You can put a lot of money in your 401(k).
Each year the IRS allows what is known as a maximum contribution to any pre-tax retirement account. For an employer-sponsored account like a 401(k), you can have up to $70,000 per year in joint employee/employer contributions in 2025 if you’re under age 50 — $23,500 of which can come from your own paychecks.
This is a potentially enormous amount of money to invest each year. A worker who can maximize these contribution limits can build a very well-funded retirement account in a fairly short amount of time. If you already have decent savings, early retirement can even be in the cards.
For example, take a 43-year-old divorced father of one. You have $580,000 in a 401(k) and make the maximum contribution each year. Can you retire at age 53?
Maybe: This is probably enough to generate a reasonably comfortable income depending on where you live, but the issue here will likely be family expenses. For most people, meeting the needs of a child and the costs (if any) of an ex-spouse on this budget will be tight. You can likely retire early, but maybe not as early as 53 depending on your circumstances.
Here's how to think about it. You can also use this free tool to match with a financial advisor to get professional guidance on reaching your financial goals.
Personal, Overall and Catch Up Contributions
There are three ways to measure the maximum 401(k) contribution.
First, there is your personal contribution. This is the maximum amount of money that you can contribute from your own earnings in a year. This money is untaxed, meaning that it does not contribute toward your taxable earnings. In 2025 your personal contribution limit is $23,500. This means that in 2025 the most money that you can contribute to your 401(k) from your income, for which you receive a tax deduction, is $23,500.
Second, there is your overall contribution limit.
As part of running a retirement program, your employer can also contribute to your 401(k). Typically, this means that they match your contributions up to a specific amount. For example, under a matching plan, you might contribute $10,000 in one year and your employer might contribute a matching $10,000. This isn't always the case, however. Your employer is free to contribute more to your 401(k) than you do, if they choose.
All contributions, yours and your employers, must be within the annual overall contribution limit. This is the most that anyone can contribute to your 401(k) in a given year from any sources. In 2025 the overall contribution limit is $70,000. So, for example, say that you contribute $23,500 personal maximum to your 401(k) in 2025. Your employer could contribute an additional $46,500 to your portfolio, for a total contribution of $70,000. However, most employers offering a match will contribute based on your own personal contributions.
Third, and finally, there are catch-up contributions. This is an additional amount you can contribute to your 401(k) each year once you turn 50. This is on top of your contribution limits from all other sources. In 2025, catch-up contributions allow you to contribute an additional $7,500 per year in addition to any personal and overall contribution limits. So, for example, say you are 50 years old in 2025. You could contribute $23,500 in standard contributions, your employer could contribute $46,500 in additional contributions, and then you could contribute another $7,500 in catch-up contributions.
So the question here is what you mean by "maximum contributions." In 2025, that can mean anything from $23,500 in personal contributions up to $70,000 from all sources ($77,500 if you are 50 or older). For ease of use, we will assume that you are making the maximum personal contributions: $23,500 per year from ages 43 to 50, and $31,000 per year from ages 50 to 53. Our analysis below might change, though, if you are adding $70,000 per year in your 401(k).
A financial advisor can help you navigate the rules of retirement plans and build a tax-efficient withdrawal strategy for retirement.
Portfolio Income
Next, we need to estimate what your portfolio might be worth in 10 years and what kind of income it can generate. You are starting in a strong position. With $580,000 at age 43, you are very well positioned for retirement at age 67. But what about age 53?
Let's assume your portfolio generates an 8% mixed-asset return. This is the average for a portfolio that holds bonds and equities in equal value. By age 53, between growth and contributions, you might have around $1.61 million in your 401(k). This is a pretty robust retirement portfolio. (If you continue to save and invest at the same rate, by age 67 you might have around $4.28 million in this portfolio.)
There are many ways to estimate the income that your portfolio generates in retirement, but a common approach is the 4% rule. Under this approach, you assume that a combination of conservative investments and inflation-adjustment will let you sustainably withdraw 4% from your retirement portfolio each year. With $1.61 million, at 4%, you might expect to withdraw $64,400 per year from this portfolio. ($1.61 million * 0.04)
Now, this is just a rule of thumb, but it's a decent place to start. It gives us around $64,400 per year in income at age 53. Then, between ages 62 and 70 you can supplement this income with Social Security benefits. The average Social Security benefit is around $1,900 per month ($22,800 per year). This can give you an average range of $15,960 per year starting at age 62 up to $28,272 per year at age 70, for an average potential combined income range of between $80,360 and $92,672 per year later in retirement.
Consider speaking with a financial advisor who can run the numbers for projections based on your personal circumstances.
Spending and Needs
Depending on where you live, you have a potentially comfortable level of income. At $64,400 you would be below the national median, but this is enough to afford a modest-yet-comfortable lifestyle. The bigger issue here is your potential spending.
Retiring early comes with its own set of risks and challenges. Most notably, your retirement portfolio will need to last much longer than usual. At age 53, you're also likely to live a busier and more active life than you will in your late-60s and 70s, which is more expensive.
Then there are your family costs. Here, you are a divorced father. This means you may have at least four major costs: alimony, household contributions, child support and college savings. (You might have other costs, but these are particularly common.) Of these, alimony is the most flexible since most states let you renegotiate it based on changed circumstances. It's rare to eliminate alimony altogether, though, so if you pay spousal support this will likely continue in some form.
Then there are household costs. Do you continue to help pay for the house your ex- and child live in? Do you pay for miscellaneous costs of living? What are your contributions overall?
Household costs are informal though. Child support is not, and it is very rare to renegotiate this. If you have child support payments, they will continue until your child turns 18, and they are likely fixed.
Finally, there is the college fund. If you have been saving up for college tuition, you will likely need to keep doing so.
All of this is on top of your existing personal expenses. What do you spend on rent or your mortgage? What are your monthly bills? What kind of hobbies, travel and entertainment do you enjoy? Then, combined, what does all this mean for your monthly needs?
This is where the uncertainty comes in. The odds are that, combined, you will want more than $64,400 per year in order to comfortably meet these needs. This is no sure thing, especially given that this isn't too far below the $75,000 national median income. But if you can afford $23,500 per year to contribute to your 401(k), it's likely you earn significantly more than the median. So if you retire at 53, and draw down just $64,400 per year, there's a good chance you will be stuck on a fixed income that's insufficient to meet your and your family's needs.
But don't worry! You are on track for a very comfortable retirement if you wait just a few more years. Consider getting in touch with a financial advisor if you have more questions or want personalized guidance.
The Bottom Line
If you want to take an early retirement you need to plan for the many moving pieces of your money. Perhaps the best way to look at this is as an income-over-expenses analysis. How much income, specifically, will your portfolio generate? And will that be enough to cover the typically higher, typically fixed, costs of a midlife adult?
Tips on Retiring Early
- Find your FIRE number. No, we aren't talking about personal safety. We mean Financial Independence, Retire Early. It's a movement built around getting out of the rat race early in life so that you can enjoy yourself up front, while you're still pretty. We joke of course. You'll always be beautiful to us, and here's how to find your early retirement number.
- Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
- Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
- Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.
Photo credit: ©iStock.com/Artit_Wongpradu
The post I’m a 43 Year Old Divorced Dad. I Have $580k in My 401(k) and Contribute the Maximum. Can I Retire in 10 Years? appeared first on SmartReads by SmartAsset.
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