Monday, October 8, 2007

Saving too much in 401k?

Sometimes I wonder if I am saving too much in my 401k? Although I will have a small pension from an old employer in 25 years, my new employer has no pension of any kind. No defined benefit, No cash balance, No Nothing.
Luckily, they compensate for the lack of a pension with a very generous 401k program. Up to 5%, the company match is 150%.
Including the company match, I am saving 15% of my pre-tax earnings.
Why I should save more?
1. Due to law school and B-School, I got off to a slow start.
2. Without a significant pension, I am on my own.
3. The fiancé is moving in. With our combined incomes, I have more flexibility to save.
4. The tax deferral is a huge benefit. Even with the penalty tax, having a large amount of money in the 401k is a nice risk reduction tool.

Why I should save less?
1. The emergency fund is getting a little low. After getting the engagement ring, it is not where I want it to be.
2. In addition to spending on the wedding, I am spending more money fixing up the house for the fiancé. I expect this spending spree to continue into 2008. In addition to living room furniture (I have none), the house needs about $5-10,000 in repairs and upgrades.

Although I am not going to reduce my contribution, I am starting think about it.

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