Questions on maxing my 401k

[Jluke]

The others had already covered the biggest points. Ask your 401k administrator, I guarantee they can clarify everything... They almost certainly field those questions regularly.

Only note I'll add, you may be able to direct that no portion of your bonuses get contributed to the 401k (I can do that at least). That would allow you to schedule your contributions a little easier to endure you get the full match, since you'd only be contributing out of your normal paycheck.

Careful with that. My employer matches the bonus portion that I contribute to the 401k (so I set it to 6% just for the bonus)

[terri77]

In my plan the contributions are elected separately, but both automatically stop when you reach the maximum.

[scfr]

This may not be important for you, disneysteve, but for others reading this, if your employer doesn't match catch-up contributions, it may be important to know the order in which deductions are taken from your paycheck. If someone doesn't have a high income and has a lot of payroll deductions (insurance, FSA, etc), and if catch-up contributions are not matched by the employer and are taken out before regular 401k contributions, by making catchup contributions you may lose out on some of the employer match.

I have 2 jobs. I have benefits only at one of those jobs, where the order of deductions is:
1. SS & Medicare Tax
2. Medical, Dental, Vision Insurance
3. Catchup 401k Contribution (no employer match)
4. Regular 401k Contribution (employer match only happens here)
5. Income Tax (based on what is left after deductions 1-4 are taken)

I have opted out of making catchup contributions in order to increase the amount of income that makes it to "level 4" and gets the employer match.

[Gailete]

This may not be important for you, disneysteve, but for others reading this, if your employer doesn't match catch-up contributions, it may be important to know the order in which deductions are taken from your paycheck. If someone doesn't have a high income and has a lot of payroll deductions (insurance, FSA, etc), and if catch-up contributions are not matched by the employer and are taken out before regular 401k contributions, by making catchup contributions you may lose out on some of the employer match.

I have 2 jobs. I have benefits only at one of those jobs, where the order of deductions is:
1. SS & Medicare Tax
2. Medical, Dental, Vision Insurance
3. Catchup 401k Contribution (no employer match)
4. Regular 401k Contribution (employer match only happens here)
5. Income Tax (based on what is left after deductions 1-4 are taken)

I have opted out of making catchup contributions in order to increase the amount of income that makes it to "level 4" and gets the employer match.

I don't understand the math here. Your regular contribution would be one amount and the catch up a smaller amount, how does making a catch up contribution make for less of a regular contribution and employer match? I think I need to see some actual numbers to understand. I am thinking that the example is for someone that can contribute the entire possible amount to their 401K. If you can't make the full amount, then of course you would skip the catch up so you would get the full benefits of the employer match.

[WDELTA]

You should ask if your extra pay even goes into your 410k. I get extra pay for night shifts, Sunday’s etc. but my TSP contribution is a percentage only coming from my base pay. With holidays or overtime I may gross $800 extra in a pay check, my contribution is the same as getting no extra pay.

[bjl584]

It depends.
Where I work HR will let you know when you hit the MAX. You might contribute a little over before they catch it though (1 or 2 pay cycles.)

Some employers allow you to contribute a set dollar amount as opposed to a percentage. That may be something you can look into.

Several years ago I contributed too much to my ROTH. My brokerage firm had to transfer the overage over to my taxable account. This all happened behind the scenes and there were no fees or penalties.

[scfr]

I don't understand the math here. Your regular contribution would be one amount and the catch up a smaller amount, how does making a catch up contribution make for less of a regular contribution and employer match? I think I need to see some actual numbers to understand. I am thinking that the example is for someone that can contribute the entire possible amount to their 401K. If you can't make the full amount, then of course you would skip the catch up so you would get the full benefits of the employer match.

Yes, true ... but only if the amount of pay is consistent (or pretty consistent). However, if you are an hourly worker at a job where the number of hours varies greatly (like I am in the job where I have a 401k), on low-hour paychecks you could hit "net $0" before making it to the regular 401k contribution and lose the employer match. I wish that my employer deducted regular 401k contributions before catchup contributions, because then it wouldn't be an issue and I could request catchup contributions knowing that they would happen only on higher-hour paychecks. Unfortunately, with the order in which they currently take deductions, I've opted not to make catchup contributions.

[corn18]

DO they withhold a percentage or a dollar amount? If a percentage, it should not matter which comes out first.

[Gailete]

DO they withhold a percentage or a dollar amount? If a percentage, it should not matter which comes out first.

I guess that is why I am confused. Back when I paid into 401K plans, they always took out what % I ever told them to, but my pay was never high enough to hit a max allowable and I wasn't to the 'catch up' age when I was still working. Now that I am old enough, I'm lucky to be able to funnel anything into the retirement fund.

[Like2Plan]

DO they withhold a percentage or a dollar amount? If a percentage, it should not matter which comes out first.

That makes sense, except scfr also has Medical, Dental, Vision Insurance coming out--if this insurance costs a lot and scfr is only working part time then I could see where there would be a problem.

[Like2Plan]

Any updates Disney Steve?

[disneysteve]

Any updates Disney Steve?

Not yet. I haven't had a chance to call.

ETA: I called Lincoln Financial. They said I do not need to do anything special to contribute up the max including the catch up contribution. I just need to increase my percentage appropriately.

As for if they automatically stop my contributions when I hit the max, Lincoln couldn't answer that as it is handled by the employer. I'll have to call our Benefits department for that.

I just bumped up my contribution from 10% to 11%. That won't get me to the max but I will adjust again in a month or so once I've made the last couple of tuition payments.

[Like2Plan]

Will you ask them how the match works? (Since you will reach the max regular contribution prior to the catch up contributions)

[Benderz]

My 401k at work is administered by Vanguard. When I reached the max last year Vanguard automatically stopped my contributions. Regardless of the contribution level I selected. Depending on your match you want to plan the contributions so you hit your max on the last pay period. For example my match is 5%, so my last paycheck in December I contributed 6.5% and i was maxed out, but still got the 5% match from my employer. I started adjusting my contribution down in October. If i hit my max in November, I would have missed out on the 5% match for the December pay period contributions.

Two years ago i switched jobs. Both the old and new job was administered by vanguard, but I still had to manage it myself because they did not sum the contributions across both employers. (Same with social security but i couldn't manage it and received a refund when i did my taxes). If you over contribute you will have to undo it at the end of the year when you do your taxes.

I'm pretty sure all of the major 401k administrators would be similar.

[MACreditRevo]

your pay stub should have a running total of your contributions for the year, as you get close you can probably adjust that if they don't automatically stop your contributions when you reach the max.