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For most of a career, the answer is yes. Near retirement, the better question is whether more saving is still doing any work.
Jim and Pam are 58 and 57. Together they earn about $250,000 a year, have roughly $3 million invested, and are still maxing out their 401(k)s. They felt good about being financially ready to retire, but had no way to confirm it.
Maxing out a 401(k) is one of the most repeated pieces of financial advice, and for most of a career it is a good one. The advice rarely comes with an end date, though. Kevin Lum sees people in their late 50s and early 60s who have saved well, lived below their means, and avoided lifestyle creep, yet still contribute exactly as they did in their early 40s. The habit runs on autopilot, and no one stops to ask whether it still fits where they are today.
Most articles on this question are written for younger savers and end with "save as much as possible." Almost none address when to stop. This one covers both sides, then introduces a simple calculation called the funded ratio. It draws on Kevin’s video, This Is When You Can FINALLY Stop Saving for Retirement.
Should I Keep Maxing Out My 401(k) Before I Retire?
It depends on whether the plan has already been funded. Two ideas frame the answer.
1. When Maxing Out Is the Right Call
For most workers, contributing the maximum is a strong default. For 2026, the employee limit is $24,500, plus an $8,000 catch-up for workers age 50 and older. Workers who turn 60 through 63 can contribute an $11,250 catch-up instead, if the plan allows it, for a total of $35,750. Contributions grow tax deferred, and an employer match is effectively free money. Workers who have not yet built a portfolio that covers retirement spending should treat the maximum as a target worth hitting. Limits and rules change yearly, so the plan administrator should confirm current details.
Ask yourself: Am I still building toward a number, or have I already built it?
2. When Autopilot Becomes the Problem
Most people learn two modes: save aggressively while working, then retire and finally start living. Switching is hard, and contributions often continue out of habit long after the plan needs them.
There is a cost to that. Money going into a tax deferred account is not funding the trips and projects that were postponed. It also grows the balance that required minimum distributions (RMDs) will later force out, leaving fewer options at retirement. The question is not whether saving is good. It is whether more saving is still moving the needle, and that needs a measurement.
Ask yourself: Am I contributing because the plan needs it, or because I always have?
When Can I Stop Saving for Retirement?
Kevin’s starting point is the funded ratio, which compares what has been accumulated to what is needed to support the planned lifestyle.
3. Calculate the Funded Ratio
- Take projected annual retirement spending.
- Subtract guaranteed income, such as Social Security and pensions. Every dollar of guaranteed income reduces what the portfolio must cover.
- Divide the shortfall by a withdrawal rate. Kevin uses 4% as a conservative baseline.
For example, $100,000 in spending minus $40,000 in Social Security leaves a $60,000 gap. Divided by 4%, that is about $1.5 million. A saver with $2 million has probably oversaved. The goal is a directional read, not the perfect number.
Kevin’s calculator adds realism. With $100,000 in spending, $30,000 of inflation-adjusted Social Security, a $10,000 pension with no inflation adjustment (worth roughly $36,000 combined in today’s dollars), and a $1.5 million portfolio, the portfolio must cover about $63,000. That puts the target near $1.6 million and the funded ratio around 94%. Close enough that contributions might ease, though not necessarily stop.
This is napkin math. If the answer looks promising, the next step is more precise modeling. Kevin offers 30 days of free access to the planning software he uses with clients (link in the video description), and the 5-Minute Retirement Plan Calculator gives a quick read.
Ask yourself: Have I calculated what my portfolio must cover after guaranteed income?
4. Use the Transition Window
Between saving mode and spending mode sits an underused phase. A paycheck still provides income, structure, and options, so there is no need to wait for a magic retirement date. A hybrid role, two or three extra weeks off each summer, or the long-delayed kitchen remodel can all happen while income is still arriving, and large purchases are easier to absorb that way. The caution is to avoid inflating lifestyle and locking in higher expenses permanently. Done intentionally, it eases the shift for people who struggle to go from saving to spending.
Ask yourself: What am I saving for "someday" that could happen while a paycheck is still coming in?
5. What Happened When Jim and Pam’s Math Said They Were Done
Jim and Pam (names changed) plan to retire at 61 and 62. Their $3 million sits mostly in taxable and tax deferred accounts, with a little in a Roth. Their Scranton home has a low-rate mortgage that will be paid off about three years into retirement. Spending is projected at about $10,000 a month, or $12,000 with travel, charitable giving, and private health insurance until Medicare. Jim plans to take Social Security at 70, and Pam a few years earlier.
Before changing anything, Kevin confirmed the math. Then the plan changed: contributions continue through this year and stop the next. That freed roughly $30,000 to $50,000 a year for a big trip and the kitchen renovation.
The plan also treats retirement as phases rather than one flat line. Early on, the portfolio does the heavy lifting. When Social Security starts, withdrawals drop. When the mortgage is paid off, that money stops leaving, like a new income source. Spending guardrails keep each phase disciplined: if the portfolio grows well beyond what the plan requires, spending gets a green light, and if markets pull back, a few trips wait. The phases begin before retirement itself.
Ask yourself: Does my plan treat retirement as one flat line, or as a series of phases?
6. The Golden Window for Roth Conversions
In retirement, Jim and Pam will draw from their taxable account first. Not every dollar is taxed as ordinary income, and gains are taxed at lower long-term capital gains rates. That creates a golden window of relatively low taxable income before Social Security and RMDs push the tax bill higher, and it may help qualify for ACA subsidies.
It is also an efficient time for Roth conversions: moving money from the large tax deferred account into a Roth at a lower rate now, instead of paying higher rates when RMDs force withdrawals. Stopping contributions earlier set aside cash to pay conversion taxes out of pocket. Finishing the kitchen while still working meant the remodel and the conversions never competed for the same withdrawals.
Kevin’s point is that preparation beats reaction: stop saving earlier, spend earlier, use the income valley deliberately, and review the plan yearly.
Ask yourself: When will my lowest-income years likely fall, and what could I do with them on purpose?
Retirement Savings Checklist
A quick self-assessment for deciding whether contributions are still doing their job.
Watch the Full Breakdown
Kevin walks through the funded ratio calculator and the full Jim and Pam case study in This Is When You Can FINALLY Stop Saving for Retirement".
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Frequently Asked Questions About Maxing Out a 401(k)
Should I max out my 401(k)?
For most of a career, yes. Contributing the maximum ($24,500 in 2026, plus catch-ups for workers 50 and older) captures tax deferral and any employer match. Near retirement, the answer depends on whether the portfolio already covers the gap between planned spending and guaranteed income. If it does, more saving may no longer move the needle, and contributions can slow or stop.
What is the funded ratio?
The funded ratio compares the portfolio already built to the portfolio needed. Subtract guaranteed income from projected annual spending, then divide the shortfall by a withdrawal rate such as 4%. For example, $100,000 in spending minus $40,000 in Social Security leaves $60,000, or about $1.5 million at 4%.
When can I stop saving for retirement?
Saving can reasonably slow or stop when the funded ratio shows the portfolio is at or above its target and a detailed plan confirms it. A $2 million portfolio against a $1.5 million target has probably oversaved.
Is it okay to stop contributing to a 401(k) before I retire?
Yes, if the math supports it. Jim and Pam, who earn about $250,000 a year and have about $3 million invested, stopped new contributions a year before retiring. That freed $30,000 to $50,000 a year for a trip and a kitchen remodel while income was still arriving.
What is the golden window for Roth conversions?
It is a stretch of relatively low taxable income after work ends but before Social Security and required minimum distributions begin. Converting tax deferred money to a Roth during that window can mean paying a lower rate than RMDs would later force.
Kevin Lum, CFP® | Retirement Made Simple
This article is companion content to the Retirement Made Simple YouTube channel. It is for informational purposes only and does not constitute personalized financial advice.
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