My friend asked me this past weekend if he should be maxing out his 401k because a lot of people are telling him to do so. My answer to him? It depends.
The max you can put into your 401k this year is $17,500, which is $1,458 a month. If you’re making under 6 figures, saving $1,458 a month for retirement might be unrealistic or put a lot of strain on your cash flow (income – expenses). But if your expenses are minimal or if you like living on a really tight budget, then of course, it’s still possible.
So I told my friend the most important thing was that he was putting money into his 401k consistently and that he was contributing at least up to his employer match, which he was. Beyond that, I told him to consider his cash flow and short-term financial goals. If he had a lot of money left over each month after expenses and savings and he wasn’t planning on needing the cash anytime soon for any major purchases (wedding, car, house, etc.) then he could go ahead and contribute more.