Originally Posted by
Merequetengue
Hey guys, I spoke with a couple of pilots who mentioned that they try to maximize their 401(k) as early in the year as possible (ideally within the first six months), even though the company’s 17% would fully maximize it by the end of the year. Does anyone understand that strategy? What’s the benefit, or did I misunderstand? All this retirement plan stuff is new to me, so I’m just trying to learn from people with more experience. Thanks in advance!
There are a couple of things in your question that need to be picked apart.
First, there are a few IRS limits to be concerned with:
1. Employee Contribution Limit (under 50, over 50 catch up, age 60-63 super catch up for 2025 and beyond)
2. Employee + Employer Contribution limit
3. Eligible income limit
Depending on your income and seniority, the company's 17% alone won't maximize the amount which you are allowed to save in your company retirement account. It certainly helps to contribute at least something. How much might depend on whether you are looking for excess spill to your health care account or not. Many military pilots don't like this as they have TriCare for life and don't need a lot of extra in those accounts. So spreading it out or contributing just enough to maximize with no spill is a good option for those pilots.
Second, some like me prefer to max out my personal contributions by June 16th (12th paycheck of the year) and take advantage of spill once I reach the combined allowed employee and employer limit until I see my target Active HRA/RHA balance at least. After that I will probably adjust to spread it out more in the year or designate excess to the MBCB Plan once it goes live.
Every pilot's situation is unique and given that I tend to take more expensive vacations in the fall, having my 401k and SS contributions over with by June allows me more take home money to spend on other things.
The R&I Committee will usually issue an email on ways to minimize or maximize spill for the following year based on the updated IRS limits that were just published on November 1st.