How Much Does It Cost, Per Month, To Fully-Fund Various Retirement Accounts?

Mar 17 2008

Posted by NCN as Retirement |

I’ve been doing a few calculations - figuring out how much it costs, per month, to fully-fund various retirement accounts.

401(k) and 403(b) plans -

(Contribution limits are for those under 50. Certain plans offer ‘catchup contributions’ for those over 50.)

Contribution limits for 2008 -

$15,500

Contributions can be made for income earned January 1st until December 31st of 2008.

$15,500 / 12 Months = $1,291.66 per month

Roth IRA and Traditional IRA plans

(Contribution limits are based on age an income. The following information is based on a person, age 33, who makes $50,000)

Contribution limits for 2008 -

$5,000

Contributions can be made from January 1st 2008 until April 15th of 2009.

$5,000 / 16 Months = $312.50 per month

Assuming a couple, married, filing jointly, in their 30’s, who qualify to make full contributions -

Fully funding two 401(k) plans and two Roth IRAs would equal -

$15,500 + $15,500 / 12 Months = $2583.33 per month

$5,000 + $5,000 / 16 Months = $625 per month

Wow.

Here’s a related post -

What If You Make Maximum Retirement Contributions For 20, 30, 40 Years? (Roth IRA, Traditional IRA, 401k, 403b)

When I do calculations like this, I get PUMPED!

Why? Well, consider the following -

What happens if I shoot for fully-funding my Roth IRA - $5000 - but I fall ’short’? Am I ‘bummed’? Of course. But, I’m also ‘psyched’. Why? Well, instead of ‘zero’ in my retirement, I have $1000 or $2500 or $4000! Would I love to fully-fund all accounts. Yes. But, the goal, especially when first getting started, is to DO SOMETHING.

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6 Responses

Future Millionaire

March 17th, 2008 at 7:49 am
1

NCN - why not put $416 per month for your Roth IRA instead of just 312.50 because Jan - April 2009 you’d have to make double payments to fund the full amount for both years.

Then you get even more pumped because it would be $833 instead of $625.

Cheers!
NCN

March 17th, 2008 at 9:28 am
2

@Future Millionaires - You are correct… I was trying - and it was difficult - to show how much it would take to fully-fund for 2008. At the same time, I wanted to show that you did have 4 ‘extra’ months. Of course, if you wanted to do 2009 over the same span of time, you’d have a 4-month overlap (Jan - April 2009).
Future Millionaire

March 17th, 2008 at 10:37 am
3

Thanks NCN for explaining.
kitty

March 17th, 2008 at 11:13 am
4

“Fully funding two 401(k) plans and two Roth IRAs would equal - $15,500 + $15,500 / 12 Months = $2583.33 per month”
Actually it’ll be less since you are contributing pre-tax dollars to 401(k). $2583 a month in pre-tax dollars is significantly less than $2583 in poast-tax dollars. Depending on your tax bracket and the state you are in, could be as much as 30-40% less.

And if you earn sufficiently high salary, live in high-state tax or have capital gains one year, max 401K contribution may be the only thing that helps you avoid AMT; or allow you to contribute to Roth. Than your tax savings will be even higher.
NCN

March 17th, 2008 at 11:21 am
5

@kitty - YES! I LOVE that I can contribute to my retirement account AND reduce taxes. NCN
Sam

March 18th, 2008 at 11:22 am
6

This post made me feel better beacause my husband and I often find ourselves short on cash. It was a good reminder that one of the reasons we are low on cash is that we are trying to stick $49,000 in our 401ks and IRAs (2007 & 2008)this year.