How much would you contribute to your 401k/Roth if there was no limit?

[sweeps]

This is a followup to the thread about who maxes out their 401k. How much would you contribute to your 401k (or Roth if you don't have a 401k) if there was no contribution limit?

I think many people think of a limit as a negative, but I would argue in some ways it's a positive. A limit can act as a goal to people. I believe a lot of people would not contribute as much as they do if it weren't for this "goal".

[Broken Arrow]

Actually, my employer does not have a limit to our 401k contributions, so I do everything I can to max it and keep it that way.

[maat55]

15% then payoff the mortgage, after all debts and mortgage are payed, then back to 401k and roth heavily.

[safari]

I'd contribute up to my company's match into my 401(k) account and then direct deposit my paychecks into a Roth account. I will then transfer out money into a checking account when I need to pay bills. Since there is no penalty on withdrawing money from a Roth account, I can always use that money for immediate/short/long term purposes. Within my Roth account I'll have a money market, CD's, mutual funds and stocks.

[disneysteve]

Actually, my employer does not have a limit to our 401k contributions

The government sets the limit at $15,500 currently.

Personally, I don't have a 401k. I've only got a Roth. I would gladly put in at least $15,000 if I wasn't stuck with the current $5,000 limit.

My wife does have a 401k. She is limited to 50% of her income. If there was no limit, we would have her put it 100% of her income.

[Broken Arrow]

The government sets the limit at $15,500 currently.

Yes, that's the limit I am currently contributing to... the legal limit eligible for the tax shelter. Within that limit, my employer itself does not have a % limit of my gross that they will match.

Sorry if I wasn't clear.

[LivingAlmostLarge]

25% of our income? We would have not bought such an expensive home and instead stuff 25% away into a 401k and then maxed out the Roth IRA. It would decrease our AGI!

[MonkeyMama]

Well, it depends. From a lower income perspective, or people who have trouble saving, it sets a goal.

For others, it limits how much you can put into tax-deferred investments. Today I wouldn't change a thing, and it is more of a goal setting for me. BUT when my spouse returns to work, I would love to put his entire income in a 401k or IRA. Assuming he worked part time tomorrow we would want to contribute around 50% of our income to retirement. Today we are hitting 25% by maxing everything out.

Likewise, most of my tax clients are good savers and would love to put much more in. So from my perspective I mostly see the limits as negative. The more we can tax shelter, the better!!

A 401k would mean approx. $15k tax-free income. Two 401ks would be $30k tax-free income. Of course I want more tax-free income!

[Caoineag]

As someone who doesn't have access to a 401(k), I would love it if the Roth Limits were raised significantly. Say $10k? But the current limits do set good goals. I just need to save more than those goals in the long run.

[disneysteve]

But the current limits do set good goals. I just need to save more than those goals in the long run.

I think that is the downside of the limits. A lot of people probably think that as long as they are maxing the account to the limit, they will have enough to retire. That may be a dangerous assumption, particularly for higher wage earners. You can't just assume that meeting those limits will meet your retirement needs.

[MonkeyMama]

As someone who doesn't have access to a 401(k), I would love it if the Roth Limits were raised significantly. Say $10k? But the current limits do set good goals. I just need to save more than those goals in the long run.

Very much agreed.

If I didn't have a spouse and an employer profit sharing plan, all I Could put away tax deferred would be $5k/year (IRA). & that was only $2k/year a few years ago really.

It just happens to be for now the $10k for our 2 IRAs is about 15% income. But that is really just a fluke. I am sure few could say the amount they can put away is the amount they should put away.

The percent that people can really put away tax-deferred varies so much in this regard. Depends if you have an employer plan and what the limits are. Depends on your income. Depends if you are married. On and on and on...

[KellyB]

I think that is the downside of the limits. A lot of people probably think that as long as they are maxing the account to the limit, they will have enough to retire. That may be a dangerous assumption, particularly for higher wage earners. You can't just assume that meeting those limits will meet your retirement needs.

Steve, you just nailed what I am going through currently. I had run the numbers, and thought I was doing great by maxing out 401k and Roth for my partner and me. We just met with our Financial Advisor the other night and when he ran the scenarios, figured out that we will not be able to retire as early as we had hoped (age 58 and 60, 11 years from now). We will each have to work until age 62. Still early, but a surprise as I thought we were really socking it away (and really can't save any more at this time due to 3 sons in or nearing college). Disappointing, but at least we found out now. Retirement is costly people, and with folks living longer and retiring earlier there are more years to cover (we are trying to cover til age 95). Sigh. Back to work!

PS - I'd be interested to know if anyone else has had these scenarios run and determined a retirement goal age and $ nuimber. And what assuptions did you use (as far as monthly expenses, living to what age, etc.) For expenses we used $6150/month and came up short at age 87/89. At $5150 we were ok til 95, but the advisor said that monthly expense was probably too low.

[LivingAlmostLarge]

Kelly, problem is how long have you been maxing out retirement for? 10 years? 20 years? If you are 20 and sock it away $25k for 20 years, I think you'll be a better position to retire early. Plus you'll be used to living on less.

[danwas44]

The last big push

I just turned 50 this year and just completed paying for 2 college tuitions. I decided it was time to get really really serious about retirement, so I did a complete financial checkup (which brought me to this site!). Anyway, I want to retire at 60. I have a significant amount in my retirment savings and I thought I'd be okay. I went through an exhaustive process to really understand my current expenses (mandatory and nice to have). I also calculated when my mortgage would be paid etc so I'd know exactly what I'll need in retirement (I added in 3K/month for 3 months to head south for the winter . After I knew my needs in retirment, I went to the Fidelity.com retirement planner and plugged everthing in (don't forget health care expenses).

Wow! I'm going to need a ton of cash to sustain me and my wife with a reasonable cashflow. My options are to continue to work (maybe a less stressful job) or die early. Guess I'll opt for a less stressful job.

As was stated on the board earlier, it's really expensive to retire comfortably. If you are young, save, save, save!!!

Dan

[Broken Arrow]

Wow! I'm going to need a ton of cash to sustain me and my wife with a reasonable cashflow. My options are to continue to work (maybe a less stressful job) or die early. Guess I'll opt for a less stressful job.

Good choice! I opt for that as well!