Router bits should not bottom out in the arbor shaft of a router, because it can compromise tightening them properly in the collet. I used to follow the usual convention of bottoming the bit out, then pulling it back up 1/16″ to 1/8″ or so. But I was never sure if the bit was slipping back down when I tightened the collet.
Here’s a foolproof solution: Squeeze out a 1/4″ bead of silicone caulk onto a scrap of melamine, plastic laminate or other non-stick surface and let it fully cure. Then cut it into 1/8″ slivers to use as spacers under your router bit. Drop one into the collet hole, and you’ll never bottom out the bit again.
– Serge Duclos