[USER]

I am still not 100% sure what “maxing” out a 401k means. Does that mean hitting the limit for what you can legally contribute to annually, or a personal limit (say for someone like me that makes only $53k).

I’ve listened to many Choose FI episodes, but not chronologically, and I’m afraid that I have an unclear understanding of what the most efficient way to maximize my savings is because of that.

New info is always coming out so there’s information overload.

I have an HSA which I max out, as in contribute the annual limit, I also contribute 8% of my paycheck into my 401k since that’s the most I can do right now while making sure I have a little to invest in my traditional IRA.

Am I doing this right?

Should I not invest anything into a traditional IRA since I can’t even “max” out my 401k?

[Ken]

Maxing your 401k means contributing the yearly max for an individual to contribute this year it’s 23K

Ideally you should look to fill the buckets in this order.

But really anything after the first bucket is a bit subjective.

401k up to the employer match

HSA Max
401K max
Roth IRA max

[Megan]

You could do Roth IRA instead of traditional IRA. But either way great job investing!

[Josh]

1) Keep maxing, the hsa- it’s the only double tax advantaged account their is

2) 401k but just enough for the match
3) max out ROTH ira

I belive those first 3 steps are foundational for everyone.

Depending on your personal variables funding a brokerage account vs putting more into 401k, will determine priority 4.

[Melanie]

Maxing a 401k is putting in the legal limit per year ($23,000 if under 50)

If your 401k has a match, do up to the match and then put whatever you can into Roth IRA.

I personally wouldn’t bother with a regular IRA at all.

Just up the 401k instead.

[Carrie]

Maxing out references the annual contribution limit. If you’re not in a place to do that, do what you can. (Been there.)

As far as IRA vs. 401k, if your 401k has a match, start there.

Otherwise IRA is usually the better choice because it gives you more options and lower costs.

[Sean]

Generally maxing out a 401k means the employee deferral limit which is 23k this year.

At your income you should almost certainly put as much as possible into Roth accounts though.

[Author]

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