5 ms·

> assuming no 401k contributions. Why? Fully contributing to a 401k (assuming no company match) would put your "take home" at ~$79,200 instead of $72k followin

> assuming no 401k contributions. Why? Fully contributing to a 401k (assuming no company match) would put your "take home" at ~$79,200 instead of $72k following your tax rate (which I assume is roughly correct). > That's a net income of $72k per year. If that engineer saves $50k, that leaves only $12k for everything else $72k - $50k = $22k, not $12k. So with no 401k, you'd have to live on $22k to save $50k/year. When contributing to a 401k, you'd have $29k to live on, which sounds pretty do-able. Add in the fact that you would probably invest these savings, and you can hit $100k after 2 years by saving a bit under $50k each year. Saving $100k in 2 years is not as outlandish as you make it seem.

jdmichal 10y ago
How exactly do you figure increasing your take-home pay by contributing to a 401k? Did you forget to subtract the money that's actually going to the 401k instead of your pocket? Even at 90% tax rate, all you are doing is sparing that 90% on the money you are contributing. In other words, you are only actually paying $10 for every $100 you put in, because that other $90 would have gone to the tax man anyway. But you are still losing $10 of your take-home pay.
- the_gastropod 10y ago
  > How exactly do you figure increasing your take-home pay by contributing to a 401k? I guess it depends what you mean by "take-home". The original premise was "saving 100k in 2 years". I hope we can agree that saving money in a 401k is saving money, regardless of whether we agree it's "take-home".
  - twblalock 10y ago
    I assumed we were talking about money for a home down payment, which would not normally go into a 401k. Getting it out would require a 401k loan, and a 401k loan for a six-figure amount is almost always a terrible idea. The only other way to get it out would be to take an unqualified distribution and get hit with a significant fine. Most 401k loans become due in full if you leave your job. That traps you in your job until you pay it back, because if you had enough cash to pay the loan outright, you would not have needed the loan in the first place. Unless you have an unusually good severance agreement with your employer that would enable you to pay back the loan if you leave your job or get fired, taking out a 401k loan is a bad idea.
    - rockinghigh 10y ago
      401k loans are limited to $50k.
  - jdmichal 10y ago
    Take-home is typically understood as the amount written on the check. As in, that's the amount you take home with you when you cash the check.
twblalock 10y ago
> $72k - $50k = $22k, not $12k. Oops. But that's still less than most people's annual rent, so it's still not enough to live on. It doesn't change my argument.

jdmichal 10y ago

How exactly do you figure increasing your take-home pay by contributing to a 401k? Did you forget to subtract the money that's actually going to the 401k instead of your pocket? Even at 90% tax rate, all you are doing is sparing that 90% on the money you are contributing. In other words, you are only actually paying $10 for every $100 you put in, because that other $90 would have gone to the tax man anyway. But you are still losing $10 of your take-home pay.

the_gastropod 10y ago
> How exactly do you figure increasing your take-home pay by contributing to a 401k? I guess it depends what you mean by "take-home". The original premise was "saving 100k in 2 years". I hope we can agree that saving money in a 401k is saving money, regardless of whether we agree it's "take-home".
- twblalock 10y ago
  I assumed we were talking about money for a home down payment, which would not normally go into a 401k. Getting it out would require a 401k loan, and a 401k loan for a six-figure amount is almost always a terrible idea. The only other way to get it out would be to take an unqualified distribution and get hit with a significant fine. Most 401k loans become due in full if you leave your job. That traps you in your job until you pay it back, because if you had enough cash to pay the loan outright, you would not have needed the loan in the first place. Unless you have an unusually good severance agreement with your employer that would enable you to pay back the loan if you leave your job or get fired, taking out a 401k loan is a bad idea.
  - rockinghigh 10y ago
    401k loans are limited to $50k.
- jdmichal 10y ago
  Take-home is typically understood as the amount written on the check. As in, that's the amount you take home with you when you cash the check.

twblalock 10y ago

> $72k - $50k = $22k, not $12k. Oops. But that's still less than most people's annual rent, so it's still not enough to live on. It doesn't change my argument.