We're told that it pays to max out our retirement plan contributions, and that's generally great advice. After all, the more we sock away during our working years, the more retirement income we'll be sitting on down the line. And while IRAs do a great job of allowing for wealth accumulation, if you have access to a 401(k) through your employer, you have an even greater opportunity to save. That's because the annual limits for 401(k)s recently increased to $18,500 for workers under 50, and $24,500 for workers 50 and over.

That said, there are certain scenarios where it actually doesn't pay to max out your 401(k). Here are a few that might apply to you.

Coin being dropped into piggy bank with 401k written next to it on a chalkboard


1. You have no emergency savings

it's crucial to save for retirement, and you have the opportunity to do just that as long as you're still working. On the other hand, if a fortune-teller were to inform you that you'll be hit with a sizable expense in two weeks from now, your odds of scrounging up the cash in such little time are pretty low.

That's the situation well more than one-third of Americans are in. An estimated 39% of U.S. adults have no savings whatsoever, which means they're extremely vulnerable in the face of a financial emergency. If you're part of that 39%, then it pays to put every spare dollar you get into a regular old savings account until you have at least three months' worth of living costs amassed, as opposed to locking it up for the future. While you will miss out on some growth opportunity, you'll avoid racking up costly credit card debt when an unplanned expense falls in your lap.

2. You have credit card debt that's costing you money

Speaking of credit card debt, here's another reason not to max out your 401(k) this year: If you're sitting on a whopping balance and have a little extra money to spare (say, you got a raise or started working a side gig), it pays to eliminate your debt before padding your nest egg. The reason? The stock market's historical yearly average is somewhere in the 9% ballpark, whereas the interest you'll pay on a credit card balance can easily top the 20% mark. Unless you're a true investing genius, you'll generally come out ahead by paying down your balance to avoid losing more money to interest than gaining a little extra in your 401(k).

3. You don't like your plan's investment choices

The money you put in your 401(k) doesn't just sit there. Rather, you're supposed to invest it wisely so that it generates nice returns over time. But if your investment choices mostly consist of high-fee funds, or ones that don't align with your investment strategy or tolerance for risk, then it pays to look into other effective savings options. That might mean funding an IRA instead, where you'll face a lower annual contribution limit ($5,500 for workers under 50 and $6,500 for those 50 and over), but will generally get a wider range of investment options than a 401(k) will give you.

Of course, if you're not in one of these scenarios, then it absolutely pays to max out your 401(k) if you're able to. And the sooner you start, the more wealth you stand to retire with. As an example, say you're 32 years old and want to retire at 67. If you max out your 401(k) for the next 35 years, you'll wind up with more than $2.7 million, assuming the annual contribution limits stay the same and your investments generate an average annual 7% return. And that's why you should always aim to max out -- as long as you don't have a good reason not to.