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How much retirement?

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  • How much retirement?

    Just switched jobs. The new job will allow me to contribute up to 18k with 18k match into their 401k. However, the issue is that because I am only working with them for 5/12 months of 2017, my base salary is only eligible to get $7500 as the "free match". I can salary reduce to do the full contribution and full match. And to throw a further wrench in, only Nov and Dec pay will be eligible to contribute so the entire my portion of $28.5k will be split between my Nov and Dec pay (I should note that the remainder will not allow me to float my monthly bills and I would either need to aggressively save in Sept/October or draw on savings). They will also allow me to customize the amount I would like to put into the 401k. (We are in the 33% tax bracket; no state income tax)

    I have about $16K contributed from my work in first half of 2017 to my SEP IRA. (I was contributing 30K annually before so the 7.5 + 7.5 free match will be a little more than what I was already doing)


    I guess my question is-

    How much is a pretax/tax deferred money worth? Should I stress the whole system to fully put away over $50k this year? Do a smaller sum?

    This extra toward retirement will mean we aren't funding other savings goals we had planned on doing.


    Thanks for your advice!!

  • #2
    This is a very personal decision.  You may be set up well for retirement and your other saving goals are your retirement home down payment, or your kids' 529 plans - both legitimate savings goals of course.  Clearly I'd favor not superfunding the 401k in that scenario.  I would first look at what allows you to achieve your goals and prioritize those goals.  Obviously, the pre-tax money can be worth a lot - especially if you're thinking about retiring early and doing a Roth conversion ladder.  You pay on the effective when coming out and save on the margin going in.  Do you think you'll be taxed at a 33% effective rate?  It's almost assuredly a win.  But despite those benefits, if it requires you to make substantial sacrifices somewhere else then this is where priorities come into play.


    • #3
      Very difficult question to answer without knowing a lot more about goals, resources, plans, tax brackets, savings, age, etc.  Different people have different priorities and plans.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


      • #4

        This extra toward retirement will mean we aren’t funding other savings goals we had planned on doing.
        Click to expand...

        I'd fund the other savings goals. Sounds like a lot of work, perhaps it'd get you some slight advantage, but from my perspective, and without knowing all the details, at least you're saving.