Author Topic: 401k Maxing  (Read 6886 times)

cbr shadow

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401k Maxing
« on: May 24, 2013, 01:31:31 PM »
My wife and I are both maxing our 401k's for the first time.  Quick question.. She gets lots of commission/bonuses so we just estimated her salary.  We estimated about $100k is what she'll make, so we are contributing 17.5% into her 401k.  She's gotten some good sales lately so it looks like she's going to make more than 100k at this point, possibly.  What happens if she hits the max in say, October?  Does she just not contribute the rest of the year, and not get a company match for the rest?  Does it just cut off her contributions, or does vanguard continue to take it and then give it back in th end?
Just trying to figure out how careful/precise we need to be.

Thanks!

madage

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Re: 401k Maxing
« Reply #1 on: May 24, 2013, 02:11:27 PM »
What happens if she hits the max in say, October?  Does she just not contribute the rest of the year, and not get a company match for the rest? 

The handling varies from company to company. My company stops the employee's contributions when the maximum is reached. If the match is not complete because maximum contribution was reached prior to December, the remainder of the match is paid in a lump sum into the employee's account early in the following year. Your wife should ask her company's HR department for their handling of this situation.


icefr

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Re: 401k Maxing
« Reply #2 on: May 24, 2013, 02:59:13 PM »
Some companies don't take 401(k) contributions out of bonuses either. Mine doesn't, which makes this a lot easier to calculate. I would double check on that as well.

cbr shadow

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Re: 401k Maxing
« Reply #3 on: May 24, 2013, 03:12:09 PM »
Thanks for the info guys.  I'll have her check w/ her HR dept. to see how they handle it.
Unfortunately (or fortunately) they do take 401k contributions out of her bonuses and comission checks.

FlorenceMcGillicutty

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Re: 401k Maxing
« Reply #4 on: May 24, 2013, 03:17:29 PM »
Just for the record, my company will put extra funds into an after-tax retirement fund.

secondcor521

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Re: 401k Maxing
« Reply #5 on: May 24, 2013, 07:30:09 PM »
My company automatically stops my 401k contributions when I hit the max, and they are kind enough to match in a way where I don't have to worry about the timing of my contributions and hitting the max earlier in the year.

My company takes 401k contributions out of bonuses.

Some companies, including a former employer of mine, will do the match on a per paycheck basis, so if you end up front-loading your contributions you can lose some matching funds, so it's important to check with your payroll department.

sol

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Re: 401k Maxing
« Reply #6 on: May 24, 2013, 10:01:17 PM »
We lose our match if we max before the last pay period of the year.  The matching funds are a fixed percent if each check, not of annual salary.

Fortunately, we have the option of specifying a dollar amount per pay period, instead if a percentage.  You probably do too.

chucklesmcgee

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Re: 401k Maxing
« Reply #7 on: May 24, 2013, 10:30:19 PM »
Any decent HR payroll system will not allow you to exceed the maximum contributions. If you hit the limit, you hit the limit and the system will automatically stop at exactly the match. If you have a $10k paycheck coming, can contribute $1k more before you max your check and have selected 20% to be contributed, it will take exactly $1k.

My guess is that your matching will probably not be affected by maxing early, but that depends on company policy. Read the fine print to say if they match 401k contributions up to 15% of annual salary OR match biweekly paychecks up to 15% of gross pay.

Catbert

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Re: 401k Maxing
« Reply #8 on: May 25, 2013, 12:00:31 PM »
How often during the year can you change 401k contributions?  Where I was you can change as often at you wanted.  So if you lose the match if you max out early then cut your % back now and raise it later in the year when you can predict better total compensation.