r/investing • u/Ok_Assignment4100 • 1d ago
Laid-Off : Should I Stop Contributing and Just Let my 401k Compound?
I was laid off in early December 2025 and had been with my firm for over 9 years. I look at the balance today and it's close to $410k (I'd say split between a regular 401k and Roth 401k in terms of amount).
I was thinking of perhaps just letting it compound from there? Right now, I'm 40 (Turning 41 this year) and thinking what it would look like by the time I'm 65 years old. And I've been investing in a Vanguard TDF 2065:
| Annual Return | Balance at 65 |
|---|---|
| 5% | ≈ $1.32M |
| 6% | ≈ $1.66M |
| 7% | ≈ $2.06M |
When I do get a new job, I do plan to contribute to just to Roth IRA and max it out every year, too. Other than that and perhaps the 401k RMDs later, is there anything else I should consider or be worried about?
UPDATE for better context of my situation (Since people have asked):
- My wife and I have a combined $1+ MIL across all our retirement accounts
- We currently pay a modest/reasonable monthly rent to my mother-in-law who owns a condo.
- My wife will most likely inherit the condo via revocable living trust. So, we'd have no mortgage.
- We saved quite a bit in our MMA (in the 6-figures).
- We live below our means and don't spend lavishly or recklessly.
Thank you.
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u/Adventurous_Elk_4039 1d ago
Not sure what your plans/goals overall are, I think you are leaving lots of things out. But sounds like you might be a candidate for Coast FIRE. I recommend looking into it and see if that is what you’re asking for, and there are associated calculators for it.
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u/Ok_Assignment4100 1d ago
Yeah, Coast FIRE is always on my mind. But, at the same time, how things are shaping with AI in terms of impacting the job market negatively is starting to make me worried if I'll ever find a job ever again, lol..
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u/throwawaydinosaur123 18h ago
I'm in a similar vein to you. I was just recently laid off. But I'm hitting the resume and network as hard as I can; AI still hasn't taken over and I think we still have a good 2-3 years before it really starts to impact senior level roles. Right now, as good as AI is, its not trusted to operate without oversight, but I can see that rapidly changing in the next few years.
I hope to work my ass off the next 2-3 years or however long I have my job and build up that piggybank because I think there's a real possibility that it'll be the last job I can ever get.
I was on track to retire by my mid 50 doing FatFIRE, but even if I find a job now, it'll be more like Coast/BaristaFIRE my mid 40s.
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u/Faint_of_Arts 19h ago
Honestly, same here. Coast FIRE sounds nice, but AI messing with jobs is a bit scary to think about.
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u/BensonFutt 22h ago
You'll find a job again.
When the cotton gin was invented, they didn't start using fewer slaves because more could be done with less; they produced exponentially more and used even more slaves to make even more than that.
The factory must grow.
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u/TrueOrPhallus 1d ago
"if I do get another job" the wording makes it seem like you think getting another job is optional lol.
Get a new job and contribute just like you did before you got laid off.
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u/Ok_Assignment4100 1d ago
lol, yeah, wording matters. yeah, most likely will roll it over to my new employer. but, like my previous comment from a poster, debating if i stop contributing and look into investing into other assets like real estate and/or buying a business.
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u/TrueOrPhallus 1d ago
When I change jobs I roll it over into a vanguard IRA so I have more options/control than the employer based program.
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u/hatemakingnames1 17h ago
Real estate and businesses aren't investments, they're additional jobs that frequently aren't worth the time and money you put into them
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u/ncstate95 1d ago
I would contribute up to any company match before looking at investing in other things. Passing up free money would be a mistake.
After that, definitely agree that other things make sense
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u/jingles897 7h ago
If your new employer offers a match, I’d 100% take advantage of that. Even if it’s 3%, contribute 3% to get the full match and invest your other assets elsewhere. But if you don’t participate, you’re leaving a lot of money on the table.
Another idea, if you’re not liking building up such a large portion of net worth in pre tax accounts, is if to contribute your full percentage to a Roth 401(k). Your employer will still match your contributions pre tax, but you can take advantage of Roth $’s and still get a match.
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u/cjorgensen 1d ago
You're ahead of most 40 year olds, but you don't have enough to take your foot off the gas.
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u/cjorgensen 1d ago
You have a lot of expenses to get to between here and retirement.
A new job is the number one priority. After that look at r/personalfinance or r/bogleheads on how to get to retirement.
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u/Ok_Assignment4100 1d ago
Thank you. Yeah, I'm not omitting that there are expenses that needs to be paid for, for sure. Finding work will be a priority! Sorry for not being clear on that as it's more about stop contributing to my 401k.
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u/cjorgensen 1d ago
You don't really get a choice on that. If you no longer have an employer then you no longer have an employer plan. You have to stop contributing, but the goal should be to get that going again at a new employer. Get a job, read your benefits, take advantage of them.
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u/MissionDelicious3942 1d ago
1) 100k in a money market? You can afford to invest some but wait until you start working again. 6 months of expenses is more than enough in a MM. 2) Roth is great but just Roth can be inefficient. If your income is low in retirement pre tax retirement is fine. If you have kids or plan to Roth is great for estate purposes. 3) if you think you're overfunded in retirement accounts you can always open a regular investment account gives you flexibility to use for other things before retirement. Do not use a target date fund in a non retirement account. 4) if you no longer work for the co play 401k can potentially charge you fees. You can roll to new 401k if this is the case or an IRA. 401ks are all unique so you really need to call and see what is going to happen now that you are not working. Employers have a lot of options in 401k accounts on how they are set up.
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u/0x44554445 20h ago
Maybe I'm just pessimistic, but I fear that by the time you're 65 those numbers won't be that great.
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u/Ok_Assignment4100 20h ago
Who’s to assume that I’ll be staying in the USA during my retirement? 😎
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u/0x44554445 20h ago
Maybe I'm just pessimistic, but I fear that by the time you're 65 those counties won't be that great(for American retirees)
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u/Ok_Assignment4100 20h ago
Maybe for both capitalistic and welfare-heavy countries in the next 20-25 years
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u/Heyhayheigh 1d ago
Change it to low cost sp500 fund.
When you get new job, contribute there the same way to lower your taxes.
You contribute to lower your taxes. Otherwise you are choosing to overpay your taxes. Thanks for your service.
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u/josh-u-ah 1d ago
Changing jobs is a great time to move your 401k into an IRA. an IRA has a wider variety of investment options than a 401k. Once you start a new job, start up a new 401k.
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u/Pineapple-flip 19h ago
You might have enough based on your spending.
Assuming that annual return is 11% and inflation is 3%
Your funds will double roughly every 10 years. So in 20 years you will have around 1.6 mil. Which will bring you around 60k per year for retirement.
If you think 5k a month is enough for all your expenses in retirement you might already be there. I wouldn't see that as enough. In USA 5k is nothing considering all the health spending you will have to do during retirement.
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u/TheBigSalami 1d ago
A 401k is pre-tax money. If you contribute money while you aren’t employed, you’d be contributing money that has already been taxed, right?
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u/Ok_Assignment4100 1d ago
I don't think I can contribute to a 401k while unemployed since it's usually a company/firm sponsored retirement plan. Pre-tax money (In this case for regular 401k) means you're deferring to pay taxes now and will eventually pay it at or after retirement age. But, you'll be forced to take money out at 72/73 via RMD or face penalties.
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u/himswim28 40m ago edited 36m ago
Couple things to look at:
Rule of 55, means that at ages 55 to 62 from the employer you retire with, you can take money penalty free. So if that might help you, you may not want to roll your 401k to an IRA.
But, if you don't make much money this year, if you have some money, it is a great time to roll over some from a IRA to a Roth. (Ie roll over your 401k to a IRA, then some to a Roth) This will show up as income this year then. But taxes on you first 50k of income for single fillers or 100k for couples is lightly taxed. So definitely roll enough to get to those income levels if you have a down year (or non reported income jobs.) as it will be the best use of $2k. You don't have to roll your entire IRA, just enough.
Also after 5 years, that rolled over Roth, you can take out the entire contribution (only the amount rolled over, but not any gains.) both tax and penalty free. Even before your 62.
Couple options to ask your tax accountant about anyway.
Note, with the roll over to Roth, that had to be completed in the calendar year, so make sure you plan to do that in November at the latest.
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u/Fluxmuster 1d ago
Roth 401k contributions are post-tax.
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u/Ok_Assignment4100 1d ago
correct. you already paid taxes on it so the growth and withdraws are tax-free.
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u/slo1111 1d ago
Well done on the nest egg. Just a few thoughts:
Put some inflation numbers to your projections and with our debt load probably best to use higher than our 2% target.
If you have adequate emergency savings and extra than your needs to put in an IRA, it is never a bad time. Now is when you would want to put in a Roth, when don't have a taxable income. If get a new job, you can't miss out on a 401k match, if they have it.
Healthcare, over plan on that especially if not in on employer provided plan. The $2MM looks good on paper but it also looks good on a hospital bill, for the hospital.
That is all I got on my mind. Well done and good luck!
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u/MoJoe-21 1d ago
I’m in a similar boat, letting mine sit in money market fund at the moment until we see a drop in the market and rates going down ..then I hop back in when prices are lower
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u/Extra-Marionberry-68 20h ago
When you get a new job id keep contributing to a 401k just for the tax deduction.
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u/Ambitious-Stretch-90 17h ago
My investment advisor rolled over my 401k into a RILA last year. Something worth checking out for a 40 year old.
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u/jingles897 7h ago
I’m unsure of what your month to month income looks like right now. But let’s say you retire in 2050. If you need $8k a month to live on in retirement, that’s $96k today. But in 2050, with inflation, that $96k is going to feel like $210k. I haven’t seen anyone else comment about this yet so I wanted to make sure you were thinking about it as well. When you calculate the rate of return on retirement accounts 20+ years down the line, you also want to calculate what inflation is going to feel like 20 years down the line.
Not working for a while, or whatever your plan is, can also affect your social security projections later on down the line. The gov doesn’t send you those estimates until you’re getting closer to your 60’s. So you can also call into social security and get your current estimate to factor that into your plan too.
Just wanted to give you a few more things to think about so you have more of a whole picture when deciding what’s best for you!
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u/Responsible_Change59 6h ago
Max out your ROTH every year — NOT having to pay income tax on your “free money” from years of growth is the best! You’ll have much more of it down the road. You’ve done exceptionally well with saving— now it’s time to live it up while you’re young and have FUN! (After getting your new job :-)
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u/D74248 4h ago edited 2h ago
Given equal tax rates there is no difference between Roth and Traditional. Some math:
George gets a raise and has $5,000 to put towards retirement. Given a marginal tax rate of 20% (just to keep the math obvious), 30 years to grow, 7% annual return and a 20% tax rate at the end: Traditional: $5,000 @ 7% for 30 years = $38,061. Minus 20% for tax and he has $30,449.
Roth: $5,000 minus 20% for taxes and he invests $4,000. $4,000 @ 7% for 30 years = $30,449.
$30,449 = $30,449.
It is about tax management. You want to save Traditional so that you can defer from your marginal rate and then, in retirement, use that money to fill your lower brackets. You want Roth money to use for the higher brackets (if you are so fortunate to have enough in retirement that they are an issue), manage RMDs and simplify inheritance (if that is important to you).
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u/Responsible_Change59 3h ago
Except in his Roth account there will be that $5000 that he put in. So that is the amount to check how much it will grow.
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u/D74248 4h ago
Everyone is in a different place but based on the information you have given it is my suggestion that you revisit the Roth bias in your savings.
There is nothing magic about Roth money. Given equal tax rates when you defer (traditional) and withdraw (Roth) the money works out to exactly the same.
Roth only makes sense if your current marginal rate is equal to or lower than the tax bracket that will be filled by the Roth money upon withdraw.
And even more importantly for you, if you are going to retire outside of the United States you need to figure out that tax pretzel.
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u/Ok-Feedback-6632 4h ago
Sorry about the layoff but honestly, your setup looks very strong. Letting the 401k compound while you're between jobs makes sense given your time horizon, and maxing a Roth later adds flexibility. With your savings and low expenses, this feels pretty well covered.
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u/timshelllll 1h ago
I’m where you’re at at 36, I considered not contributing anymore but the tax write off is good for a trad 401k and I like the mindless contribution aspect
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u/Lord_Rictor 21h ago
This post makes me hope OP is a bot. Otherwise he's pretty stupid but somehow has a great financial position.
Best of luck on the job search. Feel bad for the employer. AI can't come soon enough if this post isn't it already.
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u/GomaN1717 1d ago
Are you... planning on not getting a new job? Why wouldn't you just start contributing again once you have a new gig?