It’s important to ensure you pay yourself first by stashing away a fixed portion of every paycheck for retirement. Indeed, a 401k is a great tool to help turn your retirement dreams into reality. Of course, maxing out your 401k every single year is far easier said than done, especially with 2025 prices on the way.

Undoubtedly, inflation has finally chilled in response to swift action from the Federal Reserve. But prices of many must-have goods (think rent and food) are still poised to continue moving higher in the new year. And for the many in the workforce who won’t be getting Christmas bonuses or annual raises this year, it can feel tempting to forego the ambitious goal of maximizing your 401k contribution (at least for the time being) so that you’re able to gain more financial wiggle room in the present.

Is maxing out the 401k always the best idea?

I believe there’s zero shame in not maxing out your 401k if it means making your life today a bit easier.  Now, I’m not talking about merely “trading down” to generic alternatives at the grocery store to save a few bucks. Rather, I speak of canceling subscriptions that you use (and get great value out of) or cutting out your daily coffee habit. While many personal finance pundits, including Suze Orman, may view morning runs to the café as a blatant waste of money, I’d argue that if such a routine helps pick you up on a tough Monday, the $10 treat may very well be worth the price of admission.

As always, though, your mileage may vary. For some, making coffee at home or putting that home espresso machine to work is sufficient. In any case, the key takeaway here is that I don’t think it’s optimal (or very sustainable) to be cutting smaller expenses that will have you feeling like you’re “missing out on the now.”

At the end of the day, everybody needs to find the right balance between saving for the 401k and spending on goods, comforts, and conveniences in the present to stay content. In other words, you don’t want to cut into the budget too deeply to maximize 401k contributions such that you’ll feel tempted to splurge on the sum later on, whether it be in retirement or sometime before.

There are ways to save up without living in extreme frugality

I recently came across a young individual on Reddit who wants to make the most responsible move by maxing out their 401k to ensure a lofty retirement. However, at the same time, they don’t want to deprive themselves or take away from their current lifestyle. Indeed, living like a student when one can afford more conveniences doesn’t sit well for many. While many savers can be happy and content with a frugal lifestyle, which can hit the accelerator on one’s wealth creation, I do think that scenarios exist that allow one to save for the future while also living well in the present.

For this individual, I’d recommend visiting a financial advisor so they can help you find the optimal budgeting strategy. Perhaps there are ways that one can maintain their current lifestyle while also making the maximum contributions to hit their retirement milestones. And while a financial advisor would probably prioritize saving in investing over treating yourself today, I do think the conversation can get one down on the right path to a sustainable retirement savings plan that won’t lead you to throw in the towel on building up the 401k at some point down the road.

The bottom line

I think feeling subtle FOMO (fear of missing out) by prioritizing one’s 401k and retirement savings before expenses and experiences is not out of the ordinary. While some sacrifices need to be made in the present to save for the future, I do think that heftier expenses and experiences can be budgeted and planned for. Indeed, there’s more than one way to fit a big expense into the budget without having to derail your retirement savings targets!

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