Questions on maxing my 401k

[disneysteve]

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.

Yeah, but that's a pain, still risks overshooting the mark as it may take one or two cycles for the change to take effect, or risk not quite hitting the max if I cut out a bit too soon. It shouldn't be that complicated. Take out until I max it and then stop. That should be the normal process. Obviously I don't want to do more than the maximum allowable amount.

[QuarterMillionMan]

Mine's (52 yrs old) get automatically stopped at $24,500. I'm in the public sector with a 457 plan. And that includes the 4% match. And it is difficult to calculate and time it perfectly to hit $24,500 at the end of the year. Some years I contribute too much too fast and by November I have max'd out and miss out on December's 4% match. Contribute too little and you won't max out for the year. For me 27% is about the right number.


BTW Disneysteve it's about time you started to take advantage of maxing out your 401k contribution. I remember a few years ago when you first brought up your delight about having a 401k and I asked why you didn't max out then and you came up with some other reason. It's about time!


And I don't even want to bring up the other why? Which is why you don't write a check and pay off your $20,000'ish remaining mortgage. With the increase in standard deductions the mortgage interest deduction probably isn't worth keeping any longer. I'll be looking forward to the new thread where you proclaim that you've paid it off!

[disneysteve]

BTW Disneysteve it's about time you started to take advantage of maxing out your 401k contribution. I remember a few years ago when you first brought up your delight about having a 401k and I asked why you didn't max out then and you came up with some other reason. It's about time!

LOL. You make it sound like I was out blowing my money on booze and blackjack instead of saving for retirement. I first became eligible for the 401k in late April 2016. I was working per diem and earned $22,000 for the year. Even if I had contributed the maximum allowed of 50%, that would have only been 11K so maxing in 2016 wasn't even a possibility. Besides, had I put in the 11K, it would have pretty much defeated the point of taking the extra job because my increased take home would have been minimal.

For 2017, I could theoretically have maxed the 401k as I did earn more than $49,000, but again, the whole point of the new job was that we needed more income. Keep in mind that college was costing us at least $32,000/year out of pocket. I also had to purchase a $15,000 malpractice policy last year when I left my practice and pay off a 15K student loan we took out the prior year. I put in more than enough to get the match (10%) and we fully funded 2 Roths ($13,000) so a sufficient amount got put away for retirement. I wasn't interested in putting more in the 401k at the expense of not being able to max out the Roths.

This year, 2018, I am only working at the 401k job so the situation is different and my gross is higher so I can afford to max the 401k without a problem, especially since college costs are just about over. We only owe another $6,200 and we already have that money in hand. Also, we might not be able to do the Roths this year as my income may exceed the threshold, so the 401k might be our only retirement plan (other than the small amount I get to put in my SEP-IRA each year).

And I don't even want to bring up the other why? Which is why you don't write a check and pay off your $20,000'ish remaining mortgage. With the increase in standard deductions the mortgage interest deduction probably isn't worth keeping any longer. I'll be looking forward to the new thread where you proclaim that you've paid it off!

My accountant and I just had this conversation when I did my taxes last Friday. In my "what to do with extra money" thread, I mentioned this also. Right now, the plan is to first payoff our 13K HELOC and then start accelerating (well, further accelerating as we already pay extra) the mortgage. Why haven't I paid it off previously? Because we've been in a 9-year bull market and our investments have been far outperforming the interest we would have saved by prepaying the mortgage. Now that we're done with college and we're losing the deduction and might be losing our Roths and the bull market might be winding down, throwing extra funds at the mortgage probably makes sense.

[Like2Plan]

Also, we might not be able to do the Roths this year as my income may exceed the threshold, so the 401k might be our only retirement plan (other than the small amount I get to put in my SEP-IRA each year).

The Roth option might not be out of the question:

https://www.bogleheads.org/wiki/Backdoor_Roth_IRA

This only works if you don't have any of pretax IRA type accounts (like a pretax SEP). But, even if you do--sometimes the pretax $$ can be rolled into your 401k. And, if you can't do this--maybe your DW could if she doesn't have any pretax IRA accounts.

[Like2Plan]

Step by step Backdoor Roth Tutorial by the White coat investor

https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/

Another step by step tutorial

https://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html

[Like2Plan]

If you are calling your HR anyway, you should ask if they allow after tax 401K contributions (and in service rollovers of the after tax contributions).... for the Mega backdoor Roth....

https://www.bogleheads.org/wiki/After-tax_401(k)

You could get up to 61 K into your 401k using this method. Note: the 61k includes the 6k for over 50 contribution and is accounted separately from the 55k annual limit. You also have to include the employer match in the max amount.

[disneysteve]

Update: My employer will automatically stop taking money out when I hit the maximum contribution, so that's good.

The person I spoke to couldn't answer my question about how the match is handled so I left a message for the retirement specialist who handles that.

[scfr]

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

It is a dollar amount.

I have 2 jobs. One is part-time, year-round, steady work, zero benefits. The other job is extremely variable, can be anywhere from 0 to 55 hours per week, with a definite peak season, all my benefits are attached to this job.

I've been mulling this over and waiting to hear what my work lineup at the variable job will look like during peak season. Now I know ... I have a plan ... and the plan is on the calendar. I'm going to sign up for catchup contributions just before peak season starts, and cancel catchup contributions just before it ends. I won't be able to make the full $6K catchup contribution, but it will be a good-size chunk, and definitely better than nothing. And I won't lose any employer match this way.

As is often the case "talking things out" here on the SA Forum helped me, not by giving me a direct answer, but by sparking thoughts and making me think things through more thoroughly so that I could come up with a plan that will work for my situation. So, thanks!