There is no universal answer to this question. Public employees have varying earnings and financial obligations. However, you get to decide how much you set aside every month. It is your personal obligation to make sure that you’re not part of the older generation that still works to cater to their needs after retirement.1

Factors to Consider When Contributing to Your 401k

1 – Limit set by the IRS

As per the limits set by the IRS, the most amount an employee under 50 years can contribute to a traditional 401k is $ 19,500 in 2020 and $ 26,000 for employees above 50 years. Your employer’s contributions only add up to your contribution. 

Keep in mind that the IRS just sets the limit, and you can decide to contribute any amount below it. These limits are subject to change each year.

2 – Always Match Your Employer’s Contribution

Your employer has the choice to match your contribution to the traditional 401k up to a limit, set by him. If you have this at your place of employment, you should contribute enough to get the full match.  

The matched amount by your employer is basically ‘free’ money for your retirement, so you should always take it to the highest contribution amount that can be matched.  

1 – A Roth IRA is a better option

Contributing to a Roth IRA is a better option than contributing to your traditional 401k, but only after you have matched your employer’s traditional 401k contribution. The value of your money on collection after retirement will be more for a Roth IRA than a traditional 401k.

Your contributions to a traditional 401k are made pre-tax, but they are taxed as income when distributed after retirement. This means that the tax on this income is deferred, not exempt. 

A Roth IRA on the other hand will be taxed now on the contribution but will be tax-free on distribution after retirement. This makes the money contributed through a Roth IRA more valuable on retirement than one on your traditional 401k.

The limit for contribution for a Roth IRA is much smaller than the 401k limit and is set at $ 6,000 for those under 50 years of age and $ 7,000 for those over 50.

If you’re thinking of increasing your retirement savings, talk to a CalPATH Home Loan Program advisor for invaluable tips. 

Calculate your retirement savings using a 401k calculator

Find out how much money you have set aside for your retirement. Remember:

  • There is no set in stone way to contribute to your retirement, different people given their different positions and circumstances should contribute as they see fit.
  • The IRA has set a maximum contribution of $ 19,500 in 2020 if you are under 50 years old, and $ 26,000 if you are over 50. This limit is subject to revision every year.
  • If your employer matches your contribution to the Traditional 401k, you should contribute the maximum amount that gets a match from them.  , the more money you get.
  • The value of the distributions on a Roth IRA is higher than what will be offered in the traditional 401k.

 If you max out your Roth IRA contribution, you can channel the rest to the traditional 401k.

About Mountain West Financial and the CalPATH Home Loan Program

Mountain West Financial is the exclusive lender offering CalPATH, the #1 home loan program for Teachers, Police Officers, Firefighters, and other public employees who serve our local California communities.

You may contact our CalPATH Hotline @ 800-310-7577, seven days a week from (8:30 am to 8:00 pm). A CalPATH advisor will be standing by to answer (any & all) questions you may have about the home buying or refinance process.

We look forward to working with you soon!


Joe MooreBranch Manager


Links to sources used

  1. The Hidden Retirement Crisis: Older Americans’ Debt –