Even though my new employer doesn’t offer an employer match on my contribution to my 401(k), I will still attempt to maximize my contribution to my 401(k) in the last four months of 2006. So far this year, in the 8 months I was with my former employer, I contributed less than $4,000 – far less than the maximum contribution of $15,000 a year.
There are two big reasons why I’ve contributed so little this year:
- Mortgages are ugly ugly creatures that need to be fed, even with only a minimum contribution (6%), my mortgage accounted for nearly half of my income. HALF! If it wasn’t for the blogging income, I would’ve been in sorry shape.
- See reason 1.
Now, why am I increasing my contribution so much? There are a few reasons:
- With a healthy increase in my salary, I feel that I should take some of that and put it towards my retirement. I’ve grown accustomed to my current lifestyle at my former salary so why not take a small portion of the windfall and earmark it for a rainy day?
- This would, of course, decrease my total compensation. Since some tax deductions depend on your adjusted gross income, decreasing my compensation is important especially since I’m nearing the phase-out spreads of several things (like Roth IRAs!). This will become more significant next year when I’ll be at my current salary for a full year but I might as well get it started now.
- Now my mortgage accounts for a more manageable percentage of my income and I can actually afford to both pay the mortgage and eat (and save for the future).