Balancing Your 401k: Smart Retirement Savings for Every Age

How Much Should I Contribute To My 401(k) Or 403(b)?

Ever wondered if you're putting too much—or too little—into your retirement accounts? This question plagues nearly every working adult, but the answer isn't as straightforward as many financial advisors might suggest.

In this deeply insightful conversation, Cody Stansell reveals a revolutionary perspective on 401k and 403b contributions that challenges conventional wisdom. Rather than pushing the "max out your retirement" mantra, he explains why your age fundamentally changes how you should approach retirement savings. For those over 45, he unveils a mathematical tipping point where investment returns actually drive more growth than your contributions—potentially freeing up cash flow for other priorities like long-term care insurance, mortgage payoff, or enjoying life with family.

The discussion demystifies the pre-tax versus Roth contribution decision with a simple "two trees" analogy that clarifies exactly when each option makes sense for your tax situation. For younger savers, Cody provides practical guidance for balancing retirement savings with debt repayment and emergency funds, explaining why capturing your employer match might be sufficient during certain life stages.

What truly distinguishes this episode is how it weaves financial wisdom with faith-based stewardship principles. "The whole goal is not just to accumulate zeros and commas," Cody reminds us, emphasizing that moderation and balance should guide our financial decisions. This perspective transforms retirement planning from a numbers game into a thoughtful exercise in building a life that honors both present needs and future security.

Ready to apply these insights to your own financial journey? Visit Stansellwealth.com for a complimentary consultation or call 469-606-2040 to speak with an advisor who understands both financial wisdom and faith-based values.

To learn more about Stansell Wealth Planning visit:
https://www.StansellWealth.com
Stansell Wealth Planning
5550 Granite Pkwy, STE 270
Plano, TX 75024
469-606-2040

Episode Transcript

Speaker 1 (00:04):
Welcome to the Steadfast Wealth Planning
Podcast, where faith andfinancial wisdom come together.
Hosted by Cody Stansel, ownerand senior wealth advisor, we
provide comprehensiveChristian-based financial
planning to help families,individuals and business owners
build a life they're proud tolive.
From investment management andtax planning to preparing for

(00:25):
retirement, we're here to guideyou with clarity, integrity and
purpose.
Let's get started.

Speaker 2 (00:36):
When it comes to retirement savings, there's no
one-size-fits-all formula.
In this episode, Cody walks usthrough how to approach 401k or
403b contributions with strategyand stewardship.
Welcome back everyone.
I'm Sophia Yvette, co-host andproducer, back in the studio
today with Cody Stansel, SeniorWealth Advisor for Steadfast

(01:00):
Wealth Planning.
Cody, how's it going?

Speaker 3 (01:03):
Hey, Sophia Doing well.
How are you guys doing?

Speaker 2 (01:06):
Doing great here, Cody, Now excited to dig into
this one.
Retirement questions are wherefaith and financial foresight
really come together.
So, Cody, how much should Icontribute to my 401k or my 403b
?

Speaker 3 (01:24):
Yeah, question as old as time as it seems like that's
one of the first ones weusually get from when we meet
with new people.
I'm going to break it down intothere's really two answers okay
, enough to be on track forretirement, that's an obvious
one.
And then two, to benefit fromthe tax advantages right, that's
why 401ks and 403bs exist.

(01:45):
Is a tax advantaged way to savefor your own retirement, right?
The short answer to all of thisis we meet with clients
one-on-one and we have softwareand we go through.
Truly, what do you earn?
Okay, let's look at your 401k.
What's your employer match?
It really is unique to everysingle client.
Every client's a little bitdifferent, so take that with a

(02:07):
grain of salt.
But I get into some detailshere for the podcast, obviously.
So I'll start off.
If you are 55 years old oryounger I'm going to stereotype
here I would put you in thesecond answer enough to benefit
from the tax advantages of the401k If you are 45 years or
older.
The first answer enough to beon track for retirement is where

(02:29):
I'd categorize you.
I'll get to the 45 and youngerhere in a second, but I want to
speak on the 45 and older firsthow much you contribute to
retirement is more of an overallplanning, financial planning
topic At this stage of your life.
Once again, if you're 45 orolder, retirement isn't just a
word anymore, right, it'sstarting to become a reality.
In the next decade or two,you're most likely closer to

(02:51):
retirement than college.
Let that sobering fact sink inright for a lot of folks.
So I see a lot of clients thatjust max out their 401k, not
thinking about it, and move on,and that's not bad per se, but
there are maybe someopportunities you're missing out
on.
Once again, we have softwarethat shows where you are today
with your balance, contributions, your investments, et cetera.

(03:13):
Then we discuss where you wantto go Retire at 62, 65, spending
10,000 a month, 20,000 a month,whatever it may be, with travel
, eating, grandkids, medicare,social Security.
It's a really overall financialplanning thing.
So we can forecast.
Is maxing out your 401k needed,is it enough?
Are there other things I shouldbe doing with my cash flow?

(03:35):
Really dive into all that.
Most people don't realize thisone.
You may be better off focusingyour cash flow somewhere else at
this stage in your life thanjust maxing out your 401k or
contributing to it.
And stay with me here.
There's at some point yourinvestment returns really start
driving more of your balancegrowth than how much you

(03:55):
contribute to it.
So I'm going to say it againthere's a point where your
investment balance gets largeenough where your actual
investment returns are moresignificant to your overall
growth of your account balancethan what you add to it from
each paycheck.
Okay, so, for example, if youhave a hundred thousand dollars

(04:16):
in your 401k and you'recontributing 23 000, well, a 10%
rate of return on your $100,000balance is $10,000, right, just
basic math.
So you adding $23,000 is morethan twice as impactful than
what your investments actuallyearned you that particular year,

(04:37):
right.
But as you get older, as yourinvestment balance grows.
Same example, but let's justsay your balance is now $500,000
and you still contribute thatsame $23,000.
A 10% rate of return on$500,000 invested is now $50,000
.
Now it's flipped right.
Your investment balance it'smore than twice as impactful

(05:01):
than you contributing to your401k, contributing to your 401k.
So over time, I actually show alot of clients hey, instead of
putting in 23,000, which that'sthe max for 2025 is why I'm
saying that number, that's themost the IRS will allow you to
put in, instead of adding thatto your 401k.
Maybe there's some other thingswe can do with that money and

(05:22):
help your cashflow right.
Let's open a brokerage accountthat you can access before you
retired so you can buy a lakehouse or spend it on your
grandkids.
There's long-term careinsurance that we may need to
pay for, and where's thatcashflow going to come from
right?
Paying taxes if you have Rothconversions aka moving

(05:42):
traditional IRA or traditional401k and converting it to a Roth
there's going to be a tax billwith that.
Or we may need to have yourmortgage paid off in the next 10
years for you to be able toretire.
Maybe that's where thatcashflow should go.
So once again, I put folks in acertain category for this
podcast, but if you're a 45 orplus, I may want you to

(06:06):
contribute to your 401k less, alittle bit less than a lot of
people think.

Speaker 2 (06:12):
Understood.
Now can you explain thedifference between pre-tax and
Roth contributions, and onemight be better than the other.

Speaker 3 (06:22):
Yeah, absolutely, and I'll get to that here in a
little bit.
It's all the tax situation.
So, pre-tax, think of two trees, if you will,000, you
contribute $10,000 to yourtraditional IRA.
The IRS is only going to taxyou on $90,000.

(06:55):
So you're going to owe from thejump less than taxes by doing
that.
That money is invested, itgrows and grows and grows.
You add to it.
It grows to a bucket of moneyIn retirement.
When you take money out to abucket of money in retirement,
when you take money out of atraditional 401k or traditional
ira, that's where the tax billcomes in.
So any money you take out thatcalendar year is a tax taxable

(07:17):
income to you, right?
So think of that as tax benefittoday.
But oh, I'm gonna have to paytaxes at some point in the
future.
A Roth is the exact opposite.
Right same example you make ahundred thousand dollars.
You contribute ten thousanddollars to your Roth 401k or
your Roth IRA.
The IRS still tax taxes you ona hundred thousand dollars that

(07:40):
you made.
They don't care.
That you contribute to itdoesn't affect your taxes today
at all.
But the difference is that moneygrows and grows and grows over
time.
You add to it Doesn't affectyour taxes today at all.
But the difference is thatmoney grows and grows and grows.
Over time you add to it thatbucket of money, that tree, is
now 100% tax free, right?
So it's a beautiful thing.
And this is where we sit downwith clients and say, okay,

(08:00):
where's your tax situation today?
Like, what tax bracket are youin, what kind of income do you
have and what makes senseContributing to the pre-tax
portion, contributing to yourRoth 401k, doing a little bit of
both to get you in a certaintax bracket.
So that's the overall scope ofit.
Obviously, we sit down withclients and have a detailed

(08:20):
recommendation form amazing.

Speaker 2 (08:24):
now final question for you today Are there
spiritual or lifestyleconsiderations that influence
how much someone should save?

Speaker 3 (08:34):
Yes, great question.
That is more so the planningaspect as well.
The whole goal is not justaccumulate zeros and commas on
your number and retire and neverget to benefit or bless others
with that money.
Right?
There's such a thing asoverdoing it, right?
We don't want to overdo it andjust have so much money but we

(08:54):
never had any fun or we nevertook our grandkids on a vacation
or something like that.
It's moderation On the flipside.
You don't want to just livelife right now and never save,
and now you're poor when you're70.
That's not the right answereither.
It's about moderation and it'sabout balance, balancing today
with 10 years from now, 30 yearsfrom now.

(09:16):
So that's a spiritual aspect,as well as just benefiting
yourself, benefiting other folkstoday and in the future, and
having that balanced approachstewardship mentality.
Absolutely.
And then, real quick, I do wantto talk on the 45 or younger.
Uh, just real quick, I'll walkthrough that.
So the reason originally when Ihad the two different, uh, you

(09:38):
know, 45 or older or 45 oryounger, if you're younger than
45, life will change so much inthe next 15, 20, 25 years that
it's really hard to hone in on.
Okay, what's the exactpercentage that we should be
contributing?
Right, the Lord's looking down,chuckling that we're trying to
forecast 20 years in the future,right?
So a blanket answer.

(10:00):
If you don't have an advisor,how much should I contribute?
15% is a blanket.
Just say 15% of what you make.
That's a great starting point.
Once again, over time, talkingwith a professional and honing
in that number doesn't need tobe 17%, doesn't need to be 12.
That's really where that fallsin line.
But obviously we do this for aliving and we have more detailed

(10:20):
recommendations.
So, baseline, it's 15%, but forfolks' situation and depending
on where you're at in life hey,cody, I'm still paying off debt.
Should I contribute to my 401k?
Hey, cody, we don't have muchin a savings account.
You know, we're one waterheater exploding or fence
falling over from dipping intoour retirement account or

(10:43):
putting on a credit card.
If you're in those phases oflife, I'm going to want you to
back off what you'recontributing to a 401k to focus
on those topics, right?
So I'd say, if you're in thatphase where you're working on
building your cash or paying offdebt, contribute the minimum to
get your employer match.
So most companies will match acertain percentage of what you

(11:05):
put in your 401k, but the mostcommon company match is about 3%
.
Some do more, some do less, butI will warn you, be careful.
Some company matches have a 50%or 25% up to a certain number.
So if they match 50% up to 3%,what that really means is you

(11:26):
must contribute 6% and they'lldo 50% of that number, and so
they'll contribute three.
But you have to contribute sixto get all of that three.
Some folks just think, oh, I'llput in three to get the three
and it's like, oh, if you put inthree, you're only going to get
one and a half, right?
So every 401k is a little bitdifferent.
So, looking at that, one is agood one and, once again, if you

(11:50):
are working on building cash orpaying off debt, I would do the
minimum to the 401k to get thematch, but focus the rest of
your cash flow on those othergoals and then, over time, once
your cash is in a good spot,once your debt is paid off or in
a good spot, then let's bump itback up, either to that 15% or
sit down with a professional.

(12:10):
If we can go through what weexactly recommend.

Speaker 2 (12:14):
Wow.
Thank you so much for sharingthose insights with us today,
cody.
Appreciate the wisdom and theencouragement, as always.
Can't wait to join you nexttime for another step forward
toward faithful financial living.
Take care, cody.

Speaker 3 (12:28):
Absolutely.
Thanks, Sophia.
God bless you.
Faithful financial living.
Take care, Cody.

Speaker 1 (12:32):
Absolutely.
Thanks, sophia.
God bless you.
Thanks for joining us on theSteadfast Wealth Planning
Podcast.
Ready to take the next step inyour financial journey, visit
steadfastwealthplanningcom for acomplimentary consultation or
call 469-606-2040.
Smart planning, christianvalues, a life well lived.

(12:54):
We'll see you next time.