#RetirementPlanning #401kContributions #FinancialFreedom
Hey there! π So, you’re gearing up to retire at the end of March next year, just after you hit the big 5-5. That’s super exciting! π But it sounds like you’re pondering a big financial question: Should you max out your 401k contributions during those last three months? Let’s dive into that!
Hereβs the scoop:
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Maxing Out Contributions: If your plan lets you contribute up to 75% of your gross income, that’s a fantastic opportunity to really boost your retirement savings. Think about it: those last three months could significantly add to your nest egg!
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Tax Advantages: By maximizing those contributions now, you may also lower your current taxable income. This can be a strategic move, as it’ll give you a little more breathing room when tax season rolls around.
- Withdrawal Timing: Since you’re planning your retirement soon, consider how you’ll withdraw from your 401k later. Having a larger amount saved can provide more options for your retirement lifestyle. πΉ
However, there are some potential pain points to keep in mind:
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Cash Flow Needs: If you max out your contributions, ensure you still have enough cash flow for your immediate needs. Retirement is about enjoying life, right? πΈ
- Investment Diversification: Consider if your 401k is your only retirement savings vehicle. Having a balanced portfolio across different investment types can reduce risk down the line.
Possible Solutions:
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Create a Budget: Before committing, take a close look at your monthly expenses. Can you comfortably maintain your lifestyle with a substantial deduction from your paycheck?
- Consult a Financial Advisor: It might be helpful to chat with someone who can provide personalized insights based on your entire financial situation. They can help you weigh your current financial needs against your long-term retirement goals.
Ultimately, whether you decide to max out your contributions or not should align with your comfort level and financial goals. What do you think about this strategy? Have any of you made similar decisions before retirement? Share your experiences or tips below! Let’s discuss! π
Can you afford to live of the remainder?
What other investment planning/actions do you? Do you need to keep your taxable income low to qualify for this year’s RothIRA? Do you have sufficient investments to retire (25x your annual budget or there abouts)?
If you do not plan on taking a distribution right away, I would.
Our final years before retiring, we maxed the 401ks and added the catchup amount. No regrets.
The benefits of traditional tax-deferment are probably not going to be very significant if you only have income for 3 months. (Your income for 2025 will be low and therefore your marginal tax rate will also be low). You could pencil it out if you want but it probably doesn’t make a big difference.
If your plan allows a Roth 401k contribution, THAT may be something you want to look into. 2025 would be a great year for you to do Roth contributions since your tax rate will be low.
30K this year and another 30K next year, go for it
I am retiring in March and I plan to do it. I suggest it only if you can afford it. Donβt rob Peter to pay Paul.
Start piling up cash. You will need it.