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Max out 401K in last year?
Old 11-23-2021, 07:52 AM   #1
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Max out 401K in last year?

I am planning to retire at some point next year. Did you max out your retirement 401K your last year or only fund up to the match to have the excess cash?



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Old 11-23-2021, 07:58 AM   #2
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Originally Posted by ecowtent View Post
I am planning to retire at some point next year. Did you max out your retirement 401K your last year or only fund up to the match to have the excess cash?



M

We both maxed out our 401k contributions the years we retired. I retired April 1, 2013, so didn’t have much of a paycheck that year. DW retired later in the year so it was a normal paycheck for her. Neither of us has yet to touch our retirement accounts since we’ve had plenty in our taxable accounts. It pays to save and invest in both taxable and retirement accounts.
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Old 11-23-2021, 08:08 AM   #3
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Originally Posted by ecowtent View Post
I am planning to retire at some point next year. Did you max out your retirement 401K your last year or only fund up to the match to have the excess cash?

M
The best course depends on your age and account mix. For an early retiree, if you have over-saved in tax deferred (I did) you might want to just grab the match and keep the rest in taxable for pre-age-59.5 spending, or put it in a Roth. If you are already 59.5, you can put it in the 401(k), a Roth or taxable depending on your current and future tax situation.

And don't forget 401(k) withdrawals (not just the proceeds) are taxed as ordinary income. Capital gains currently have much better marginal rates if you are middle to high income, and principal is not taxed - giving you a lot more flexibility to manage tax brackets and cliffs in ER.
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Max out 401K in last year?
Old 11-23-2021, 08:10 AM   #4
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Max out 401K in last year?

I contributed the maximum to my 403(b) account every year. There was no match. In later years while still working the rules changed such that one could also contribute to a 457 (deferred compensation) account and I did that too (also maximum w/no match).

[ADDED] The 457 wasn’t subject to a 59-1/2 age requirement for penalty-free withdrawal, only separation from service so it could have been used as a cushion. I was 53 when I left.
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Old 11-23-2021, 08:12 AM   #5
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DW and I both worked in the same company. We both resigned and set our last date 1/3/2019. For that year, we were able to contribute 401K in full amount from the vacation dates accrued, and our eligible annual bonus.

Since the company provide true-up 401K match after yearend, so we also received a check of the match in 2020.
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Old 11-23-2021, 08:13 AM   #6
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I am retiring end March and will be juicing my contribution rate for 2022 to 40% in order to achieve a maximum contribution for the year. I expect my federal tax bracket to be 12% in retirement (beyond next year) versus 22% in 2022, so the extra contributions will generate a 10% tax savings compared to taking the income next year.
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Old 11-23-2021, 08:18 AM   #7
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At retirement I had many hours of vacation in my account and employer bought it all back. Used those funds to max out 457 and 403(b) accounts. Stashed another $7k in my IRA.

Used the remainder to fund a kitchen remodel.
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Old 11-23-2021, 09:48 AM   #8
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I only worked 1-2 days a week for the last couple of years that I worked. And stashed as much as I could in my 401k even though I was getting the match anyway. Just by habit I guess. DW was still working then so our tax rate was higher than minimum. So it probably made sense to keep some cash out even though I had about 5 years or more cash at the time.

I liked to use my 410k partially as a deterrent to over spending.
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Old 11-23-2021, 10:41 AM   #9
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I funded all my deferred accounts to the max up to the end, but I also had plenty in a taxable account too. So it depends on your situation.
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Old 11-23-2021, 11:17 AM   #10
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I maxed my 401K as I already have my cash requirement set aside.
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Old 11-23-2021, 12:02 PM   #11
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In my last (1/2) year, I only contributed to the match. I was building cash for the first year and half living expenses (till the end of the first tax year FIREd so I can then realize any income with tax efficiency in mind).
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Old 11-23-2021, 01:48 PM   #12
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my plan allowed for employer matching trueup - so I did max it out completely before leaving. Its definitely worth the top-off in order to get the tax deferral.
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Old 11-23-2021, 02:07 PM   #13
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I maxed for several years leading to ER. The year I retired I wasn't sure exactly when I'd be leaving, so I amped up my contributions to as much as I technically could, so that I'd be sure to clear the full year contribution by the end of the first quarter.
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Old 11-23-2021, 05:52 PM   #14
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I maxed out until I retired, which was 6 weeks before turning 59.5.
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