Maximizing Your 401(k): What Busy Professionals Need to Know
Albuquerque's Tax-Savvy 401(k) Approach for Complex Family Finances
As your career advances and your financial life becomes more complex, questions about retirement planning take on new urgency.
One question I frequently hear from clients is whether they should be maxing out their 401(k) contributions.
With 2025 contribution limits at $23,500 for those under 50 and $31,000 for those 50+, this is a significant financial commitment. Is it always the right move? Let's look beyond the conventional wisdom to help you make the decision that's right for your unique situation.
The Clear Benefits
The advantages of robust 401(k) contributions are well-established:
✅Compounding growth - especially valuable in Roth accounts where withdrawals in retirement are tax-free
✅Tax advantages - traditional 401(k) contributions reduce your current taxable income
✅Employer matching - often described as "free money"
But you've likely heard all this before. What's often missing from the conversation is how 401(k) contributions fit into your complete financial picture.
Beyond the Basics: What's Right for You?
First Things First: Capture That Match
The absolute minimum contribution should be whatever amount captures your full employer match. This might be 3%, 6%, or another percentage depending on your company's formula. Whether it's dollar-for-dollar or a partial match, this is truly the lowest-hanging fruit in your financial plan.
Before Maxing Out, Consider These Priorities
While conventional wisdom might suggest automatically increasing contributions to the maximum, your situation deserves a thoughtful approach:
❓ Is your emergency fund adequate?
As your lifestyle and responsibilities evolve, so should your safety net. Having 3-6 months of expenses readily available prevents tapping retirement funds in an emergency, which can trigger penalties and derail your long-term plans.
❓ Have you optimized your HSA opportunity?
Health Savings Accounts offer unique triple tax advantages that even outshine your 401(k) benefits. For 2024, you can contribute up to $4,150 (individual) or $8,300 (family), with an additional $1,000 catch-up provision for those 55+. These funds grow tax-free and can be withdrawn tax-free for qualified medical expenses—now or in retirement.
❓ Do you have goals beyond retirement?
Perhaps you're planning to purchase an investment property, fund education, or launch a business. These mid-term goals might be more important than maximizing retirement contributions right now.
❓ Are you diversifying your tax strategy?
While tax-deferred growth is powerful, having all your assets in tax-deferred accounts can create tax challenges in retirement. Building tax-diversified accounts gives you more flexibility later.
❓ Are your investment options limited within your plan?
Many 401(k) plans offer a relatively narrow set of investment options. You might benefit from directing some funds to a brokerage account where you have more control and potentially lower fees.
When Maxing Out Makes Perfect Sense
Maxing out your 401(k) can be the right strategy when:
You're in a high tax bracket and expect to be in a lower bracket during retirement
You've addressed your emergency fund, HSA contributions, and other pressing financial priorities
You value the simplicity of automatic contributions and the discipline this enforces
You're playing "catch-up" on retirement savings
The Personalized Approach You Deserve
The families I work with often share a common frustration: generic financial advice that doesn't account for their unique situation. Your retirement strategy shouldn't be built on rules of thumb, but on your specific goals, values, and circumstances.
Whether you choose to max out your 401(k) or allocate those funds differently should depend on a comprehensive view of your financial life—not just conventional wisdom or what your colleagues are doing.
Taking the Next Step
As your financial life grows more complex, having a thoughtful partner to help navigate these decisions becomes increasingly valuable.
Unlike the rotating advisors and impersonal 800-numbers of larger firms, working with an independent advisor means having someone who truly knows your situation and values, and can help you evaluate these decisions in the context of your complete financial picture.
Whether you prefer a fully advised relationship or a hybrid approach with some self-directed accounts, the right advisor will meet you where you are and help you make confident financial decisions that align with your unique goals.
Ready to Feel More Confident About Your Taxes?
Take the First Step Toward Smarter Tax Decisions
Book a free 15-minute strategy session or download our Free EBook
We’ll walk you through where to focus and how to act.
