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When clients shouldn't max out 401(k), IRA contributions Although it is usually advised that people max out contributions to their 401(k)s and IRAs, there are circumstances when it is not a smart move for retirement savers, according to Bankrate. Clients may contribute below the maximum amount if they incurred a high-interest debt, have no emergency funds, need funds for education, a new home or business, or buy insurance coverage. Not maxing out their 401(k) contributions is just fine if they expect a big financial obligation. Sometimes, it even makes sense to pay less than the max if clients are in a high tax bracket and expect to borrow from their own retirement account. In that case, they'll be taxed at their ordinary rate, whereas income from dividends and capital gains would be taxed at a lower amount.  --Bankrate

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