How many in pre-retirement make catch-up contributions to 401K

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There are changes coming for 401K plans because of recent federal tax law changes. One involves the catch-up contribution allowed for employees in pre-retirement. But the statistics are that less than 10% of eligible employees contribute anything to the catch-up portion of a 401K.

I maxed everything I could in my 401K.

Ii n 2023 I believe I will be considered an HCE and can only contribute 7% to the regular portion of my 401K.
 
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very few. Another bonus for the well off.
I'd say it is more than a very few who participate and certainly not a 'bonus', merely an incentive to save for retirement and an opportunity to defer taxes that will be paid at some point. It is a no brainer if one can. Also, given the burden on those who do actually pay taxes, it pales in comparison to 'bonuses' provided to others... I'm off my soapbox now, and IBTL!

Merry Christmas all!
 

Astro14

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very few. Another bonus for the well off those with financial discipline
Fixed it for you.

You presume people with high incomes are good savers. Not always true.

You presume those with wealth got it from high income. Also, not true.

It takes decades to build wealth - and it can be done on a modest income.

If you understand money and investing.

Jealousy, envy, and “sour grapes” will not accomplish anything.

Anyone, and I mean anyone, can achieve wealth.

But it comes through discipline, applied over decades.

Class envy, and excuses, will never work.

Forty years ago, my Dad told me, “People don’t plan to fail.”

“But they do fail to plan”
 
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Donald

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So a question of fairness comes into play with the 401K and HCE. The 401K program is normally open to all employees but the ones earning six figures seem to save at higher percentage than the low paid workers. Do you penalize the six figure salary workers because the ones earning a lower salary are not saving very much (percentage)? 401K has no provisions that are tilted towards the high income earners.
 

Donald

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Max out 401k, after 50 catch up as well as my HSA. Doesn't leave a very big paycheck to live on but I run a debt free life so I don't need much. Believe in the power of cash not credit.
In order to be eligible for a HSA you must have a high deductible medical plan. Why not go with a medical plan with decent coverage and skip the HSA.
 
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Not eligible to make catch up contributions but max out 2 401ks (ROTH), two ROTH IRAs, deductible contributions to 529s and a family HSA. As a couple have said, not easy but the payoff will be there later.
 
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Fixed it for you.

You presume people with high incomes are good savers. Not always true.

You presume those with wealth got it from high income. Also, not true.

It takes decades to build wealth - and it can be done on a modest income.

If you understand money and investing.

Jealousy, envy, and “sour grapes” will not accomplish anything.

Anyone, and I mean anyone, can achieve wealth.

But it comes through discipline, applied over decades.

Class envy, and excuses,
will never work.

Forty years ago, my Dad told me, “People don’t plant to fail.”

“But they do fail to plan”
Never said it’s a bad idea. Simply said if you’re not saving for the future to begin with, the government giving you an incentive to save MORE isn’t going to encourage those not inclined to save, to save more. You’re either disciplined to look and save toward the future or you’re not, if the stats show less than 10% you can bet it’s on the lower end.
 

Sam_Julier

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I have contributed the maximum allowed to every retirement account available to us since my first W2 and when the IRA was introduced.

The concept of long term total return, compounding and the time value of money was pounded into me by my Dad and Grandfather
 
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In order to be eligible for a HSA you must have a high deductible medical plan. Why not go with a medical plan with decent coverage and skip the HSA.
For us, family coverage is $3,300 in premiums more for a "decent" (really good) plan then a HDHP, plus company contribution to HSA in HDHP. Other benefit is HSA is yours to use whenever versus FSA account that needs to be used by year end. Opting for the HDHP with HSA created the ability to remove taxable income today, so nice perk.

Granted, its about where we want the risk, high out of pocket if something happens with lower premiums, or higher premiums with copays.
 

Astro14

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Never said it’s a bad idea. Simply said if you’re not saving for the future to begin with, the government giving you an incentive to save MORE isn’t going to encourage those not inclined to save, to save more. You’re either disciplined to look and save toward the future or you’re not, if the stats show less than 10% you can bet it’s on the lower end.
I wasn’t replying to you, as I quoted someone else.

To your point, people without financial discipline fail. We agree on that.

Externally imposed discipline can mitigate people‘s bad tendencies.

If auto sign up is required, then people have to take action to stop contributing. The very people for whom discipline is an issue are also not likely to take steps to opt out, right?
 
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I wasn’t replying to you, as I quoted someone else.

To your point, people without financial discipline fail. We agree on that.

Externally imposed discipline can mitigate people‘s bad tendencies.

If auto sign up is required, then people have to take action to stop contributing. The very people for whom discipline is an issue are also not likely to take steps to opt out, right?
I fear that people who are “disciplined to not save” will be the first to exploit ways to opt out of saving. When you perceive yourself living paycheck to paycheck that line item deduction on your pay stub for a savings account you didn’t seek out yourself will be the first to go. Not to mention dipping into it regardless of the penalty if things get tight. I dunno Astro, I think there’s a vast portion of the population that thinks Social Security will cover everything, while they work off the books for years. Our government kicks so many cans down the road is it a surprise that the average citizen follows suit?
 
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I opened a "Safe Harbor" 401k at my business.
Allows for significant catch up contributions but mandates profit sharing.
 

Astro14

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As a data point, my plan has both 401(k) contributions but is covered by 415(c) limits. I hit the max dollar limit in August. The company is still required to make their contributions, which spill over into a retirement health account.

So, for me:
max number - yes
catch up - yes
additional savings - yes

But here is the critical point: the preponderance of my portfolio comes from the growth of very modest dollar contributions invested decades ago.

Sure, I max it out now, as I have for a very long time. But the big investment numbers now are meaningless because this portfolio success is result of the actions taken in the early 1990s, when carving out $166/month from the budget for a family of four, living on one modest income, was hard, and took sacrifice.
 
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Exactly. There’s always going to be a sliver of the population doing NOW what you did then. The rest will be crying the blues years from now just as they are doing today. They’ll never be enough life boats for everyone. It’s just the way it is. And even if there were, there’s a lot of folks who never will see the need for one..until
 
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