By Brandy Branstetter, CFP®
“I’m maxing out my 401(k), so I should be fine.”
I hear some version of this in a lot of my first meetings with new clients when I ask them about their savings situation. And I understand why, because it’s very possible that for most of their career, it was true. Maxing out your retirement account was the responsible thing to do, the finish line, the box you could check and stop worrying about.
But here’s what I tell my clients. As your income grows throughout your career, the finish line needs to move as well.
Let me explain why people overlook this truth first, and then I’ll talk about our approach at Beyond Wealth.
Let’s say you’re earning $150,000 a year and you max out your 401(k) at $24,500 (the IRS limit for 2026). That’s 16 or 17% of your income. Add an employer match and you’re saving 20% of your gross income. Genuinely great.
Now let’s run the same numbers at $350,000. If you put in the same $24,500, it might feel the same to you. It’s the same process and the same box checked. But now it’s only about 7% of your income.
That’s the misconception: the higher your income climbs, the faster you hit the ceiling on these accounts, and they begin to represent a smaller portion of your real earning power. So the advice that made you a great saver at $150,000 stops working quite as well at $300,000 and beyond.
If you max out your 401(k) every year for 20 years at a 6-8% return, you’ll accumulate somewhere between $1 million and $1.5 million. That sounds like plenty until you turn it into a monthly amount. Using a safe 4% withdrawal rate, that balance generates about $4,000 to $5,000 a month in retirement income. Not so good, considering most of the families we work with are accustomed to spending $10,000 to $20,000 a month today.
Take one of our clients, who has worked at a large software company since their twenties. Now in their mid-40s, they’ve nudged their contributions higher as their income has grown, and these days they easily max out their 401(k) early in the calendar year. Their goal was to retire in their late 50s, but when we built their plan, the numbers were clear. To enjoy the same lifestyle in retirement that they have today, maxing out wasn’t going to be enough.
That gap doesn’t close on its own, but we can help.
Introducing the 1/3 Rule
If you Google it, the advice you’ll find online says to save 15 to 20% of your income. But as we just saw, a flat percentage doesn’t mean much if you are a high earner. It also doesn’t answer the question that might be burning in you right now: is that gross or net?
So at Beyond Wealth, we use a different starting point with high-income families. We call it the one-third rule:
One third of your income goes to savings, one third covers taxes, and you live a comfortable, enjoyable life on the remaining third.
We love this rule because it’s simple and doesn’t require any interpretation. We’re using the big number: your total gross income, not what’s left over.
Okay, so if a third of your income should be going to savings, and maxed-out retirement accounts only get you partway there (say 15%) then the real question becomes, where do the rest of your savings go?
For our clients, the answer is what we call the Future Opportunity Fund: an investment account, outside your retirement accounts, that exists to give you options. Sometimes it’s earmarked for something specific like a second home, a sabbatical, or a big family trip. Often, it isn’t earmarked at all. It’s simply there so that when life presents an opportunity, you can say yes.
And the opportunities that matter most usually aren’t purchases. The single biggest one we see is being able to step away from work whenever you want to. Your 401(k) can’t and won’t do that for you before age 59½. The Future Opportunity Fund, aka your reasonably accessible savings, is what makes an early retirement or a second act possible.
One client of ours saved over 30% of her income for years, well beyond what her retirement accounts could hold. When we built her plan, we were able to show her she could retire at 55, years before she’d ever dreamed, before her pension kicked in, and before she could even touch her retirement accounts. The only work she’s doing today is on her golf handicap.
One thing to do this week
If you were my client, here are the three numbers I’d have you find this week.
First: your household’s gross income. The big number — everything that comes in before taxes and deductions.
Second: one third of that number. That’s your savings target.
Third: how many dollars you’re actually adding each year to your retirement accounts, college accounts, and savings combined.
Now hold your actual savings number up against your calculated savings target. For a lot of high-income families, this is the first time they’ve ever seen that gap in plain dollars, and it explains why “I’m maxing out my 401(k)” felt like enough… when it wasn’t.
Want help figuring out how to close the gap for your family? That’s a conversation we’d be happy to have. Click here to schedule your consultation.
About Brandy
Brandy Branstetter, CFP®, is a Principal and Wealth Advisor at Beyond Wealth, a fiduciary financial advisory firm based in Overland Park, Kansas. She specializes in helping mid-career professionals and entrepreneurs enjoy financial independence through her “Good, Better, Best” planning framework. With a career beginning in 2005, she is particularly passionate about supporting female clients, providing them with the transparent and values-driven guidance needed to navigate complex financial transitions. A University of Tulsa alumna and dedicated sports enthusiast, Brandy delivers personalized wealth management to the Kansas City area and beyond.
