I changed the contribution rate to my 401(k) today. Previously 12% of my pretax income was being diverted to the 401(k) despite only 4% of my income being matched by the employer. I reduced the rate from 12% to 4% so I could still get the complete company match while allowing me more cash. This should help my cash savings which has not been growing as much as I want.
I would have made this change earlier, but since I have access to “insider information,” I’m only allowed to change certain contributions to my 401(k) during special “trading windows.”
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You should absolutely have a cash reserve of 3-6 months, but after that, you’ll want to do your best to max out your 401(k) every year for the tax advantage.
I wholeheartedly agree about having 6 months worth of expenses in cash in reserve. It would be nice to max out my 401(k) contributions but if you’ve been following my postings you’ll probably know that with my salary and expenses, putting $14,000 away in the 401(k) each year is a bit… impossible.
I’m glad to see that you’re at least taking enough to get all of the match. As for the rest, I would simply consider it as moving your investment from stocks to education :)
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