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Whether you’re living on campus or commuting to school, college is a time to experiment with independence. College students can choose their own classes, make their own friends, and decorate their dorms according to their own styles. And while exploring diverse areas of study and deepening intellectual curiosity is a pivotal element of the college experience, it’s only one aspect of those four significant years.

College is also a period to define one’s life outside of academia and get involved on campus. On-campus activities are one of the most important elements of a college experience, helping students to get to know themselves and others, build a community, and develop long-term skills.

From clubs and sports teams to jobs and volunteer work, there are countless ways to play a part in campus life and explore new areas of interest.

Finding the right balance between college activities and classwork can be a challenge for any student, so it can be crucial to determine which activities are worth the time.

Some activities, like major-based clubs or a college publication, can enrich one’s intellectual experience, while others are more focused on building friendships or maintaining physical health. All of these types of activities are worthwhile as long as they don’t distract a student from their academic goals.

Getting Involved On Campus

As a new student, one way to see what the school has to offer for extracurriculars is to attend a student activity fair. This can be an opportunity for students to survey the different activities and clubs on campus and talk to current members about what they do and the types of time commitments involved.

Here are some other ideas for how college students can get involved on campus.


💡 Quick Tip: When shopping for a private student loan lender, look for benefits that help lower your monthly payment.

Assess Current Interests and Skills

Many students may have already begun to take part in extracurricular activities during their high school years. Perhaps they were on a sports team, took part in Model UN, or were part of the school choir.

Students will find that many universities offer continuation of the activities they were involved with in high school, though they will generally have to reapply or audition.

Even if a student-athlete doesn’t make it onto a college varsity team, they can try out a club sport instead. Larger schools may have more varied clubs and activities, but smaller schools will offer more opportunities for students to have their voices heard.

There may be less competition to make it into a school play, for example. Whatever size a school is, there are ways to get involved and continue to develop skills cultivated during high school.

Recommended: 2 Ways a College Athlete Can Make Money

Find a New Hobby

College extracurriculars can also be a great way to experiment with new interests, whether a student has long had the desire to explore an area, or is simply intrigued by a new idea.

Most colleges have activity fairs early on in the school year as a way for clubs and activities to advertise to new students. This is a wonderful way for students to find out what clubs are available, and to get to meet the students who are already involved.

Students may get overzealous and sign up for too many clubs and activities at first, so it’s important to assess which of these pursuits are worth sticking with and which can be politely left behind.

Recommended: Crash Course: A Student’s Guide to Money

Flex Your Inner Athlete

Playing a college sport, whether it’s trying out for varsity or joining an intramural team, can be a great way to get involved. The community that’s fostered through team sports is perhaps unmatched among other college activities, with athletes spending multiple days a week in practice, at games, and socializing off the field.

Physical activity can be one effective way to combat depression, which is on the rise among college students. If a sports team is too much of a commitment, a dance or yoga class can be a good way to meet people and stay in shape, or simply hitting the college gym.

Recommended: Balancing Being a Student Athlete & Academics in College

Get Creative

Students interested in creative expression will find a wide range of ways to get involved on campus. Trying out for a college play, auditioning for an acapella group, or joining the jazz band are great ways to meet other students and explore one’s artistic side.

College theater clubs and musical groups allow students to invest in a meaningful project and ultimately perform for their campus communities and can help improve a student’s sense of confidence and self-worth.

Visual artists may want to join a figure drawing group, and writers may be interested in joining a creative writing or poetry workshop with their peers outside of class. There are countless ways to tap into the creative bug on campus and perhaps even discover a new artistic interest to pursue beyond university.

Recommended: 3 Summer Jobs Ideas for College Students

Go Greek

For some students, Greek life forms the backbone of their social lives during college. Rush or recruitment events for fraternities and sororities provide an array of activities for potential members in an attempt to draw students to their particular organization. Pledging will take up much of a student’s time as well before they finally join the ranks of their house.

Once involved in Greek life, students often find a built-in community waiting for them. Sororities and fraternities often sponsor campus-wide events and parties or facilitate volunteer opportunities for members.

While Greek life is a great way to build friendships on-campus, it can be all-encompassing at times. It’s important for students to be able to strike the right balance between their fraternity or sorority and the rest of their lives on campus, including their classes.

If a student is interested in joining a social club that’s not Greek, or the school they are attending does not have Greek life, there may be other social clubs offered.


💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

Try Your Hand in Media

Lots of colleges and universities have student-run newspapers, magazines, radio, and TV stations. Participating in one of these media organizations can be a great opportunity to meet students and get acclimated to the campus.

Joining the school newspaper will allow students to explore their campus from the inside out, researching topics that affect the community and publishing their work.

Writing for a literary magazine is also a wonderful way to get involved, with students being able to help solicit work and screen submissions.

College radio stations are also a classic staple of campuses—running a radio show, whether it’s talk radio or playing a certain genre of music, is a wonderful way to connect with the community, even if you’re doing it via radio wave.

Recommended: 6 Reasons to Go to College

The Takeaway

Getting involved on campus helps students build community, maintain a sense of productivity and accomplishment, and explore potential career avenues. The connections made through on-campus activities can be the most enduring of one’s college career since they’re often based on the passions a student will continue to enjoy after graduation.

On-campus involvement can also be a major form of stress relief from the heavy workload that college entails. Taking a break from the library by going to rehearsal for a play or music group, or by practicing with a sports team, can be one of the best ways to take the edge off a day of intense studying or classwork.

Physical activity, whether through a college team or a yoga class, helps improve health and releases endorphins that can improve one’s mood as well.

While getting involved in multiple on-campus activities can be highly beneficial to any student, it’s important to balance extracurriculars and academic work, making sure to allot the proper amount of time for studying so that one’s interests outside of class don’t eclipse everything else.

Another aspect of a successful college career is figuring out how to cover the cost of your education. Private student loans can be an option when other forms of aid, including federal student loans, scholarships, and grants aren’t enough.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Heading off to college is hands down one of the most thrilling times in a young person’s life. It’s the chance to get to know yourself and your passions, close the childhood chapter of your life, and prepare for the future ahead.

But, before you can do all that, you’re going to need to pack.

Not quite sure what to bring and what to leave behind? Don’t worry, we’re here to help with a college packing list that covers all the essentials from dorm room needs to toiletries and beyond.

What to Pack for Campus Life

Hang on — before we dive into this list, we need to discuss the all-important first step every student should take in their college essential checklist planning, and that’s to reach out to your new roommate.

Once you know who that is going to be, it’s a good idea to reach out and get a feel for their likes and dislikes, how your can work together on a decor theme for the room, and if you can split the cost for shared goods, like microwaves, mini-fridges, or any other items you may share along the way.

Once you know what your roommate is responsible for you can get on your way to make your own checklist.

Shower and Toiletry Needs

Packing up for college means compartmentalizing everything in your daily life. And, for most people, their days begin with a shower. Here are a few of the items needed to set students up for a hygienic semester ahead.

Shower caddy: This is a very important base. Because students will likely be sharing communal showers they will need to cart their goods back and forth to the bathroom, so a sturdy caddy is key.

Bathrobe: On a related note, you’ll be traversing back and from the bathroom for showers. A bathrobe makes it easy to cover up.

Washcloths and towels: This isn’t an item students will want to share. Purchase a few matching sets in a unique color so students always know which color is theirs.

Flip-flops: Again, students will likely be sharing communal showers with many other students. Avoid any potential foot fungus with a simple pair of flip-flops.

Toiletries (Shampoo, Soap etc): Keep it clean from head to toe with shampoo and conditioner. For an added bonus, try a shampoo bar, which will dissipate when it’s done, leaving no plastic bottle pollution behind. Pick up your favorite scent before heading off to college so every time you open the bottle you are reminded of the sweet smell of home.

Toothbrush and toothpaste: It’s easy to pick up a simple toothbrush at any pharmacy, but students could also level-up with an electric brush, or even go for a subscription-based brush so they never have to remember when to replace the brush heads.

Deodorant: Students will be living in close proximity to one another, making it important to stay on top of hygiene and smelling nice. Look for a signature deodorant scent before leaving home.

💡 Quick Tip: SoFi offers low fixed- or variable-interest rates. So you can get a private student loan that fits your budget.

School and Office Supplies

Headphones: Yes, headphones can be used for entertainment, but they can also be a valuable tool in a student’s office supply area too. That’s because, again, you will be sharing a small space with another person so finding peace and quiet may be difficult for study and work time. But, it’s nothing a good pair of noise-canceling headphones can’t fix.

Memory cards or USB flash drives: Students will likely need to transport data files from home to printer, to class, or delivered straight to a professor. Have a few of these handy just in case.

Laptop: Though a typically expensive item, a laptop is critical for a college or university education. It’s how students can get their work done in the dorms, in class, or anywhere in between without having to head to the library for free computer use every time they need the internet. Some schools may have recommendations for laptops based on programs and the requirements for processing power or software.

School Supplies: Sure, the high-tech stuff above is great, but make sure to kick it old school too and purchase a few pens, pencils, highlighters, index cards, and notebooks so you can jot down notes, ideas, and more whenever you need to or if your computer runs out of battery.

Thinking about your current study habits can be a good place to start when evaluating what school supplies you’ll need as you head off to university. Don’t forget textbooks!

Surge protector and extension cords: Because there will likely be multiple students using up all the plugs in a dorm room, it’s a good idea to purchase a surge protector and a few extension cords to protect the electricity from overload.

Recommended: College Freshman Checklist for the Upcoming School Year

Kitchen Supplies

Microwave: A microwave can be a college student’s culinary best friend. Find a sturdy one that can handle reheating food and drinks, or even cook up entire meals.

Mini-fridge: Another college kitchen staple is the mini-fridge. Make sure it’s big enough for two roommates and all their in-room dining needs.

Dishes: College students need something to eat off of. Pack up a small collection of plates, cups, bowls, and cutlery before move-in day.

Food containers: Save any leftover goodies with some plastic food storage containers. Keep it simple with a few stackable options.

Coffeemaker: Come on. This is college we’re talking about. College kids deserve to have coffee on tap, but the next best thing is remembering to pack a good coffee maker. Prefer tea? An electric kettle may be your new best friend. Review school policies on having electric appliances in a dorm room.

Room Needs

Under-bed storage: College dorms can be tight. The average dorm room clocks in at just 180-square feet. But, a few key items can make it not only feel a touch larger, it can also make it feel more like home.

Pillows: Take a few pillows to college — a few functional pillows or sleep and another couple of throw pillows for added flare.

Linens: Students should check with their college or university for their dorm room bed sizing, but odds are it’s a twin, or twin XL. Get two sheet sets so students have one to wash and one to make the bed at all times.

Mattress pad: Look, dorm room beds aren’t exactly known for being the most comfortable things on earth. But, an easy way to upgrade student bedding is to purchase a mattress pad or feather bed.

Recommended: College Planning for High School Students

Cleaning Supplies

Going to college means students will now have to fend for themselves, and that goes for household chores too. Here are a few items all students need to get the job done right.

Laundry detergent: Find a favorite scent and stick with it. A good idea may be to find a detergent that works for both colors and whites, just in case the college student in your life forgets the laundry rules.

Vacuum: Keeping a dorm room tidy is easy with a small vacuum. Even a dust buster will do.

Paper towels: Stock up on paper towels to clean up any accidents, or to double as napkins when needed.

Wipes: Keep cleaning simple by purchasing a few canisters of wet wipes and use them regularly to disinfect surfaces.

Recommended: Using Student Loans for Living Expenses and Housing

Preparing to Pay for It All

Looking at this list, it’s clear that getting everything on your college packing list can get expensive. But, rather than stress about if you can afford cleaning supplies, linens, and office supplies, students can financially plan for what’s ahead by looking into all their college funding options, which may include savings, grants, scholarships, work-study, and federal subsidized and unsubsidized loans.

If you still have funding gaps, you may also want to consider applying for a private student loan. These are available from banks, credit unions, and online lenders. Students who have good credit (or cosigners who do) typically qualify for the best rates and terms. Just keep in mind that private student loans don’t offer the same protections, such as government-sponsored forgiveness programs, that come with federal loans.

💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

The Takeaway

Getting ready for college requires a lot of planning, packing, and organizing. To create your ultimate packing essentials list, think about your current day to day routine — what items do you use the most frequently?

It can be helpful to break the items on your packing list up into categories like school supplies, bedroom, kitchen, and bathroom so that you can compartmentalize and review smaller pieces at a time. With all your essentials in hand, you can focus on the big picture… like picking the right college major and figuring out how you’ll cover the cost of your college education.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

 

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Maxing out your 401(k) involves contributing the maximum allowable to your workplace retirement account to increase the benefit of compounding and appreciating assets over time.

All retirement plans come with contribution caps, and when you hit that limit it means you’ve maxed out that particular account.

There are a lot of things to consider when figuring out how to max out your 401(k) account. And if you’re a step ahead, you may also wonder what to do after you max out your 401(k).

What Does It Mean to Max Out Your 401(k)?

Maxing out your 401(k) means that you contribute the maximum amount allowed by law in a given year, as specified by the established 401(k) contribution limits. But it can also mean that you’re maxing out your contributions up to an employer’s percentage match, too.

If you want to max out your 401(k) in 2023, you’ll need to contribute $22,500 annually. If you’re 50 or older, you can contribute an additional $7,500, for an annual total of $30,000. Starting in 2024, people who are 50 or older and make more than $145K will have to put the additional amount, the catchup contribution, in a Roth account.

For some quick background, 401(k) plans are one of the most common types of retirement plans in the U.S. They are employer-sponsored accounts that allow both you and your employer to make contributions.

When you set up a 401(k), you can opt to have a certain amount or percentage of your paycheck go directly to your 401(k), and sometimes an employer will match your own contributions up to a certain percentage or dollar amount. For example, you might contribute 3%, and your employer might match your 3% dollar for dollar, for a total of 6%. If your employer’s maximum match is 3%, and you contribute up to that matching amount, then in this case, you’re “maxing out” your 401(k).

If you were contributing less than 3%, you might want to make changes to your 401(k) contributions to “max” it out.

But on a broader scale, and what we’ll stick with for the purposes of this piece, maxing out a 401(k) primarily refers to contributing as much as legally possible during a given year.

So, to max out a 401(k) for tax year 2023, an employee would need to contribute $22,500 in salary deferrals — or $30,000 if they’re over age 50. Some investors might think about maxing out their 401(k) as a way of getting the most out of their retirement savings strategy.

Is It Good to Max Out Your 401(k)?

Generally speaking, yes, it’s a good thing to max out your 401(k) so long as you’re not sacrificing your overall financial stability to do it. Saving for retirement is important, which is why many financial experts would likely suggest maxing out any employer match contributions first.

But while you may want to take full advantage of any tax and employer benefits that come with your 401(k), you also want to consider any other financial goals and obligations you have before maxing out your 401(k).

That doesn’t mean you should put other goals first, and not contribute to your retirement plan at all. That’s not wise. Maintaining a baseline contribution rate for your future is crucial, even as you continue to save for shorter-term aims or put money toward debt repayment.

Other goals could include:

•   Is all high-interest debt paid off? High-interest debt like credit card debt should be paid off first, so it doesn’t accrue additional interest and fees.

•   Do you have an emergency fund? Life can throw curveballs—it’s smart to be prepared for job loss or other emergency expenses.

•   Is there enough money in your budget for other expenses? You should have plenty of funds to ensure you can pay for additional bills, like student loans, health insurance, and rent.

•   Are there other big-ticket expenses to save for? If you’re saving for a large purchase, such as a home or going back to school, you may want to put extra money toward this saving goal rather than completely maxing out your 401(k), at least for the time being.

Once you can comfortably say that you’re meeting your spending and savings goals, it might be time to explore maxing out your 401(k). There are many reasons to do so — it’s a way to take advantage of tax-deferred savings, employer matching (often referred to as “free money”), and it’s a relatively easy and automatic way to invest and save, since the money gets deducted from your paycheck once you’ve set up your contribution amount.

6 Steps to Maxing Out Your 401(k)

For 2023, the IRS has set the 401(k) contribution limit as $22,500 in salary deferrals. Individuals over the age of 50 can contribute an additional $7,500 in catch-up contributions. Only a relatively small percentage of people actually do max out their 401(k)s, however. Here are some strategies for how to max out your 401(k).

1. Max Out 401(k) Employer Contributions

Your employer may offer matching contributions, and if so, there are typically rules you will need to follow to take advantage of their match.

An employer may require a minimum contribution from you before they’ll match it, or they might match only up to a certain amount. They might even stipulate a combination of those two requirements. Each company will have its own rules for matching contributions, so review your company’s policy for specifics.

For example, suppose your employer will match your contribution up to 3%. So, if you contribute 3% to your 401(k), your employer will contribute 3% as well. Therefore, instead of only saving 3% of your salary, you’re now saving 6%. With the employer match, your contribution just doubled. Note that employer contributions can range from nothing at all to upwards of 15%. It depends.

Since saving for retirement is one of the best investments you can make, it’s wise to take advantage of your employer’s match. Every penny helps when saving for retirement, and you don’t want to miss out on this “free money” from your employer.

If you’re not already maxing out the matching contribution and wish to, you can speak with your employer (or HR department, or plan administrator) to increase your contribution amount, you may be able to do it yourself online.

2. Max Out Salary-Deferred Contributions

While it’s smart to make sure you’re not leaving free money on the table, maxing out your employer match on a 401(k) is only part of the equation.

In order to make sure you’re setting aside an adequate amount for retirement, consider contributing as much as your budget will allow. Again, individuals younger than age 50 can contribute up to $22,500 in salary deferrals per year — and if you’re over age 50, you can max out at $30,000 in 2023.

It’s called a “salary deferral” because you aren’t losing any of the money you earn; you’re putting it in the 401(k) account and deferring it until later in life.

Those contributions aren’t just an investment in your future lifestyle in retirement. Because they are made with pre-tax dollars, they lower your taxable income for the year in which you contribute. For some, the immediate tax benefit is as appealing as the future savings benefit.

3. Take Advantage of Catch-Up Contributions

As mentioned, 401(k) catch-up contributions allow investors over age 50 to increase their retirement savings — which is especially helpful if they’re behind in reaching their retirement goals. Individuals over age 50 can contribute an additional $7,500 for a total of $30,000 for the year. Putting all of that money toward retirement savings can help you truly max out your 401(k).

As you draw closer to retirement, catch-up contributions can make a difference, especially as you start to calculate when you can retire. Whether you have been saving your entire career or just started, this benefit is available to everyone who qualifies.

And of course, this extra contribution will lower taxable income even more than regular contributions. Although using catch-up contributions may not push everyone to a lower tax bracket, it will certainly minimize the tax burden during the next filing season.

4. Reset Your Automatic 401(k) Contributions

When was the last time you reviewed your 401(k)? It may be time to check in and make sure your retirement savings goals are still on track. Is the amount you originally set to contribute each paycheck still the correct amount to help you reach those goals?

With the increase in contribution limits most years, it may be worth reviewing your budget to see if you can up your contribution amount to max out your 401(k). If you don’t have automatic payroll contributions set up, you could set them up.

It’s generally easier to save money when it’s automatically deducted; a person is less likely to spend the cash (or miss it) when it never hits their checking account in the first place.

If you’re able to max out the full 401(k) limit, but fear the sting of a large decrease in take-home pay, consider a gradual, annual increase such as 1% — how often you increase it will depend on your plan rules as well as your budget.

5. Put Bonus Money Toward Retirement

Unless your employer allows you to make a change, your 401(k) contribution will likely be deducted from any bonus you might receive at work. Many employers allow you to determine a certain percentage of your bonus check to contribute to your 401(k).

Consider possibly redirecting a large portion of a bonus to 401k contributions, or into another retirement account, like an individual retirement account (IRA). Because this money might not have been expected, you won’t miss it if you contribute most of it toward your retirement.

You could also do the same thing with a raise. If your employer gives you a raise, consider putting it directly toward your 401(k). Putting this money directly toward your retirement can help you inch closer to maxing out your 401(k) contributions.

6. Maximize Your 401(k) Returns and Fees

Many people may not know what they’re paying in investment fees or management fees for their 401(k) plans. By some estimates, the average fees for 401(k) plans are between 1% and 2%, but some plans can have up to 3.5%.

Fees add up — even if your employer is paying the fees now, you’ll have to pay them if you leave the job and keep the 401(k).

Essentially, if an investor has $100,000 in a 401(k) and pays $1,000 or 1% (or more) in fees per year, the fees could add up to thousands of dollars over time. Any fees you have to pay can chip away at your retirement savings and reduce your returns.

It’s important to ensure you’re getting the most for your money in order to maximize your retirement savings. If you are currently working for the company, you could discuss high fees with your HR team. One of the easiest ways to lower your costs is to find more affordable investment options. Typically, the biggest bargains can be index funds, which often charge lower fees than other investments.

If your employer’s plan offers an assortment of low-cost index funds or institutional funds, you can invest in these funds to build a diversified portfolio.

If you have a 401(k) account from a previous employer, you might consider moving your old 401(k) into a lower-fee plan. It’s also worth examining what kind of funds you’re invested in and if it’s meeting your financial goals and risk tolerance.

What Happens If You Contribute Too Much to Your 401(k)?

After you’ve maxed out your 401(k) for the year — meaning you’ve hit the contribution limit corresponding to your age range — then you’ll need to stop making contributions or risk paying additional taxes on your overcontributions.

In the event that you do make an overcontribution, you’ll need to take some additional steps such as letting your plan manager or administrator know, and perhaps withdrawing the excess amount. If you leave the excess in the account, it’ll be taxed twice — once when it was contributed initially, and again when you take it out.

What to Do After Maxing Out a 401(k)?

If you max out your 401(k) this year, pat yourself on the back. Maxing out your 401(k) is a financial accomplishment. But now you might be wondering, what’s next? Here are some additional retirement savings options to consider if you have already maxed out your 401(k).

Open an IRA

An individual retirement account (IRA) can be a good complement to your employer’s retirement plans. The pre-tax guidelines of this plan are pretty straightforward.

You can save up to $6,500 pre-tax dollars in an IRA if you meet individual IRS requirements for tax year 2023. If you’re 50 or older, you can contribute an extra $1,000, totaling $7,500, to an IRA.

You may also choose to consider a Roth IRA. Roth IRA accounts have income limits, but if you’re eligible, you can contribute with after-tax dollars, which means you won’t have to pay taxes on earnings withdrawals in retirement as you do with traditional IRAs.

You can open an IRA at a brokerage, mutual fund company, or other financial institution. If you ever leave your job, you can roll your employer’s 401(k) into your IRA without facing any tax consequences as long as they are both traditional accounts and it’s a direct rollover – where funds are transferred directly from one plan to the other. Doing a rollover may allow you to invest in a broader range of investments with lower fees.

Boost an Emergency Fund

Experts often advise establishing an emergency fund with at least six months of living expenses before contributing to a retirement savings plan. Perhaps you’ve already done that — but haven’t updated that account in a while. As your living expenses increase, it’s a good idea to make sure your emergency fund grows, too. This will cover you financially in case of life’s little curveballs: new brake pads, a new roof, or unforeseen medical expenses.

The money in an emergency fund should be accessible at a moment’s notice, which means it needs to comprise liquid assets such as cash. You’ll also want to make sure the account is FDIC insured, so that your money is protected if something happens to the bank or financial institution.

Save for Health Care Costs

Contributing to a health savings account (HSA) can reduce out-of-pocket costs for expected and unexpected health care expenses. For tax year 2023, eligible individuals can contribute up to $3,850 pre-tax dollars for an individual plan or up to $7,750 for a family plan.

The money in this account can be used for qualified out-of-pocket medical expenses such as copays for doctor visits and prescriptions. Another option is to leave the money in the account and let it grow for retirement. Once you reach age 65, you can take out money from your HSA without a penalty for any purpose. However, to be exempt from taxes, the money must be used for a qualified medical expense. Any other reasons for withdrawing the funds will be subject to regular income taxes.

Increase College Savings

If you’re feeling good about maxing out your 401(k), consider increasing contributions to your child’s 529 college savings plan (a tax-advantaged account meant specifically for education costs, sponsored by states and educational institutions).

College costs continue to creep up every year. Helping your children pay for college helps minimize the burden of college expenses, so they hopefully don’t have to take on many student loans.

Open a Brokerage Account

After you max out your 401(k), you may also consider opening a brokerage account. Brokerage firms offer various types of investment account brokerage accounts, each with different services and fees. A full-service brokerage firm may provide different financial services, which include allowing you to trade securities.

Many brokerage firms require you to have a certain amount of cash to open their accounts and have enough funds to account for trading fees and commissions. While there are no limits on how much you can contribute to the account, earned dividends are taxable in the year they are received. Therefore, if you earn a profit or sell an asset, you must pay a capital gains tax. On the other hand, if you sell a stock at a loss, that becomes a capital loss. This means that the transaction may yield a tax break by lowering your taxable income.

Will You Have Enough to Retire After Maxing Out 401(k)?

There are many factors that need to be considered, however, start by getting a sense of how much you’ll need to retire by using a retirement expense calculator. Then you can decide whether maxing out your 401(k) for many years will be enough to get you there, even assuming an average stock market return and compounding built in.

First and foremost, you’ll need to consider your lifestyle and where you plan on living after retirement. If you want to spend a lot in your later years, you’ll need more money. As such, a 401(k) may not be enough to get you through retirement all on its own, and you may need additional savings and investments to make sure you’ll have enough.

Pros and Cons of Maxing Out Your 401(k)

There are some pros and cons to maxing out your 401(k).

Pros of 401(k) Max Out

The most obvious advantage to maxing out your 401(k) is that your retirement savings account will be bigger, which can lead to more growth over time. That’s critical if you hope to indeed retire some day, and by maxing out your 401(k) every year, you might be able to hit your goals sooner.

Maxing out your 401(k) can also make your saving and investing relatively easy, as long as you’re taking a no-lift approach to setting your money aside thanks to automatic contributions.

Cons of 401(k) Max Out

The downsides of maxing out a 401(k) include the fact that not everyone is in a financial position to do so. Depending on your specific financial situation, you simply may not be able to afford to contribute the maximum amount per year, especially if you’re also tackling debt and taking aim at other savings goals.

There are also opportunity costs to consider, which boil down to the fact that you may be able to do something else with your money besides put it in your retirement plan. For instance, during years when the stock market realizes substantial returns, your money could be more immediately accessible if invested in these assets via a non-retirement account, rather than being tied up in a retirement fund.

That said, putting money away — no matter how you do it — isn’t necessarily a bad thing, and it’s likely always better than frittering it away on unnecessary expenditures.

The Takeaway

Maxing out your 401(k) involves matching your employer’s maximum contribution match, and also, contributing as much as legally allowed to your retirement plan in a given year. For 2023, that limit is $22,500, or $30,000 if you’re over age 50. If you have the flexibility in your budget to do so, maxing out a 401(k) can be an effective way to build retirement savings.

And once you max out your 401(k)? There are other smart ways to direct your money. You can open an IRA, contribute more to an HSA, or to a child’s 529 plan. If you’re looking to roll over an old 401(k) into an IRA, or open a new one, SoFi Invest® can help. SoFi doesn’t charge commissions (the full fee schedule is here), and you can access complimentary professional advice.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

What happens if I max out my 401(k) every year?

Assuming you don’t overcontribute, you may see your retirement savings increase if you max out your 401(k) every year, and hopefully, be able to reach your retirement and savings goals sooner.

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Claw Promotion: Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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