Author Topic: Frontloading 401k Mistake  (Read 1371 times)

Mgmny

  • Pencil Stache
  • ****
  • Posts: 548
  • Age: 28
  • Location: Northwest 'Burbs of MSP
Frontloading 401k Mistake
« on: May 19, 2018, 06:35:01 AM »
Hey everyone!

I'm starting a new job the day after Memorial Day, and they will match 401k contributions at 30% of contributions made. Currently, my employer matches 0%. I front loaded my 401k (apparently like an idiot) this year, and have already contributed $14,500, meaning I will only be able to contribute another $4,000 to the max in 2018 leaving something like $5,000 of potential employer contributions on the table.

Do I have any options? Can I withdraw or recharacterize my previous 401k contributions from this year and then be able to reset my 401k contributions to $0 for 2018? I know I can take the money, but then I'd have a penalty plus taxes and I doubt that resets my contributions.

Any help or thoughts appreciated!

Mgmny

  • Pencil Stache
  • ****
  • Posts: 548
  • Age: 28
  • Location: Northwest 'Burbs of MSP
Re: Frontloading 401k Mistake
« Reply #1 on: May 19, 2018, 06:59:51 AM »
Here's what I'm thinking: tell my new employer I've currently contributed $0 to a 401k. Take my old 401k, rollover to an IRA, at year end, classify my old 401k as "excess contributions" and take it out and pay taxes on it (and somehow calculate gains/losses).

Thoughts?

mintleaf

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Frontloading 401k Mistake
« Reply #2 on: May 19, 2018, 05:39:17 PM »
I think you're on the right track, but to stay out of trouble you should probably withdraw the "excess contribution" from the old 401k before you roll it over. This will require an earnings calculation, which might be a pain depending on when the contributions were made, and how good your records are. In any case, you should talk to your plan administrator about it, since they'll need to help you. And be really nice to them... these kinds of maneuvers can be tricky, and they're partly on the hook if something gets messed up.

Gone Fishing

  • Magnum Stache
  • ******
  • Posts: 2739
  • So Close went fishing on April 1, 2016
    • Journal
Re: Frontloading 401k Mistake
« Reply #3 on: May 19, 2018, 05:48:47 PM »
Following.  Not an issue for me anymore, but curious. I got burned frontloading my Roth 401(k) right before a big raise that pushed me solidly into the next tax bracket.

Kakashi

  • Stubble
  • **
  • Posts: 115
Re: Frontloading 401k Mistake
« Reply #4 on: May 20, 2018, 04:08:34 AM »
I'm really commenting to follow this thread just out of interest.  I suspect you will need to talk to a tax professional about this. 

Mgmny

  • Pencil Stache
  • ****
  • Posts: 548
  • Age: 28
  • Location: Northwest 'Burbs of MSP
Re: Frontloading 401k Mistake
« Reply #5 on: May 20, 2018, 07:10:49 AM »
I think you're on the right track, but to stay out of trouble you should probably withdraw the "excess contribution" from the old 401k before you roll it over. This will require an earnings calculation, which might be a pain depending on when the contributions were made, and how good your records are. In any case, you should talk to your plan administrator about it, since they'll need to help you. And be really nice to them... these kinds of maneuvers can be tricky, and they're partly on the hook if something gets messed up.

Thanks got the advice! I already submitted the paperwork to roll it over, but I will send them a note to cut the check to me instead.

If anyone else has any thoughts, I'd appreciate them!

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Frontloading 401k Mistake
« Reply #6 on: May 20, 2018, 10:08:43 PM »
Post this over on the bogleheads forum or white coat investor forum, and/or contact user Spirit Rider on either of those forums.

Mgmny

  • Pencil Stache
  • ****
  • Posts: 548
  • Age: 28
  • Location: Northwest 'Burbs of MSP
Re: Frontloading 401k Mistake
« Reply #7 on: May 21, 2018, 08:03:59 AM »
Post this over on the bogleheads forum or white coat investor forum, and/or contact user Spirit Rider on either of those forums.

Will do. Thanks!