How high was your gross income when you felt able to make the maximum contribution to your 401(k)/403(b)? Is contributing close to half of my already modest income a bad idea?
I recently eliminated some recurring expenses, cutting my absolutely non-negotiable monthly expenses (rent and utilities, food, medical insurance, student loan payment) to below $850/month. My monthly gross income is approximately $2350. I already contribute about 13% to my 403(b), but I worry that, even though this is smack dab in the middle of the common-sense-recommendation range, the absolute amount isn't enough. I'm thinking about establishing a small emergency fund and then increasing my contribution to somewhere in the $13,000-16,000/year range.
A few other points: I'm in my mid-thirties. I haven't ever made much money, and have only been able to afford a retirement fund in the past year or so. I currently have about $4000 between my 403(b) and an IRA. I have $40,000 of student loans, and I'm currently on the IBR plan. My job will qualify me for public service loan forgiveness in eight years, so I am mostly comfortable with the fact that I am only paying enough to cover the interest.
I realize that the correct advice is to increase my income, but I'm not sure that's a realistic option--I'm already approaching the peak income age bracket, and the only thing on the horizon is my annual 2% COL adjustment. That said, I'm accustomed to fairly severe financial discipline. I commute by bike, buy everything used, prepare most of my food and coffee at home, don't buy electronics, live with roommates (currently my girlfriend), don't have and don't plan on children, etc.--but I recognize that this will be difficult, at least until I get used to it. I regularly spend $30-60/week on...stuff...which I don't track too tightly, and I would have to rein this in.
I know that if things do go pear-shaped and I need more liquid cash, I can always modify my contribution and the money will be there in my next paycheck. But, I'm afraid that I'm not thinking this through very well, and this post
reinforced my suspicion that I may have different (and potentially unhelpful) ideas about money than most people do.
Would I be better off spending the money on therapy to address my anxiety about being destitute in my declining years? (For reference, after my grandfather developed Alzheimer's, my grandparents burned through the better part of $1M USD, and this has, obviously, had an impact on how I think about retirement savings.) Is this a horrible idea? Have you done something similar? How did it work out?