Not Maxing Out Your 401k
There is a lot of confusion out there as to what “maxing out” your 401k plan really means. I’ve met plenty of people who believed they were “maxing out” their plans because they were contributing the 5% needed to get full employer matching by their company.
They were leaving a lot of tax-free money on the table. In 2017, you can defer $18,000 of your salary to a 401k plan and $24,000 if you’re age 50 or older, not including the company match. And if you’re married and your spouse works, you can each contribute that much.
If you’re young, single or earn a modest income, it might be a stretch to contribute $18,000 per year. But if you’re in a higher tax bracket, you should make this a priority, as nearly 40 cents of every dollar you earn goes to the tax man.
And if you’re married and both spouses are working, it should definitely be doable. If it’s not … again, you might really want to re-evaluate your priorities.