Investing, Retirement 

Contributing 90% Of My November Salary to 401(k)

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Oh yeah, you read that correctly… I will be contributing the maximum percentage allowed by my employer, 90% (my employer’s max), in the month of November, in an attempt to get my aggregate 401(k) contributions for 2006 as close to the maximum as possible. According to my last paystub from my former employer and my last paystub from my current employer, I’ve contributed a total of $4,352.09 to both 401(k) plans, which is $10,647.91 less than the 401(k) maximum contribution of $15,000 per year for 2006.

Why am I doing this? I want to reduce my taxes and as someone with no children, very little in the way of debt (only student loans and a mortgage), these are the years I want to try to put as much away for the future as possible before other financial demands come along. Right now I view the income from this site as supplemental and I’ve made a point of trying to use the extra income to maximize my contributions.

On the retirement contribution front, I’ve already contributed the maximum to my Roth IRA, I’ll be contributing the maximum to my SEP-IRA (20% of self-employment income) once I finish my taxes, and I’ll try to max out the 401(k) with this little scary 90% maneuver. Before anyone starts to warn me about putting too much away and not enjoying life, don’t worry, I enjoy life plenty and I’m not one of those Extreme Savers you read about on Yahoo Finance. I save when it’s sensible and enjoy when I don’t feel like being sensible.

It’s a little scary contributing 90% of my full-time income (leaving me with a scant 10%) and relying on my site’s accounts receivables – I guess this is what those full-time bloggers feel like when they make that plunge (except I’ll be jumping into a kiddie pool knowing I’ll leave in a month or two).

{ 13 comments, please add your thoughts now! }

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13 Responses to “Contributing 90% Of My November Salary to 401(k)”

  1. Jeremy says:

    That’s a great year-end move if you’re able to afford to do so. I’ve been meeting with a lot of employees the last few weeks who are doing the same thing in our plan, although our max is 75%. But it is good to see so many people taking advantage of the instant tax benefits as well as adding a large chunk of money to the plan that will have more time to continue to compound and grow.

  2. Matt says:

    Smart move from a financial point of view and the best part is you still have a backup in the case of a serious emergency. I would never advocate relying on your investments for money but if push comes to shove then you can always do that.

    but if you don’t then you’re that much further ahead of the game. Good for you!

  3. Good luck man. I hope bargaineering will generate enough income to live off of.

  4. TBH says:

    This is a good idea, except that your HR department must be much easier to deal with than mine! There is no way they’d process the paperwork fast enough to increase my allocations for a one-month period and then decrease them again right afterwards.

  5. I upped my contribution to my employer’s max (25%) earlier this year and it caused me to miss out on $hundreds. See to read about how to avoid making the same mistake I did.

    Good luck living on 10%!

  6. Great News……

    looks like next year you’ll be able to put more away throughout the year and not need to do this. Seems like you’re making enough ‘on the side’ to cover it, so you’re not really trying to live off the 10%.


    BTW – Isn’t it funny that the more money you make, the more you have to shelter it from the IRS. Sounds like your next step is to buy a big house….

    – Bryan

  7. eROCK says:

    Hey! Great job man! Once my loans are gone (reduced), I hope to do the same. I’d be interested what kind of tax benefits you’ll receive as a result of this move? Perhaps this could be a future post?

    Keep up the good work!


  8. No suggestions to live your life (instead) here. That’s great to sock away large sums of money right from the start. The smaller your net income after 401(k) contributions, the more you’ll become accustomed to living well below your means. Then when you do retire, you won’t need as much because you’re already used to living on very little. That’s how I retired at 51.

  9. jim says:

    I don’t contribute to a traditional IRA because then I wouldn’t be able to contribute to my Roth IRA since they share the same limits. If they were separate, I’d just straight up contribute to the Traditional instead of doing it, somewhat by proxy, via my 401k.

  10. Jessie says:

    Kudos to you on the 90% contribution. My employer does not currently do any matching, so I am putting most of my retirement/investment income into a solid IRA. I miss the days of dollar for dollar or 50/50 matching.

    To the commentor above, congrats retiring at 51!

  11. John says:

    I thought a co-working of mine contributing 20% was a big deal. Wow 90%, you’re my hero.

  12. Otis says:

    Great move, but ideally you want to do this at the beginning of the year. That way, you capture your employer’s match for the entire year. Two benefits to this. One, you have more time to earn interest off of the match. Two, if you unexpectedly lose your job mid-year, at least you have maxed out on the matching funds.

  13. I did this as well when I was moving from my job. As soon as I knew I might not have a 401k at the new job, I started putting 75% in for a month and half. It was tough, but I got by.

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