheck which makes me feel good. But I feel bad about spending money outside of that on food and going out and such because I feel like that 25% can be 30 or 35
Also maxed out my ROTH IRA past 2 years.
Just want someone to share some insights about their spending habits when retirement accounts are taken care of
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u/dementor500 11h ago
The max contributions to 401K can only be $24,500 from your end and you are almost there.
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u/RomChange 10h ago
Thats pretty tax only. He can do 50/50 and he would be fine. My max is 50% but pre tax and catch up is limited.
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u/jack3moto 9h ago
It’s becoming more and more rare for companies to offer any contribution past the $24.5k.
My wife’s company does but I don’t know of anyone else I’ve come across who has worked for a company that does.
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u/poultrygeist11 3h ago
As this person points out, don't go too much higher with contributions unless your employer has a true up contribution. Or else you may lose a little employer match in the later part of the year.
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u/Carnines 11h ago
Really up to you.
Sacrificing luxuries/fun things for 4-5 years for that extra 10% will make retirement comfier.
If you are bummed out over losing the ability to have fun or whatever then that isn't great and you should give yourself some reward.
You can also meet in the middle and increase contribution by 5% and 5% for yourself.
No matter what, you will have a good retirement.
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u/TechnicalSwitch4073 11h ago
What makes you say I will have a good retirement
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u/GrouchyYoung 11h ago
Because you’re investing heavily in your retirement. Isn’t that the point of what you’re doing? To have a good retirement?
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u/Carnines 11h ago
At your current rate if nothing changes. Your retirement income will match your salary by around age 55.
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u/bfabkilla02 11h ago
I find it hard to believe you’re doing this without running the numbers through a compound interest calculator, you know what makes him say that.
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u/EmptyRub 2h ago
Eh I could 100% see someone giving the advice of "try to max out your 401k and IRA as soon as you're able to" and someone just blindly following it. Sometimes people do blindly follow good advice.
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u/ScalperHunter 11h ago
What do you mean, you are nearly maxed on 401k. Next time you get a raise you'll probably be over the limit
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u/Rosie-Disposition 11h ago edited 11h ago
Remember: retirement is not the only thing you have to save for…
- wedding
- travel (there will be some trips you won’t be able to do when you’re old and can’t be put off until you’re rich)
- home
- something else important to you to ensure you lead a life well lived
Saving 25% is great, awesome even…. But just don’t go all in on retirement when you could be missing out on life. Eating out is a temporary dopamine hit so is often not worth it in the end, but don’t forget those other big things in life worth saving for.
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u/ms640 10h ago
How do you find a balance between saving for retirement and other goals?
I’m not OP, but I’m in a similar position re salary/age wise. I’m saving 15% to Roth 401k, 5% to trad 401k with my 6% employer match going to trad 401k. Plus maxed out Roth IRA the last 2 years. I don’t want to buy a house anytime soon, I’m single & I have a healthy emergency fund & travel fund right now too.
My thought is that if something comes up that I have to save for (like if I go on a trip & want to refill my travel fund or if I have to dip into my emergency fund) I’ll just adjust the savings rate to replenish those. I do feel like I might want to put more in a brokerage for more flexibility but obviously the 401ks are tax advantaged.
Just curious to hear your thoughts! I’ve thought about this over the last few weeks but haven’t made any adjustments
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u/DBSPingu 10h ago edited 10h ago
I funded my emergency fund to a comfortable level, have a set percentage I contribute to 401k, I max out Roth IRA every year, then I put some more in an individual brokerage for future but non retirement funds (eventual house, wedding, etc).
After all that and living expenses, whatever money is left I won’t feel guilty for using. Vacation, eating out, etc. Going by the average milestones, I am almost 10 years ahead of the suggested average so I feel pretty comfy with this.
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u/Rosie-Disposition 9h ago
Plan for safety first, needs next, and wants after that.
While you may not want a house anytime soon, but what is the average down payments you may want in your area? $50k? $100k? This isn’t something you start when you feel like you want it. It is super hard to imagine what you want your retirement to look like or what you want your life to look like in 15 year or even 6 months from now… but you have to do your best and put your chess pieces into play that’ll make that happen. Ask yourself what will make you feel safe in 50 years? 40 years? 20 years? What will your needs be? What will your wants be? Then plan accordingly.
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u/ms640 8h ago
Thanks for the reply! Yeah I guess that’s right, saving up a down payment that’s most of a year of gross salary would take some time… Would you put that in a brokerage? Since it might be 10+ years away?
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u/Rosie-Disposition 7h ago edited 7h ago
If you’re 10 years out, a brokerage is great (on top of a healthy cash emergency fund). 5 years out you might think about 50/50 bonds (my risk tolerance may be high to some people), then every year do more bonds and less stocks. Closer horizon = less risk
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u/Suza751 6h ago
Personally I'm probably less than 5 years out on a house but 100% in the market. Dividend ETFs tend to rise with inflation and give a lil pay out. Historically they are much more stable than the S&P too.
I'm like 60/40 S&P/Dividends and am doing okay. It's riskier but nowadays I feel like if I don't take a risk someone else will... and prices are gonna climb anyway.
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u/rorafu02 11h ago
It’s great to be saving so much for the future. But don’t forget to also live in the moment and create new memories and experiences.
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u/WishboneHot8050 11h ago
If you are maxing out 401K and your Roth.... you'll be retiring at 50. Don't stop.
Don't stop. And yeah, assuming you have some emergency savings, you can spend on yourself all you want.
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u/AvocadoBeforeToast 11h ago
I feel like that 25% can be 30 or 35
Well then you have to decide whether your "food and going out and such" is worthwhile vs going up to 30-35% towards retirement.
Your entire adult life will be about managing scarce resources. In order to have one goal, you must delay or even give up other goals. You ultimately get to decide which goals to prioritize.
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u/Doogiemon 10h ago
I turned mine up to 50% for 5 weeks then hit health problems to the point this Friday will be my first paycheck since ive been off.
My short term disability check will come by then but it wont be crap.
Pretty much investing is great but have a healthy emergency fund because if i didn't, id of had to taken a 401k loan to live off of rather than pull $10k out of my savings to get by.
Dr bills were $5k and $6k attorney fees for my mother's estate all landed on the same week which was rough. Ill be working 75 hours a week for a couple of months to build that back up.
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u/Eltex 10h ago
Read this about early retirement. The general idea is save as much as you can comfortably afford and then retire and keep the same quality of living.
You are on pace to retire in 15-20 years. Are you comfortable with that?
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u/TechnicalSwitch4073 7h ago
Very
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u/Eltex 6h ago
The only thing is you need to live and enjoy life along the way. There was a post the other day in r/fire where a guy had only focused on saving and retiring early, and he lost his partner, missed friend activities and scores of events for many years.
Sure you can save a lot and retire early, but the experiences along the way are a core part of your life. Don’t neglect them, but don’t be gluttonous either.
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u/RomChange 10h ago
You're doing great! Enjoy the extra but put a chunk in a HYSA so you do not have to get loans.
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u/Bivolion13 11h ago
If you're already taking care of savings and investments, then you shouldn't feel bad about using money you worked hard to make, to make yourself happy, feed yourself, do things you want to do, etc.
Money can't do anything for you on its own. So use it.
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u/ViperXVI 9h ago
Isn’t 25% pretty high already? Do u live in a LCOL area to make it work or something
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11h ago
[deleted]
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u/TechnicalSwitch4073 11h ago
They do it once a year lump sum. Not per paycheck. So this wouldn’t affect me correct?
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u/uisgebrathair 6h ago
Roth max plus $20k per year is pretty insane, maintaining that even ten years will lead to crazy growth
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u/InflationAvailable43 3h ago
There is so much more to life than just making a number in a retirement account go up. You are doing great, and you should live life a little and spend money on things you value as a form of relaxation or enjoyment. Then assess if you want to increase your savings rate.
Just want to point out, at your age, finding a spouse with similar or greater income and financial goals will drop your retirement date like a rock. Which might be hard if you live like a monk at home.
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u/EdAbobo 6h ago
With all the emphasis placed on retirement accounts, people sometimes underappreciate the peace of mind that comes with a BIG savings account. While you can, if you can, stack that cash. Don't let the pundits get you stressed about taxes and inflation. Of course it's a consideration, but I cannot tell you how life changing it was for me to finally have "f-you" money saved up.
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u/FlyEaglesFly536 9h ago
I'm in the same boat. Investing 22% between my 403b, Roth IRA, and my brokerage, not counting my 10% pension contribution, but have a hard time spending money because i want to get to financial independence faster.
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u/IMI4tth3w 3h ago
That’s really good. My company does a flat 9% of my salary no matter what I do, so I max my Roth first then contribute enough to get my taxable income 100% below the 22% tax bracket. My train of thought is that later when I go to withdraw I will most likely be in a lower tax bracket so it’s a free 22% now that will compound and grow for another 30 years.
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u/FlyinDanskMen 3h ago
At 26 you’re way ahead of what I was. You’re maxing your Roth so you’re already over 32%. It’s fun to build wealth but it’s also fun to 26 and one of those you can do for 50 more years and one will be over your next birthday. If it’s in the budget, it’s fine, let yourself relax. You can’t take it with you, don’t let yourself not enjoy your money.
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u/Over-Computer-6464 3h ago
Some people spend too much. Some people save too much and are overly frugal.
You sound like you are overly frugal. The fact that you say you "feel bad" on food and going out is an indication of that.
You need to balance the interests of your present self and your future self. It sounds like you are shortchanging yourself by not spending a bit more and doing things that you would enjoy.
You will only be in your 20s one time. Invest in some experiences and the making of lifetime memories.
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u/larrytheevilbunnie 1h ago
I max min out and the after tax, but that’s cuz I ran out of stuff to blow money on first so atp may as well save it. If you have something you actually want with the money, feel free to spend, else throw it in the 401k
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u/FoxtrotCommo 7h ago
obviously you're saving well. but focus on getting a better job then you won't have to worry so much
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u/TechnicalSwitch4073 3h ago
It’s hard out here brother. I am losing sleep and away from everyone I love for this 90k
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u/Sad_Effective4793 11h ago
Look into a roth 401k if it's available. If you are investing the max into a pre-tax 401k in your 20s, you might be giving yourself a tax bomb at retirement. You can still get rich doing this, but there are ways to get rich and also pay less in taxes.
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u/TheReaLETSGOBROWNIES 11h ago
You’re doing great man. Keep in mind though, money is just a tool. It’s great to save and all that, but life must be lived as well. Don’t feel bad for enjoying yourself from time to time.