Should I stop contributing to my 401(k) when I reach the limit of my employer's match?

Asked by John

3 Answers

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Good afternoon John, and thank you for your question. Ideally you want to put a way as much as possible in to a 401k account. It offers multiple benefits:
Tax differed Growth
Immediate reduction of your income for tax purposes.

However you also want to make sure that you have an emergency fund that has about 3-6 month worth of expenses, once that is done and if your income allows, you might want to consider putting $5k a way in to a Roth IRA as it growth Tax free, then if you are able to contribute extra you are able to go back to your 401k and add there. Many 401k plans now offer tax differed options or a Roth 401k option which growth Tax Free.
So the bottom line is, putting in the max that would get matched is a no brainier if you can afford it, then make sure you have enough in the emergency account, once that is done and you have additional money to put a way for retirement I would definitely recommend that you consider adding more to your 401k. I would also recommend that you seek and start building a relationship with a fee based planner to make sure your money work as hard as you do and you are maximizing your growth and trying to minimize the losses.
I hope this helps
Please let me know if you have any questions
Sincerely
Michael
www.VisionaryWealthMgmt.com | 01.08.14 @ 19:56
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 12:33
Answered by Kim Miller, CFP®PRO+ in Redmond, WA
I always advise 401k participants to max fund their account regardless of the match level. This means $17,500 per year if you are under 50 and $23,000 if you are 50 or older. If you have a Roth option (post-tax) you can usually split your contribution between pre-tax and post-tax - the tax savings on the pre-tax side will at least partly cover the taxes you have to pay on the post-tax side. Keep in mind that any contributions you make post tax will come out of the plan tax-free at retirement age. Good luck! | 10.01.14 @ 22:20
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 12:33
Answered by Timothy Grieco, Insurance Agent in Glendale, AZ
Hello John,

Thank you for your question and like Michael said in his response you want to put away as much as possible for retirement;

Do you personally think taxes be higher in future? 401 k's and IRA's are a great financial vehicle only if taxes go down in the future. If you are reaching your max on your 401 K then I would suggest investigating an alternative solution such as a properly structured Index Universal Life Insurance policy.

Here are the benefits
1. IRS allows Unlimited Contributions - limitation set by insurance companies
2. Tax deferred growth - zero market risk
3. Tax free distribution
4. Liquidity - use & control of money
5. No means testing Social Security

I hope this helped you .

Best regards,

Tim | 05.05.15 @ 22:01
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 12:33
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Answered by

Kim Miller
Kim Miller, CFP®PRO+ in Redmond, WA

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