I’m not a financial advisor, but a rule of thumb is that you want to invest a higher percentage of your portfolio in stocks the further away you are from retirement. As you get closer to retiring, you’d want to shift more of your allocation towards bonds since you’ll be more dependent on your portfolio and you’ll likely start drawing down on it to support your lifestyle expenses. I personally invest all of my 401(k) contributions in an S&P 500 index fund and I see no need to hold bits and pieces in many different funds. Also, to your point about “underperforming funds”, if you’re referring to funds with poor returns over the short-term, that’s just part of investing in stocks. Sometimes returns can be negative during the short-term, it’s completely normal.

That’s awesome that you’re able to contribute to both a 403b and 457 plan. It sounds like those savings are starting to add up pretty quickly – kudos to you!

Thank you for the comment! That does appear to be correct and since my wife and I are not trying to do anything too fast with regards to FIRE, this is incredibly helpful. I completely forgot about the rule myself.

Again, thanks!

Yes, Barry! My wife and I also both work in education and have recently started maxing both the 403(b) and 457. It’s an amazing amount going in pre-tax.

Thanks for the article, Zach. I’d done some quick runs to come to the same conclusion, but as always yours are meticulous and well illustrated. I always find your posts informative.

Hi Barry, I just wanted to point out something Zach didn’t mention in his post! There is another rule about accessing 401(k) money early that might help you out. I don’t know the in’s-and-out’s of it 100%, but it’s something like if you turn 55 and still work for the company that you have your 401k with, then I believe you can retire at any point during the year you turn 55 and access the money penalty-free. Check it out! It’s a little-known rule.

Also to Zach, thanks for the great article! I really enjoyed it. Also, it’s evident in your graphics, but you DO pay Social Security and Medicare tax even on pre-tax contributions. So it doesn’t completely slip by the tax man, but still better I reckon! I never realized it until I was creating an Excel spreadsheet for my paycheck breakdown one day haha.