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URL:  http://boards.fool.com/a-silly-question-most-likely-but-is-there-a-21847665.aspx

Subject:  Re: Too much in a 401K Date:  1/3/2005  9:36 AM
Author:  2old4bs Number:  43839 of 74759

A silly question most likely, but is there a point where you should reduce the amount you contribute to your 401K in lieu of other investments? Currently I'm 43 and have about 2.5X of my annual income in a 401K, and contribute the maximum amount. But it does prevent me from saving much elsewhere or paying down my mortgage earlier, etc.

I agree with everything that 'reallyalldone' said. I just wanted to point out that if you are paying a low fixed mortgage rate, that would be the last thing I would use 'extra' cash for (in spite of what Suze Orman says).

Conventional wisdom advises to contribute to a 401K up to the maximum that the company matches. Then to a Roth, if you qualify. After that, to either the 401K or a taxable account. Part of that decision has to do with one's marginal tax rate at the present time, and one's estimate of what the marginal tax rate will be post-retirement.

For example, my marginal tax rate is currently 33%, and I anticipate it will be much lower post-retirement, so I do max out my 401K beyond the matched amount. I am not eligible for a Roth, but happily for me, even after maxing the 401K I have enough funds to contribute to a taxable account.

I am 54 and my 401K represents 40% of my total portfolio. 30% is in IRAs/annuity. 30% in taxable accounts.

Sorry, I can't advise on the education funding question...

2old

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