How To Max Out Retirement Accounts For New Grads

7 min read

Max out my retirement accounts?! But Change Chumps!! I just graduated and I really really really wanna blow my first paycheck on drinks and restaurants! But then you said to save money, do this do that and start investing. And I’m so confused and there’s so many things out there and I’m afraid I’ll f*** it up! Can you help me??!

Oh lawddddd… Yes, you must max out your retirement accounts. But first things first.


First, this is going to be a quick and dirty guide. No crazy details, no nothing. I say, you do. Shoot first then ask questions later. I’d still suggest that you read up on some more so you get a sense of what you’re really accomplishing.

Second, I’m not a financial advisor or a financial planner or a CPA. I’m just an Average Chump who decided to dive deep into money things because I’m curious and I like watching my money grow. Laws change, regulations change, new presidents get elected. Always check 3rd-party advice with someone qualified first.

Brokerages that I use to max out my retirement accounts

I know I’m going to keep getting these questions, so as a preemptive strike, I will list my brokerages. No affiliates:

  • Vanguard (Taxable + Traditional and Roth IRA)
  • Fidelity (Health Savings Account)
  • Charles Schwab (Traditional IRA)


Gee-louise. OK, first let’s look at the Chump Change definition of the word “investing”.

Investing is simple (but not always easy)

Make $1 today worth more than $1 tomorrow.

This is your one and only job.

If you’re able to repeat this process consistently, then you know how to invest and you can stop reading here.

Before we even think about investing though, we have to get the money, and after we get it, we have to make sure we can keep it! So it goes something like this:

Make cash: work, side hustle, gift, inheritance, business

Protect cash: savings rate strategy, budgeting, tax avoidance, tax deferment, tax deduction

Multiply cash: short-term, long-term investing, real estate

Uncle Sam wants your money.
“I want you to multiply your money.”

All of these can be extremely lengthy topics. However, this article will focus on tax avoidance because I found that a lot of my coworkers aren’t taking advantage of any of this stuff! I have to admit it can be quite intimidating for someone who never bothered to dive into personal finance.

I really think tax code was made that way so that the Average Chump had no chance of keeping their hard-earned money. Maybe another trick? Let’s begin!

Max out retirement accounts = hide your money

No, I don’t mean to stash it under the mattress.

Before we even think about investing, we need to protect our hard-earned $$$ so Uncle Sam doesn’t take it away. We must decrease our tax-burden.

Trying to invest while tax-ridden is like racing with an open parachute.

I just made up that quote.
Hide your money by maxing out your retirement accounts
That’s not really how to hide it either but that’ll do.

Get that 401k employer match – For W2 chumps

This is the EASIEST one to do. If you don’t do it I’m going to come through the screen and yell at you drill-sergeant style.

If you work for a decent company, chances are they offer a matching 401k retirement plan. What that means is that you can put money away in that account with 3 benefits:

  1. Tax-free going in.
  2. Tax-free gains on investment
  3. Your employer will also contribute the same amount (or %) you did (up to total amount)

Say you contributed 3.5k for the year (5% max that your employer matches). Your employer will also add $3.5k. At the end of the year you have $7k in the account.

That’s like free money and it’s so easy!

That’s what I said.

So then I can just withdraw it an-

*facepalm*. Don’t ever say that again. Our goal is hiding money, not spending!

Oh OK, sorry.

Hide! Invest! Get it?!

For 2019, the max contribution to a 401k is $19,000. You don’t need to put in that much, though. Getting the employer match is our goal here.

So do your budgeting for the year and then call up your HR department and tell them to crank up the 401k contribution percentage so you’ll end up putting the employer-matched amount (again, could be from 3% to 5%) for this year. After this is done, we will hide money in 2 more accounts then come back to 401k for leftovers.

FOR SELF-EMPLOYED CHUMPS on a 1099 in 2019

If you’re on a contractor status and have no employees, then you have 2 choices instead of the employer 401k:

  • Create an Solo 401k (aka Individual 401k)
    • You can contribute the tax-free 19k, then up to 53k
  • Create a SEP-IRA (Simplified Employee Pension IRA)
    • Contribute up to 25% of your after-tax earnings, up to 56k

My head hurts…

No worries. Getting started is the hard part.

Max out your Roth IRA:

Next step is to open a Roth IRA which you are eligible for if:

  • You make less than 137k gross (single filer)
  • You make less than 203k gross (joint filing)
  • If you make more than that then you’ll have to do the backdoor Roth conversion (future article).

It is important to note that this is AFTER-TAX money. However, the very cool thing is that the investment earnings and withdrawals are generallyTAX-FREE . We like that.

For 2019, the max contribution is $6,000 ($7k if you’re over 50), and you can contribute all of that before Tax Day.

Wow Change Chumps, that means I have $25,000 put away between the 401k and Roth IRA so far. I’m rich bitch!!!!

Yes, yes. But slow down there! We didn’t even invest it yet!


Change Chumps!! Wtf is that?!

Next is the HSA Hack, as made popular by Mad Fientist. This is a great one that I was not aware of until recently!

HSAs were created in the early 2000s as medical and insurance costs were going up. It’s a way for people to pay for medical costs tax-free.

If you’re covered by a high-deductible health plan (or you obtain coverage via Obamacare), then you can open an HSA. Sometimes you can contribute through work too. Check with your health plan at work or call them up.

Hsa hack explained:

  1. You put in pre-tax money
  2. Invested money grows tax-free.
  3. You can withdraw anytime to pay for medical bills or reimburse yourself at a later date, all tax-free.
  4. After you turn 65 you can withdraw for any purpose and just pay regular income taxes on it, penalty-free.

Basically it acts like a hybrid between a Traditional IRA (pre-tax goes in) and Roth IRA (grows tax-free and tax-free withdrawals in retirement).

Uh? But isn’t an HSA just for medical expenses?!

That’s how most people think of it…

But you’re not most people, right? That’s why you’re here. Of course an HSA is useful for medical expenses, but remember our mission?

We have to hide the monies from Uncle Sam. Think of it as another hideout place! Max it out!

Money goes in untaxed, grows untaxed, and gets withdrawn untaxed again to pay for medical costs! That’s triple benefits compared to 401k which is double! Yes, you can invest a HSA just like your retirement accounts!

Hacking Health Savings Account like a true hacker.
How I feel when I’m maxing out my HSA. Pro hacker status.

Which HSA do you use? and what about my medical expenses?!

I personally use Fidelity for my HSA. You could buy their mutual funds FSKAX for Total US Stock Market, or FZROX with 0% MER, FXNAX for bonds, or ITOT for Total US Stock Market. There’s many offerings available and this will be a future topic of discussion.

For your medical expenses, you can save the receipts (take a picture and save them in a safe place like online), and reimburse yourself, tax-free, at any time!

2019 contribution limits: $3,500 for single, $7,000 for families.

And we’re done! See that wasn’t that painful.

Total amount hidden in retirement accounts: $28,500

  • 401k = $19,000
  • Roth IRA = $6,000 (max it out before your 401k, before Tax Day)
  • HSA = $3,500 (max it out before your 401k, before Tax Day)

Admittedly, saving 19k in the 401k can be a lot, so I recommend maxing out the Roth IRA and HSA first (that’s still 9.5k combined) after you get the 401k contribution match, because those dollars can be worth more in the long-term. If you have extra, go back to the 401k.

HSA and Roth IRA are also very flexible: you have pretty much access to all the investing options availble. On the opposite, your 401k investing options are limited by your employer plan administrator and often have high fees.

Example of contribution to retirement accounts

By hiding 8% of their pre-tax (6% post-tax) monthly paycheck (3% contribution to 401k + HSA, this person is able to lower federal taxes by 2%! Use this calculator and see for yourself! And there’s still room to max out on the 401k! If you put in the full 19k in the 401k, taxes would drop to barely 6%. Note: the Roth IRA isn’t there because you contribute post-tax dollars so it doesn’t add to pre-tax deductions.

Example of investing contributions to retirement accounts

Example of maxing out retirement accoutnts over 10 years
Put in 116k and get 175k in return? That’s a whopping 50% return on investment over 10 years!

That’s it, you just went Beast-mode and managed to stash away as much as you could, saving yourself a lot on current and futures taxes. Now it’s time to put the cash to work!