So, You've Maxed Out Your Retirement Contributions. Now What?: Erin Lowry

For many, paying off debt and putting money away for retirement are the first financial goals to work toward.

In 2021, an individual is allowed to contribute $19,500 in “elective salary deferrals” to a 401(k). The employer match does not count against this contribution limit. But once you’ve maxed out your retirement accounts for the year, what comes next?

The only way to answer that question is to lay out your goals.

You’re already following the essential personal finance advice and saving up for your post-work future. You’ve also paid off or are on track to pay off student loans and other debts. Now what else do you want to achieve? Could you be saving and investing for a house or a child’s college fund? Or perhaps you’re more interested in funding a hobbyist endeavor or finding a way to take a sabbatical?

First, regardless of your goals, it’s important to add both dollar amounts and desired timelines to them. For example, say you want $40,000 set aside to comfortably take a four-month sabbatical in five years. That means you’ll need to save $8,000 a year.

Once you’ve set your financial goals beyond retirement, it’s time to analyze how investing can help you achieve them. The level of risk you take should line up with when you want to achieve the goal. The longer the timeline, the more risk you can safely take (safely being a relative word whenever we’re talking about the stock market). If you have five years to save $40,000, you probably won’t want to take on too much risk in investing those funds given the short timeline, unless you’re willing to push back your schedule if the market dips around the time you want to use the funds.