Maxing out your 401(k) is a great habit. For many people early in their careers, it’s the single best thing they can do.
But for high earners, it can create a false sense of progress.
If you’re making $120,000 a year, maxing your 401(k) is a serious wealth-building move. If you’re making $500,000+ a year, it’s just one small piece of the puzzle.
I’ve met many successful professionals who proudly say, “We max everything out.”
That’s good. It’s responsible. But here’s the uncomfortable truth: For many high-income families, maxing out retirement accounts will only replace a fraction of their current lifestyle in retirement.
The math just doesn’t stretch. Example, maxing out your 401(k) is $24,500 / year (in 2026):
· Person earning $120,000, that’s 20.4% of their entire income
· Person earning $500,000, it’s only 4.9% of their income!
So, a high-earner maxing out their 401(k) thinking they’ve got their financial future taken care of, they’re likely to face a hard reality when retirement age nears.
More importantly, retirement accounts are restrictive by design. They’re powerful, but they’re not flexible. You can’t easily use them for career pivots, business opportunities, helping your kids buy a home, or stepping away from work at 52 instead of 65.
That’s where brokerage accounts come in.
When I see someone with meaningful assets outside of retirement plans, something shifts. They have optionality. They have room to breathe, flexibility. They can make decisions based on what they want, not just what their qualified accounts allow.
Wealth is far beyond just hitting a number at age 65. It’s about building flexibility along the way.
[Important] This is how we guide clients: The goal isn’t to hoard money for a distant finish line. It’s to create a structure that supports your life now and later.
If your entire plan begins and ends with “We max the 401(k),” it might be time to zoom out.
Good habits are important but intentional strategy is where it’s at
If you or someone you’re close to could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help.
— Nic
Any opinions are those of Know My Plan and not necessarily those of Raymond James.
