Personal Finance

Here's how many workers are saving the maximum in their retirement plans

Key Points
  • More than 4.6 million taxpayers maxed out their retirement plan contributions in 2016, according to data from the IRS. At the time, the most you could defer was $18,000, plus $6,000 if age 50 and over.
  • This year, you can save up to $19,000 in your 401(k), plus $6,000 in catch-up contributions if you’re 50 and up.
  • It’s OK to start small: Put away at least enough to get the employer match.
Thomas Barwick | DigitalVision | Getty Images

We all want to max out our 401(k) contributions — and a select handful of taxpayers are doing just that.

Some 4.67 million taxpayers managed to squirrel away the maximum $18,000 in employee contributions to their 401(k) in 2016, according to data from the IRS.

Those who were age 50 and over were able to put away an additional $6,000 in catch-up contributions.

Older workers were among the most ambitious savers. In all, the over-60 crowd accounted for more than 1 million taxpayers who were able to save the maximum to their retirement plans that year.

Men made up the lion's share of big savers — about 3 million.

"This year, the maximum contribution is $19,000, plus $6,000 if you're 50 and over — it's a lot to defer and still have money left over for living expenses," said Michael Landsberg, CPA and member of the American Institute of CPAs' personal financial planning executive committee

Multiple priorities

A Hispanic woman of the Millennial Generation is looking at her financial statement while eating lunch at a local sushi restaurant. She is using her bank's app to balance her monthly budget. Image taken in Utah, USA.
RichVintage | E+ | Getty Images

For many workers, saving for retirement is just another item on a massive list of priorities.

Huge contributions to your 401(k) — even if they help reduce taxable income — will leave you with less take-home pay.

"You don't want to make decisions that are detrimental," Landsberg said. "You're paying off loans, you have credit card debt accruing — you don't want to have too low of a take-home check."

Striking a balance between the two can be difficult for employees, particularly when retirement plan service providers recommend that workers save at least 15% of their pretax income annually.

While this number sounds intimidating, it includes employer matches and profit sharing.

Be sure to save at least enough to get the match; it's essentially free money.

To that end, while workers contributed a median 6% of their salary toward their 401(k) plans in 2018, the median contribution rate jumped to 9.8% when accounting for employer matches, Vanguard found.

Don't forget your Roth

VIDEO3:1103:11
The three biggest money mistakes you don't want to make

Withdrawals from your traditional individual retirement account and your 401(k) are all subject to income taxes and a 10% penalty if you take the money out before age 59½.

Be sure to grow your savings in your taxable account and your Roth IRA and Roth 401(k), too.

More from Personal Finance:
The No. 1 reason why seniors work well into retirement
Here's the truth about starting an emergency fund
Younger couples are saying no to expensive engagement rings

This way, you can come up with strategies to maximize your tax savings in retirement. Withdrawals from Roth accounts are tax-free, while taxable accounts are subject to capital gains taxes.

By having a combination of taxable, tax-free and tax-deferred accounts, you'll be able to manage your tax brackets and potentially save on Medicare premiums once you've retired.

"From a liquidity standpoint, you want to be aware of having a good mix of assets," Landsberg said.