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Change of plan, maxing out my 401k!

February 3, 2010

About two weeks ago, I made yet another adjustment to my 401k contribution level and decided to max it out this year.

It was a very controversial decision (only in my own head of course).  In the end, I chose it because I could always change my mind later.  If I change my mind I can cut my contributions all the way down to 8% and still get full match.  No harm.  It doesn’t work the other way — at some point it becomes mathematically impossible to make up for contributing lower amounts early in the year.

I had a few other reasons. My next big cash goal is a new car.  If something happens and I need to get a new car sooner rather than later, I’ll cut my contributions.   Otherwise, I’ll just wait. Beyond that, we’ll want a house someday, but we have absolutely no timeline for it, so I’m not going to worry about it until we do.  With both of us working, I imagine we would be able to save up for a downpayment within a year.  Or two.

The good news is that I should get the my yearly raise in the next month or two that will help make up for the cut.  There is no speculation on the size of that raise, but I still expect it is coming.

The other good news is that I’ll have more cash in my retirement accounts when I am ready for it!

The bad news is there is now almost a zero chance I can meet all my cash savings goals.  I’m going to proceed anyway, and reevaluate sometime after the wedding.

4 Comments leave one →
  1. February 5, 2010 8:55 am

    I think you’ll be surprised how you’ll still be able to meet many of your cash goals. When I first upped my 401K contributions, even with the raise that I’d just gotten, it decreased my monthly income. This created a false feeling of poverty, and I found it a little easier to cut back or to justify frugaler activities.

    Even if you don’t get the same effect, I’d leave the goals as is for now. At the risk of sounding like a new age The Secret-reading kook, coonsider it a sort of wish to the universe. You might be surprised how the money will turn up.

    • SP permalink*
      February 5, 2010 9:30 am

      Well, so far it hasn’t worked — money has been bleeding out of my accounts! ASnd we still have that pesky honeymoon and wedding to pay for.

      But I think longer term it is the right decision. I have an efund, and my other cash goals are non-urgent.

  2. February 5, 2010 9:03 am

    Congrats on making the full 401(k) contribution. The earliest dollars will go the farthest for your retirement savings. Have you thought about doing some freelancing job or something else to make up a little for those earnings?

    • SP permalink*
      February 5, 2010 9:31 am

      That’s not a bad idea at all. But I don’t think so, not immediately. It isn’t particularly easy for me to drum up freelance work (but I’m sure if I put my mind to it I could!), and I really want to enjoy some free time this year.

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