Who contributes max to 401k?

[DebbieL]

They are starting the Canadian version of a ROTH next year actually. It will be the TFSA (tax free savings account) and will be limited to $5000/year (for now). You will be able to withdraw any of that money for any reason (penalty free) and the contribution room will be there for you to recontribute (eg. you take out $10000 for whatever reason - there is $10000 contribution room made available in the account). I personally think it is a great tool for those that are maxing out on their RRSP contributions already (few and far between btw).

I cannot say why, but RRSPs are severely underutilized here in Canada. The majority don't seem to even contribute, and those that do are not usually maxing out. Yes, you would think that it must be a slam dunk considering our taxes, but it isn't. Most people are not planning very well for retirement.

[KellyB]

I cannot say why, but RRSPs are severely underutilized here in Canada. The majority don't seem to even contribute, and those that do are not usually maxing out. Yes, you would think that it must be a slam dunk considering our taxes, but it isn't. Most people are not planning very well for retirement.[/QUOTE]

So then "not saving enough" is not just an American thing I guess! Good to kno, but sad also.

[disneysteve]

I cannot say why, but RRSPs are severely underutilized here in Canada. The majority don't seem to even contribute, and those that do are not usually maxing out.

Same reason that 401k, 403b and Roths are underutilized in the US. People don't educate themselves on the tremendous benefits of participation. They live for today and don't worry about tomorrow.

[Merch]

I contribute the max to the 401(k) and actually make too much to add to Roth.

I am debating on adding to my IRA or just putting the savings in my taxable accounts. I'll probably just put it in taxable in low expense and turnover funds.

[Daylily]

I just took the plunge. I adjusted my payroll deduction tonight so that I'll hit the max this year. I may have to tweak the percent slightly at the end of the year so that I don't go over or under the $15500 (depends on what my bonus will be). I set it for 40% of the contribution going to regular 401(k) and 60% to the Roth 401(k).

Thanks everyone for responding - it really inspired me to go for the max.

[Broken Arrow]

Congrats Daylily!

And welcome aboard, Merch.

[danwas44]

Max out as much as possible

I just turned 50 this past year and I now max out at $20,500 per year ($15,500 + $5000 catchup). The 20,500 is the amount I personally contribute. My company is very generous too, and they match my first 7% of my salary, and they also give me profit sharing of 10% of my salary. The 7% match and profit sharing is ABOVE the $20,500. You should know that the IRS limits the total I can put in my 401k to $50,500 per year (it's in Section 415 of the Internal Revenue Service Codes. If you are less than 50 years old, the max limit is $45,500.

My advice is max out your personal contributions in your 401k and then contribute to either a Roth or a traditional IRA.

Dan

[disneysteve]

I just took the plunge. I adjusted my payroll deduction tonight so that I'll hit the max this year. I may have to tweak the percent slightly at the end of the year so that I don't go over or under the $15500

Won't the plan automatically stop the contributions so you don't exceed the max allowed. Seems like the system should somehow be set up to avoid that happening.

Congrats on maxing your plan!

[danwas44]

Yes, the plan will stop u

Yes, the plan will stop you from going beyond the $15,500 or the $20,500 depending on your age. It will also stop your from going over the $45,500 or $50,500 too. If you are in danger of going over the $45,500 limit before the end of the year (which is unlikely, but higer salaried employees may), they need to be careful not to hit the $45,500 limit before their last pay checks of the year (cause they risk losing company match).
Dan

[Merch]

Thanks BA.

I saw your post on a blog about a forum. I didn't even know this site had one.

[Broken Arrow]

Thanks BA.

I saw your post on a blog about a forum. I didn't even know this site had one.

I didn't realize that you didn't realize! Otherwise, I would've mentioned sooner! You've been missing out. Although something tells me things are about to get a bit more interesting since I believe you're into the er more active side of investing and trading.

[Daylily]

Won't the plan automatically stop the contributions so you don't exceed the max allowed. Seems like the system should somehow be set up to avoid that happening.

Congrats on maxing your plan!

Yes the plan will stop taking the deduction from my payroll when I hit the IRS max. However, suppose I hit the max early - say in October. Technically, I wouldn't be contributing in November and December. In that case, I wouldn't get the 3% of salary contribution from the employer for those months.

I have my contribution percent set high right now so that that percent will come out of my upcoming bonus. After that, I'll adjust the percent downward to even it out for the rest of the year and so that I hit the IRS max on my last paycheck for the year.

[FrugalTexan75]

I'd love to max out my 401 k contributions . . . but like someone else said up thread, maxing out my 401k would leave me with barely enough money to pay rent and eat!

Right now I contribute 4%, and get my employer's match of 4%. I also contribute $75/mo to my Roth. I'd like to up both of those contributions, but I also want to finish out a number of savings goals - EF, Car replacement and house downpayment. Once those goals are acheived, then I will be looking at upping my contributions.

[MonkeyMama]

That's definitely a nice feature, but I don't think it's very common. At most companies you have to be very careful to hit the max at the end of the year.

It's kinda like The Price is Right where you need to be the closest without going over.

It's actually quite common with small employers. Like under 100 employees.

Small employers are such a different ballgame.

Likewise, I wanted to add, that small employers don't have the means or knowledge usually to keep an eagle eye on your contributions. Likewise, small employers are less likely to notice very timely if you over contribute.

[sweeps]

It's actually quite common with small employers. Like under 100 employees.

Small employers are such a different ballgame.

Likewise, I wanted to add, that small employers don't have the means or knowledge usually to keep an eagle eye on your contributions. Likewise, small employers are less likely to notice very timely if you over contribute.

Hmm, good to know. I've only worked for large employers so I'd never heard of such a thing. It surprises me actually because I would think small employers wouldn't have the time to deal with 401k stuff on their own. I would think they would be using a 3rd-party 401k administrator -- and such a company would have the technology to automate contribution matching.