Personal Finance

I'm 26 years old with a 401(k) balance over $100k and I think I might be putting too much into it - should I scale back?

Christy Bieber

Published: January 22, 2025 9:15 am

Is it possible to contribute too much to your 401(k) account? This is the question a Reddit poster recently asked. The original poster (OP) is 26 and has been investing 15% of their pre-tax income for four years. The company matches 3%, plus puts in around a 13% deferred profit share once annually so he ultimately has over 18% of his money going into his 401(k).

With these contributions, he has around a $105K balance and will have just over $281K by 30. This is more than the recommended amount of one year’s salary saved. The OP is wondering if he should reduce his contributions since he’s theoretically on track to save more than he needs. 

Can you invest too much for retirement?

Being worried about over-investing for retirement is a problem many people wish they had, as most people’s concern is that they are investing too little. 

The reality is that unless you are skipping out on other financial goals, getting into debt, or living such a frugal lifestyle that you’re making yourself unhappy, you can’t really invest too much for your future. Investing a lot of money, especially at a young age, can set you up for success later in life. In fact, when you put away a lot of money as a young person, compound growth enables you to become very wealthy over time. 

The OP may also find himself with higher expenses later in life if he buys a house, gets married, or has kids — so by saving a lot now, he makes it possible to save less later if necessary.  Plus, investing at a young age could open up the door for early retirement later if the OP decides that’s something that he wants to do. 

Should all of this retirement money be going into a 401(k)?

While the OP should keep saving if doing so isn’t a hardship, he may want to make one change. He may not want to put all of this money into a 401(k). 

It’s always smart to max out your 401(k) match before moving any money into other retirement accounts. However, once that’s done, 401(k)s are not always the best account because they sometimes charge higher fees, have limited investment options, and restrict you to claiming your tax breaks up front unless your employer offers a Roth 401(k). 

Because of these downsides, it could pay to diversify a little bit. For example, the OP may want to put some money into a Roth IRA as this would allow him to make tax-free withdrawals as a senior instead of claiming all of his tax breaks now. Or, he may want to put some money into a traditional IRA, which offers the same upfront tax savings as a traditional 401(k) but provides more investment options.

If early retirement is likely to be a priority for the OP, then it may even be worth diverting a little of his money into a taxable brokerage account so he can access it penalty-free before age 59 1/2. 

Ultimately, since the OP is in a good position to save a lot, he should consider talking with a financial advisor. The advisor can help him to better define his short-term and long-term goals and can work with him to create a comprehensive plan for where his money should go so he can make the most of his opportunities to invest at a young age and set himself up for a secure tomorrow.