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January 08, 2010


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Pretty good book (I read it too).

1.) I do my taxes online with Taxact (free, no income limit, and with free efile for fed. taxes).
2.) I do this weekly and then some (really probably twice a week)...
3.) I'm going to start for the first time. In the 10 years that I've had a 401k, I've only rebalanced it once. After the down turn and now the partial return of the market, this might be the year that I start to implement this practice.
4.) 401k is already max, and I should max out my roth (I don't max out my stay-at-home wife's roth yet though)...
..) I may increase my contribution to my kids 529 plans.

Speaking of at work retirement plans, there's something I've always wondered about 401k contributions. I see people all over the PF blogs talking about "maxing out" their 401k (and often their Roth as well). What does that mean exactly? The IRS limit is $16,500/yr. Are all of you who report maxing out both a Roth and a 401k really putting over $21,000 into retirement accounts per year? When FMF says he maxes it out, it wouldn't surprise me if he means the IRS max. But it seems like many people saying they max their 401k don't seem to have the income to pull off $21.5k/yr (based on their other comments).

So, do people have different definitions of "max out" in reference to 401k accounts? Is it the maximum amount the employer will match? Is it a limit set by the employer? I checked with my 401k admin, and she says the max on mine is the IRS max. Do other employers enforce a lower limit? Or are some contributing the IRS max in one 401k because their spouse does not contribute to one, effectively contributing $8250 per spouse/yr (which seems much more reasonable)?

Ok maybe that's too off topic and should wait for a 401k-related discussion, but it is something I've always been curious about. I'm fairly confident I'm doing the right thing as far as finances go, but when I see all these "I've maxed out my 401k" statements it sometimes makes me wonder if I missed something.

DCS --

Yes, when I say I'm maxing out my 401k I mean that I'm putting in the most the IRS will let me.

I'm guessing that some others might mean that they're putting in the amount needed to get the full employer match, but I'll let them comment on that.

One other point of context: while the IRS limit in 2010 is indeed $16.5k, depending on how many high-wage people vs. low-salary workers are contributing to a given company's 401k, the IRS can ratchet down how much any one can contribute.

I put the maximum my employer will match into my 401k (6%), but I always refer to this as "maximum matched" or "the max amount my employer will match". I thought that the term "maxing out" a 401k literally meant the IRS maximum. We cannot afford to do that but if we made 6 figures, we would be able to pull it off easily. I don't know if everyone uses the same definitions, but that's how I interpret it.

To the post:
1) I usually start getting our tax stuff together at the end of January or the beginning of February when the paperwork starts arriving.
2) I check out our investments once every week or two.
3) My 401k and our Roth IRA are both invested in target date mutual funds, so I leave them alone (yes, yes, I'm lazy and unsure of myself...whatever). lol. :P
4) I contribute the maximum my employer will match to my 401k (6%), but we only have been funding one Roth IRA. We are going to attempt to fully fund another Roth IRA this year after my husband gets out of graduate school, so we will not be raising contributions into my 401k.

1) I'm self-employed so taxes are on definitely high on my list. Mostly getting organized though I do need to fill out my sales tax return (most of my sales are out of state and so I don't have to file much for those) and estimated taxes.

2) Do that frequently.

3) Haven't been investing long enough to need to do so yet.

4) I'm already contributing as much as I can afford but of course I don't get employer matching so it's a little harder.

Ok thanks commenters, especially MrAtoZ. That clears things up a little, knowing that the "max" someone can contribute might not be the absolute IRS max, but one that can vary from employer to employer.

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