MT: When do you decide to max out your 401k?

I put a lot of money into a 401K, basically max it out, but sometimes I wonder...the deferral is nice, but you end up paying cap gains at ordinary rates.

quote:

---

but sometimes I wonder...the deferral is nice, but you end up paying cap gains at ordinary rates

---

And when you are retired you may be in a lower tax bracket than working and/or in a tax friendly state with high retirement income exclusions. In taxable, you will pay your highest marginal rate in the year you earned the money, then ongoing dividend and/or cap gains rates if you sell, etc. Planning isn't easy. If you go with tax efficient or tax managed investments in taxable it's not the worst thing in the world, it really depends on your future income and ongoing tax situation.

Thanks for the response. For this year alone I cannot foresee an expense coming up that will hurt me beyond repair. It is more of a fear for me putting that much money aside, simply because it is uncharted territory for me. In reality, I really do not have any better ideas to do with it for the time being.

quote:

---

My company matches us(40%) all the way up to the max

---

I think at that point, I wouldn't hesitate to max it out. I will bite the bullet tomorrow and increase my contribution for the year and see how things stand in the spring.

One way to eventually max out your 401k is to increase your contributions by 1 to 2% every year at annual raise time (assuming you get one). Naturally this works better if your young and is relatively painless. Some plans can be set up to do this automatically.