Author Topic: Jacked up my contribution  (Read 1538 times)

tips^up

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Jacked up my contribution
« on: February 21, 2020, 03:34:10 PM »
My work provides a 457b, as well as 401k.  There are good Vanguard options in the portfolio - I'm split 35/35/30 between VIIIX, VMCIX and VSCIX.  There is a 457 Roth option, but I'm in the traditional 457.

For 2020, the max contribution is $19,500.  Work matches 2% of what I put in; so I must contribute 98% = $19,110.  I started the year planning to hit this amount, split evenly between 27 bi-weekly pay periods (normally 26, there's an extra one this year), by paying $707.77/paycheck.  As of 3/1/2020, I changed my strategy to hit the max contribution by mid-June, by contributing $2150 for 7 pay periods, then rounding the last one to hit it exact.

I figure it's time IN the market, plus some stocks on sale right now because of the corona virus.  I have also been contemplating starting my own business, so this would front load my currently available retirement benefits.  My wife has a solid job, I self-manage 3 rentals right now (we're living in our 2nd house hack), so we should be able to swing it just fine.

The HR lady about fell out of her chair when she saw the amount I elected to contribute.  My take home pay until June will be very, very small.  She joked if I'm planning to retire soon?  I'm 35, she's about 60.  I said yes, but it'll take a little more than $19.5 to get there!  :-)

EliteZags

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Re: Jacked up my contribution
« Reply #1 on: February 21, 2020, 03:59:19 PM »
fyi typically the employer match doesn't count towards the max, so you could still contribute the full $19,500 and get 2% on top from employer
but verify with your HR

tips^up

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Re: Jacked up my contribution
« Reply #2 on: February 21, 2020, 04:11:35 PM »
fyi typically the employer match doesn't count towards the max, so you could still contribute the full $19,500 and get 2% on top from employer
but verify with your HR

I believe the way I stated it is correct for my situation, but I'll check again.  The lady I spoke with in HR didn't seem like a great expert.

erutio

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Re: Jacked up my contribution
« Reply #3 on: February 21, 2020, 04:14:51 PM »
fyi typically the employer match doesn't count towards the max, so you could still contribute the full $19,500 and get 2% on top from employer
but verify with your HR

EliteZags is correct, typically the employer's match does NOT count against your 19.5 contribution limit for the year.

So you can contribute 19.5 to your 401k, another 19.5k to your 457.  And your employer will match an additional 2% to the 401k.  Also, typically it is 2% of your salary, not of your contribution.

dandarc

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Re: Jacked up my contribution
« Reply #4 on: February 21, 2020, 04:17:01 PM »
fyi typically the employer match doesn't count towards the max, so you could still contribute the full $19,500 and get 2% on top from employer
but verify with your HR

I believe the way I stated it is correct for my situation, but I'll check again.  The lady I spoke with in HR didn't seem like a great expert.
There are 2 relevant limits. Employee deferral is the $19,500 limit. There is also an overall additions limit of $57,000 for 2020. I've never seen a match count against the employee deferral limit, but if that is the case please do tell us what you find out and the reasoning.

And you're maxing both the 457 and the 401K, right? 2 separate buckets - $39K total employee deferral for 2020. On the 457, be sure it is a governmental plan. Non-governmental 457b plans are subject to the business' creditors, so you've got to take your employer's solvency into the equation.

tips^up

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Re: Jacked up my contribution
« Reply #5 on: February 21, 2020, 04:53:14 PM »
Interesting, I will definitely look into $19,500 vs $19,110.

My 401 is different.  They match my 6% of salary.

So for the 401a (yes, these are government), if my salary was $85k, I put in 6% = $5100 and employer puts in 6% = $5100.  For the 457, they match 2% of what I contribute.  So if I put in $19,110, they put in $390.

EliteZags

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Re: Jacked up my contribution
« Reply #6 on: February 21, 2020, 05:22:13 PM »
also for the 6% 401K match verify if they have it set up to where it's only matched to 6% of each paycheck in which you contribute, in that case you would be leaving money on the table by maxing out too early since you wouldn't be getting any match for the rest of the 2020 paychecks after you hit your max

Employers can be set up either way on this just need to find out for sure. Even if it is that way you could still structure it to where you contribute the bulk of the max in the next few months then leave enough remaining to be able to contribute 6% for each of the remaining paychecks of the year to still get the match with each
« Last Edit: February 21, 2020, 05:27:53 PM by EliteZags »

ducky19

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Re: Jacked up my contribution
« Reply #7 on: February 21, 2020, 06:07:10 PM »
$19,500 is your individual limit. The total between you and your employer cannot exceed $57,000.

terran

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Re: Jacked up my contribution
« Reply #8 on: February 21, 2020, 09:29:07 PM »
I'm not actually sure all of you are right about the limit not including the employer match. You're definitely right about a 401(k) or 403(b), but unless you know for a fact that a 457(b) also has an overall $57k limit I'd be careful about making that claim. It's more typical for an employer match to go into a 401(a), 401(k), or 403(b) even if it's matching a 457(b) contribution. I'm not sure I've heard of an employer contribution to a 457(b) before, and I also don't ever recall seeing anything beyond the$19.5k elective deferral limit. That's not to say there isn't another limit, just that we should all be careful about claiming there is just because that's the case for a 401(k)/403(b).


terran

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Re: Jacked up my contribution
« Reply #10 on: February 22, 2020, 08:32:05 AM »
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-457b-contribution-limits

Yeah, I saw that, which doesn't mention increased limits for employer contributions. I would say it's not totally definitive, but the 401(k) and 403(b) versions of that page do mention the annual additions/overall contribution limits, so I think it's pretty likely there is no extra limit for employer contributions to a 457(b).

ducky19

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Re: Jacked up my contribution
« Reply #11 on: February 22, 2020, 01:26:08 PM »
Yeah sorry, I didn't see that you were talking 457 vs. 401k.

Wintergreen78

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Re: Jacked up my contribution
« Reply #12 on: February 23, 2020, 08:49:46 AM »
99.9% sure the total limit to a 457 plan is $19,500. That IRS page says that is the limit for total additions, and the linked definition includes employer contributions among the total additions.

That was my understanding when I was working, so I never went through any contortions to try and get our district to do an employer match.

Also, Iíll take this chance to brag on our HR/Finance person. The last couple years before I retired I made all my 457 contributions in the first half of the year and she never batted an eye. I retired at the end of January a couple years ago. For that year I basically changed contributions and HSA amounts in each of my last few paychecks, to max out everything. She just had me fill out a different request for each pay period and handled everything perfectly. It is really nice to work with people like that.

dandarc

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Re: Jacked up my contribution
« Reply #13 on: February 24, 2020, 10:26:11 AM »
I think you're right @Wintergreen78  - if the match goes into the 457(B) itself, that reduces the allowed elective deferral. Score one for the 401K.

https://www.irs.gov/retirement-plans/457b-plans-for-state-or-local-governments-key-characteristics

Quote
Single contribution limit for elective deferrals and contributions

Still think "max both" is the best play if OP is able. Would be interesting to read the plan documents - maybe if OP participates in both plans, they could direct where the match goes?