Saving $1 million for retirement is a genuine milestone worth celebrating. Anyone who reaches that number is officially a millionaire, and the habits that got them there, paying themselves first and avoiding lifestyle creep, are worth keeping. Once the celebrations settle down, though, smart savers start asking harder questions. The following Redditor is doing exactly that, wondering whether continuing to pile money into a 401(k) is still the right move.
After crossing the seven-figure mark, a conversation with a financial planner becomes more than just a good idea. The questions go well beyond monthly budgets. Choosing the right securities, maintaining a sound asset allocation, and optimizing for taxes are the levers that can turn a first million into a far larger fortune over the long haul.
In this piece, we check in on a new millionaire couple who is wondering whether it makes sense to keep maxing out a 401(k) or redirect some of that savings power elsewhere.
The couple is in their late 30s with three children, a good mix of assets spread across several account types, and only $12,000 parked in a taxable brokerage. Given that profile, there is a reasonable case for redirecting some contributions toward accounts that offer easier access when life gets expensive. But is there actually such a thing as having “too much” in a 401(k)?
The Math: What “Maxing Out” Actually Looks Like Today
Contributing above the legal maximum is one clear answer to that question, but the math makes a subtler case as well. For 2026, the IRS raised the individual 401(k) employee deferral limit to $24,500, up from $23,500 in 2025. Savers aged 50 to 59 or 64 and older can add a catch-up contribution of $8,000 on top of that ceiling, while those between 60 and 63 are eligible for an enhanced super catch-up of $11,250 under a SECURE 2.0 provision. When one spouse earns $45,000 per year, maxing out a traditional workplace account means deferring more than 54% of gross income into a locked retirement pool. For a growing family with near-term expenses on the rise, concentrating that much of a paycheck into a restrictive account creates a real liquidity problem.
The 401(k) is a great tool. But can one overdo it?
For a spouse earning a modest salary, receiving no employer match, holding limited cash outside retirement accounts, and facing rising costs across three young children, the more pressing risk is not an oversized 401(k) balance. The real danger is having too little accessible outside of one. Every dollar locked behind an early-withdrawal penalty is a dollar that cannot cover a car repair, a medical bill, or a tuition payment without triggering a tax hit on top of a 10% penalty.
Anyone searching for the right account allocation strategy should consult a professional. The upfront cost is real, but in most cases the value of good advice more than covers the fee, especially as net worth and financial complexity grow. A household sitting at $1 million with a mixed account structure and three dependents is precisely the kind of situation where professional guidance earns its keep.
Three children are expensive, and those costs compound quickly as they age. Keeping all assets tied up in a 401(k) sacrifices flexibility. Tax deferral is a meaningful benefit when income is high, but that calculation shifts considerably when one earner’s salary is modest.
Flipping the Script: The Roth Alternative for Lower Brackets
When one spouse earns $45,000, that income falls squarely in the lower federal tax brackets. Deferring taxes today through a Traditional 401(k) produces only a minimal benefit, because the rate being avoided is already low. That dynamic makes a strong case for a Roth 401(k) or a Roth IRA instead. For 2026, the IRS set the IRA contribution limit at $7,500 for savers under age 50, up from $7,000 in 2025. Savers 50 and older can now contribute an additional $1,100 in catch-up funds, bringing their total to $8,600. Notably, that $1,100 catch-up figure represents the first inflation-indexed increase to the IRA catch-up limit under SECURE 2.0, having been fixed at $1,000 for years. For the lower-earning spouse in this scenario, the Roth IRA offers a useful liquidity backstop: principal contributions can be withdrawn at any time without taxes or penalties, giving the household a genuine fallback fund even while retirement growth compounds tax-free.
One additional wrinkle worth knowing: a SECURE 2.0 provision now requires that catch-up contributions made by workers who earned more than $150,000 in prior-year FICA wages be designated as Roth starting in 2026. The threshold, which was indexed upward from $145,000 to $150,000 for this year, applies to plans that offer Roth features. For the lower-earning spouse in this scenario, the rule simply does not apply, which makes the Roth path even more straightforward.
Mitigating the Liquidity Trap: How to Access “Locked” Funds Early
A young family should know that retirement accounts are not completely sealed vaults until old age. If assets end up heavily concentrated in pre-tax accounts, there are established strategies for accessing funds early without triggering the standard 10% IRS penalty. One common approach is a Roth IRA conversion ladder, where pre-tax funds are shifted systematically to a Roth account and accessed penalty-free after a five-year seasoning period. Another is Substantially Equal Periodic Payments under IRS Section 72(t), which allows for structured early distributions calculated using life expectancy. Neither path is frictionless, but both are legitimate tools for households that have over-concentrated in tax-deferred accounts and need a way to reach their money before traditional retirement age.
The Bottom Line
The 401(k) is a powerful savings vehicle, and that power can cut both ways. Maximizing contributions is not the right call every year for every household. The answer depends on income, near-term expenses, the presence or absence of an employer match, and where the saver expects each of those variables to go over the next several years. A lower-earning spouse facing a $24,500 annual limit on a $45,000 salary faces very different math than a high-income earner who can comfortably absorb the deferral. Tax deferral and liquidity are real trade-offs, and finding the right balance is a personal calculation best made with a qualified adviser in the room.
Editor’s note: This article was updated to include the 2026 IRA catch-up contribution of $1,100 (up from $1,000 in 2025, marking the first COLA-indexed increase under SECURE 2.0) and the resulting $8,600 total IRA limit for savers 50 and older, as well as the 401(k) catch-up limits of $8,000 for ages 50-59 and 64+ and $11,250 for ages 60-63. The SECURE 2.0 Roth catch-up threshold was also clarified: the $150,000 FICA wage limit was indexed upward from $145,000 for 2026.
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