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Both my wife and I set a goal in 2012 to max out our 401k and achieved that goal in the last paycheck from work. I had assumed that any overage to the 17,000 would simply not be taken from my paycheck but it turns out that it was placed in an after tax account. Can I withdraw this money since it was after tax or will I still get hit with fees and such?
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You will have to talk to your employer about it.
I prepare W-2s for a lot of small businesses, and try to catch those mistakes before we prepare the W-2s. But these plans are too small to audit, so I usually just ask the employee if they want to apply it to the next year instead.
So, your employer may be willing to amend your W-2 and fix if it is a smaller employer. & if not, they may make you go through a bunch of red tape. It depends what they are willing/able to do to fix it. (Less options the bigger the plan). In general, a withdrawal for over-contribution should not be taxed or penalized. The earnings it generated would be taxed.
& now you know that your employer is not very careful about checking contribution limits at year-end, so you will want to be more vigilant this year. I think that is the takeaway here. -
Speak with the institution your 401K is with. I am with Fidelity and you can cash out what you are over. I just call and they send the check for the overage. I usually pull it out at the end of the year and then send it to my financial guy so I can invest in other options than the 10 in my 401k.Comment
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