401K Contributions, When to Stop?


We have written about basic ways to hack your 401K for additional liquidity but one question that does not seem to be addressed is this:

“When have I over saved in my 401K?”

The truth is it depends. If you intend on living in the USA forever and have no interest in leaving the country for more international exposure (wink, wink) then you are likely going to contribute the max for life. However… for those of you that are interested in going international, there is certainly a limit we should all be aware of.

When you’re fresh out of college the answer is simple. Always obtain the Company match and if possible max out the entire $17,500 limit. For additional details review our post on investing priorities.

With the background out of the way lets jump into a detailed chart and highlight the important markers.


Chart Summary:

1) Dashed red line: This is where we believe financial independence is in clear sight solely from your silly 401K. A great investment vehicle for building a small amount of wealth. You’re making about $1,000 a month. This is not a lot but it is constantly being reinvested into the same portfolio. Momentum achieved.

2) Dashed green lines: This is where we believe it becomes less useful to contribute. Why? Your retirement at this point is practically set in our opinion. If you can bring in ~$25K per year in income during your 60s you can certainly live off of this amount in multiple countries around the world. Assuming the same 7% returns you are going to be even richer by the time retirement age rolls around.

3) Match vs. Non-Match: As you can see, the difference between the matched and un-matched portfolio is greatest in the beginning years and becomes less important over time (compounding is extremely powerful). Ideally your income continues to go up but we safely assumed that it was a fraction of your $17,500 max contribution.

4) Million Dollars (Bold): Long story short? By the time you make it to 50 years old, if you have maxed out your 401K for ~13 years… You’re going to be in the million dollar club by retirement. If you can’t live off of $1M outside the USA you’re certainly doing something wrong!

Tax Avoidance:

Yes we know what you’re saying “but that million dollars is going to be taxed!” Well we all hate taxes. That is one thing the rich and the poor can agree on. No one enjoys paying a lot of taxes. So what can be done? Well it is time to utilize the progressive tax system in our favor and leverage the international laws as well.

1) Up to $97,600 earned outside of the USA is tax free if you legally live outside the USA

2) If you pull income out of your 401K it is treated as regular income .. meaning? Do not go past the 15% level at $36,900

What this implies is your best bet is as follows: When you intend to pack your bags and leave to Thailand, you can earn some income abroad (tax free) and  live with the much lower tax rate as you slowly bring money out of your 401K. Finally, if you retire early, you can use the same 401K roll over rule we have talked about in the past. You slowly roll over pieces of the 401K one year at a time into a Roth IRA and take the money out in 4 years and 1 day.

Review Time: Stop and ask. Do I want to live in the USA forever? If yes then continue contributing the max and saving even more than that to live a great lifestyle. If no? Then it may be time to run the math. If you’re in your mid 30s with close to $500K in your 401K account, you’re probably good to go since the rule of 72 states that your money will roughly double every 10 years at a 7% compounding rate.

Below are the bullets for those that plan on living abroad:

1) Match your 401K at minimum

2) Max out your 401K at $17,500 as soon as possible and do this for 13 years

3) Reconsider your strategy when you are at the ~$400-500K 401K value range

4) Set up your tax structure by finding income abroad, no one wants to sit on a beach all day

5) Practice the native language and have a blast

If you’re looking to relocate, be sure to run the numbers.

If not? Well keep stacking that cash.



  1. e.p. says

    Do wall street employers really only match a percent based on the IRS contribution limit?

    I’m in engineering, the company I work for matches 3% of my base income (and that’s low, 5% is typical). A hypothetical $100k engineer gets matched $3,000/year, or an automagic 17% RoR in a flat market.


    • Wall Street Playboys says

      No it is the same on the Street as it is outside, we simplified the equation quite a bit.

      If you make $100,000 then yes the match would be $6,000 (6%) if you contribute at least $6,000

      We didn’t want to include assumptions for your annual pay in the calculation so we simply ran the numbers off of the 17.5K number.

      With this set up it gives you wiggle room to mess up here and there in your 401K and make mistakes. Overall the number is certainly an understatement if you have high income and have a good company match.

  2. Minimalist says

    You know this post really is more about minimalism. If you keep your expenses in check and you have a million dollars it really is easy to live a good life out in Thailand.

    Liked the international travel post by the way!

    • Wall Street Playboys says

      This is a major issue on Wall Street as well. Most people have their expenses climb at rapid rates “Lifestyle Inflation” so they work harder and harder for good pay but save next to nothing on a relative percentage basis.

      This is a dangerous downward spiral.

  3. OCD analyst says

    The word “more” in the chart should be capitalized and it looks like the dashed lines are cut off on the right side 🙂

  4. Jimmy says

    Yeah i don’t know why people save so much in their retirement accounts.

    You know after working at a hospital i realized life is very short, you should save money but there is a point where enough is enough. I think your number is too low, especially if you want to work in the USA but kind of see the point. No one needs $10M when they are 60, they need a few million when they are younger to enjoy it.

  5. Andrew Bourne says

    What do you recommend on 401k vs Roth 401k? My employer offers both and I make ~$80k/yr.

    If I plan on not leaving the US does it make sense to contribute everything to the traditional 401k to max out the money my employer contributes? Then when I’m reaching retirement age begin to roll over my 401k to a Roth IRA and utilize the 5 year rule?

    • Wall Street Playboys says

      Sure max out both if you can. Assuming you ha e 6 months of buffer.

      More importantly go read our post called “money making machine” and on careers.

      You’re going to want to focus on earning more money at your levels because you can only save so much. Roughly $40K of you’re aggressiv win your case.

      So, in your shoes, put as much away as you can *but* since you won’t be able to have much fun spend your free time *generating income*.

      Upside to earnings is unlimited!!!

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