That\u2019s not just a lot of money. It\u2019s the maximum you can contribute to a 401(k) for 2015 if you\u2019re under the age of 50 and still receive a tax benefit. If you\u2019re over 50, the IRS allows you to put away an additional $6,000 per year, or a total of $24,000. Regardless of your situation, this is $500 more than in 2014.\r\n\r\nIf it sounds impossible to save $18,000 or $24,000 every year, just toward retirement, keep reading...\r\n\r\nIt\u2019s hard, but not impossible to max out your 401(k) year in and year out. It requires a few things, the first of which is sacrifice. If you have a family, a lower-paying job or other things you are saving for like a house or car, it can feel insurmountable to set aside this much money on top of one or all of those things every year. However, with wisdom, sacrifice and an understanding of the power of defined contribution plans, it is achievable.\r\n\r\nBoth Traditional and Roth IRAs, amongst other vehicles, provide great benefits that you should avail yourself to, but none of them stack up against the benefits found in the 401(k). Aside from the free money the possible matching component adds, a 401(k) provides the ability to shelter a significant amount of your income from taxes making it one of the best tools to save for retirement.\r\n\r\n\r\nMeet a Couple Planning to Retire at Age 33\r\nWhen it\u2019s utilized to its maximum potential, your 401(k) can create a solid foundation for your retirement planning and wealth accumulation efforts.\r\n\r\nOne such couple that has chosen to follow the path of contributing the maximum amount to their respective 401(k) plans are a pair of bloggers who go by the pen names of Mr. and Mrs. Frugalwoods. Several years ago, Mr. and Mrs. Frugalwoods came to the realization that they did not want to fill the rest of their lives by working in the traditional 9-5 setting, but instead wanted to pursue retiring early. As we will learn, maxing out their 401(k) plans plays a key part in their journey.\r\nHaving a Specific Goal in Mind\r\n\u201cWe've made concerted financial decisions focused toward enabling us to retire early.\u201d Mrs. Frugalwoods explains that the key driver in deciding to max out their 401(k) plans is to be able to retire early. The Frugalwoods plan on using a Roth conversion ladder once they retire in 2017, at the age of 33, but do not plan on touching those monies until later in life. \u201cWe consider our 401(k)s to be actual retirement accounts and we don't plan on touching that money until older age.\u201d Pursuing something like the Roth conversion ladder does require some extensive planning and work, but it is possible to accomplish.\r\n\r\nAfter purchasing their home in 2012, the Frugalwoods decided they could attack their goal of making serious contributions to their plans and put away $12,000 in 2012, $15,000 in 2013 and hit the max amount in 2014 while also doing so in 2015 and future years.\r\n\r\nThe Frugalwoods have been aided by having relatively good 401(k) plans. Whereas most current plans might offer a 50 percent match on the first six percent contributed, Mrs. Frugalwoods explains that they have access to plans that match more. \u201cMr. Frugalwoods' employer provides a dollar-for-dollar 8% match and Mrs. Frugalwoods' employer provides a dollar-for-dollar 5% match.\u201d Mrs. Frugalwoods goes on to explain that her husbands plan has a three year vesting schedule (he has been with the employer for eight years) while her plan does not have a vesting schedule \u2013 thus meaning they can take the entirety of their funds with them when they choose to leave.\r\n\r\nIt would be easy to think that it\u2019s not possible to hit the maximum contribution limit and that it\u2019s only possible for the select few. It would also be easy to believe your goals are different from someone who wants to retire early. The latter may very well be true, however the former is not.\r\n\r\nYes, hitting the maximum contribution amount will likely require sacrifice. It has for the Frugalwoods, who look for a myriad of ways to reduce their expenses every day. Those choices involve things like spending nothing on entertainment, not eating out, taking lunch to work, doing hair cuts at home, going a year without buying new clothes and shopping used for everything from cars to furniture. Even their dog, the Frugal Hound, wasn\u2019t new.\r\n\r\nYes, saving this aggressively for your future will mean that you might need to choose to pass on other things, but it is most definitely possible \u2013 especially when you personalize it to your specific goal. That is what will take it from pie in the sky impossibility to something that becomes actionable and attainable.\r\nMaxing out a \u201cBad\u201d Plan\r\nUnfortunately, not all defined contribution plans are created equal. Some employers truly look out for their employees with high quality plans featuring a broad selection of index funds and low fees. Other employers, however, are not so thoughtful.\r\n\r\nIn fact, the Supreme Court is deliberating over a case to determine the fiduciary responsibility of companies to their employees. You may very well be in that case if your plan isn\u2019t very good and offers few decent options. If your only choice when it comes to your 401(k) plan is a bad one, you have to look at whether or not the tax benefits are worth it to you.\r\n\r\nLet\u2019s go back to the Frugalwoods for a little insight. If their plans weren\u2019t that good would they still be maxing them out? According to Mrs. Frugalwoods, \u201cIf our plans were subpar, we would still max out to reap the tax savings. In our income bracket, the tax savings alone make maxing out a no-brainer.\u201d\r\n\r\nThis mindset displays the wisdom of taking advantage of the significant tax savings possible through sheltering income in a 401(k) plan. While many plans are subpar, most contain at least several broad-based index fund choices, which are generally lower in cost and provide access to much of the market. If such funds exist in your plan, then maxing out is something you should seriously consider.\r\nA Multi-Pronged Approach is Best\r\nRetirement planning and wealth accumulation is a battle waged on multiple fronts. Simply maxing out a 401(k) plan, maxing out a Roth IRA or something else alone will likely not get you to your desired goal. Rather, it requires establishing as many diverse streams of income as possible. Thus, don\u2019t just stop with maxing out your 401(k).\r\n\r\nThere are a number of benefits to the multi stream approach. The diversity of income alone will help protect you against pullbacks in one area but it will also help you better provide for your family and enjoy the things you hold dear. Outside the 401(k) this can include things like Roth or Traditional IRA accounts, real estate, and side businesses to name a few. Whatever option you consider, let expenses and tax benefits guide your evaluation and weigh heavily in your ultimate decision.\r\nMaxing Out A 401(k) is Not Easy, But it is Possible\r\nI know that it\u2019s easy to look at people who max out their 401(k)s and believe that it\u2019s not possible for you. I also know that looking at the fact that you need to put away $750 per pay period if you\u2019re paid twice per month to hit the current $18,000 limit may feel impossible.\r\n\r\nIt makes sense, on one level to feel that way. However, depending on your situation, it is very much possible to max out your 401(k) even if you\u2019re not making six figures or come from a family of great wealth. Not to oversimplify it, but accomplishing this as a goal requires purposeful living and a long-term view of life that casts aside needless things in the present to live a greater life of freedom in the future. This is the approach the Frugalwoods take.\r\n\r\nAccording to Mrs. Frugalwoods, \u201cIn general, we live extremely frugally and very far below our means. In addition to maxing out our 401(k)s, we save 71% of our post-tax income. To accomplish this, we only spend on the things that matter the most to us in life. For us, frugality is all about prioritizing what matters to us and optimizing the rest.\u201d They aren\u2019t reusing dental floss or living off of rice and beans, but they live a life of purposeful frugality that allows them to do such things as max out their retirement plans so they can reach the goals they have. By eschewing large purchases and embracing frugality, they are empowered to put more of their money to work for them.\r\n\r\nYou might think this may not be possible for you, but it can be. It may mean cutting expenses to do so \u2013 looking for reasons not to spend as opposed to reasons to spend. It will mean looking to cut investment fees as much as possible to enhance what your money can do for you.\r\n\r\nThere are many things that vie for your money. There is no doubt about that. By doing some math and analyzing the tax benefits you might find that it is indeed possible to reap the benefits of maxing out your 401(k) plan year in and year out.