Author Topic: 27 paychecks this year - change contribution  (Read 1123 times)

myrrh

  • 5 O'Clock Shadow
  • *
  • Posts: 57
27 paychecks this year - change contribution
« on: December 01, 2020, 01:07:32 PM »
For some of us who get paid biweekly, there are 27 paychecks this year. Cool!

Which means for those who work for companies that don't true up, $19,500 no longer divides evenly by 26, you get to divide by 27 for a contribution amount of 722.22, missing out on $0.04 for the year. Boo!

Is anyone else changing their contribution amounts, or am I the only one?

sherr

  • Handlebar Stache
  • *****
  • Posts: 1543
  • Age: 35
  • Location: North Carolina, USA
Re: 27 paychecks this year - change contribution
« Reply #1 on: December 01, 2020, 01:35:36 PM »
I would certainly not bother changing my contribution to shield four cents from income taxes, no. I think you might be the only one.

myrrh

  • 5 O'Clock Shadow
  • *
  • Posts: 57
Re: 27 paychecks this year - change contribution
« Reply #2 on: December 01, 2020, 01:43:41 PM »
I think you misunderstand. I certainly do not care about the loss of $0.04. I'm changing 401k contributions from $750 to $722.22 for 2021 to prevent an extra $750 from going into limbo at the end of the year. While I'm sure it would be returned eventually, I have no yearning to find out how much time and effort in the way of phone calls and emails into a black hole it would take.

sherr

  • Handlebar Stache
  • *****
  • Posts: 1543
  • Age: 35
  • Location: North Carolina, USA
Re: 27 paychecks this year - change contribution
« Reply #3 on: December 01, 2020, 01:49:32 PM »
Ah, okay. It would almost certainly not disappear into a black hole, instead they would simply not take any more 401k contributions out of your paycheck once you hit the limit. You might therefore miss out on a small portion of the company match (if you have one) if they do it per-pay-period and they don't true-up, but you should at least have all your earned money. Then again I have no idea how incompetent your plan administrator is, so you might know something I don't.

ixtap

  • Magnum Stache
  • ******
  • Posts: 2929
Re: 27 paychecks this year - change contribution
« Reply #4 on: December 01, 2020, 02:12:58 PM »
For some of us who get paid biweekly, there are 27 paychecks this year. Cool!

Which means for those who work for companies that don't true up, $19,500 no longer divides evenly by 26, you get to divide by 27 for a contribution amount of 722.22, missing out on $0.04 for the year. Boo!

Is anyone else changing their contribution amounts, or am I the only one?

Some are unexpectedly getting that in 2020, rather than 2021. Since Jan 1st is a holiday, some systems will pay out on Dec 31st. Others will delay until the next business day. Do you know for sure which is the case for your employer?

MissPeach

  • Bristles
  • ***
  • Posts: 350
Re: 27 paychecks this year - change contribution
« Reply #5 on: December 01, 2020, 04:45:14 PM »
It might not work for the full company match but if you call the company you can get back or contribute the contribution portion to max it out and not go over. I've done that before switching jobs mid year and mis-calculating things.

PDXTabs

  • Handlebar Stache
  • *****
  • Posts: 2418
  • Age: 37
  • Location: Portland, OR, USA
Re: 27 paychecks this year - change contribution
« Reply #6 on: December 01, 2020, 05:58:07 PM »
Yes, I have 26 paychecks this year, but if I had 27 the payroll department just wouldn't take my last contribution out and I would miss out on my match.

EDITed to add - no 401k provider that I am aware of will allow you to over-contribute. The obvious exception is if you change jobs mid year. But the only penalty is double taxation come tax time. That is, you will pay income tax on your over-contribution and then again when you go to withdraw it years later.
« Last Edit: December 01, 2020, 06:00:14 PM by PDXTabs »

DeniseNJ

  • Bristles
  • ***
  • Posts: 453
Re: 27 paychecks this year - change contribution
« Reply #7 on: December 02, 2020, 06:31:31 AM »
Oh no. I'm turning 50 next year (yay) so I get to contribute catch up savings. It's a total of 26K which I was pleased to see was exactly 1000 per pay period. Somehow that made me so happy. $962.96 is not as nice at all as an even 1,000. I should post this in MPP.

ETA--oh thank goodnes.  I just checked the federal pay calender and I do only have 26 pay dates. Whew!
« Last Edit: December 02, 2020, 06:37:23 AM by DeniseNJ »

use2betrix

  • Handlebar Stache
  • *****
  • Posts: 2178
Re: 27 paychecks this year - change contribution
« Reply #8 on: December 02, 2020, 07:37:24 AM »
I work hourly with time and a half overtime. My hours vary week to week but are typically around 55 hrs/wk.

This makes it incredibly hard to plan to get my 401k exact. Typically if I have my contribution set at 6% or 7% I’m good to go. I have to plan it well enough so that I at least get 5% every pay period, to get my companies 5% match. If I were to max it out by say August, my company wouldn’t contribute the remainder of the year.

secondcor521

  • Magnum Stache
  • ******
  • Posts: 3463
  • Age: 51
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: 27 paychecks this year - change contribution
« Reply #9 on: December 02, 2020, 08:29:26 AM »
But the only penalty is double taxation come tax time. That is, you will pay income tax on your over-contribution and then again when you go to withdraw it years later.

My understanding of the law was that the overcontribution penalty is 6% every year that the overcontribution remains in the account.  But that is for IRAs; I would think it is for 401(k)s as well but don't know for sure.

OP, I'd do $722.23.  Your last paycheck in December they'll take out a few cents less and you should hit the maximum exactly, and get any per-pay-period company match.  My experience matches PDXTabs in that all companies will cut off your contributions when you hit the limit.

SimpleCycle

  • Handlebar Stache
  • *****
  • Posts: 1177
  • Location: Chicago
Re: 27 paychecks this year - change contribution
« Reply #10 on: December 02, 2020, 10:18:27 AM »
But the only penalty is double taxation come tax time. That is, you will pay income tax on your over-contribution and then again when you go to withdraw it years later.

My understanding of the law was that the overcontribution penalty is 6% every year that the overcontribution remains in the account.  But that is for IRAs; I would think it is for 401(k)s as well but don't know for sure.

OP, I'd do $722.23.  Your last paycheck in December they'll take out a few cents less and you should hit the maximum exactly, and get any per-pay-period company match.  My experience matches PDXTabs in that all companies will cut off your contributions when you hit the limit.

401ks also have a 6% overcontribution excise tax.  But the only time I've had to deal with this is when changing jobs mid-year.  Otherwise the company stops contributions or starts putting them in an after-tax 401k.

PDXTabs

  • Handlebar Stache
  • *****
  • Posts: 2418
  • Age: 37
  • Location: Portland, OR, USA
Re: 27 paychecks this year - change contribution
« Reply #11 on: December 02, 2020, 10:35:47 AM »
But the only penalty is double taxation come tax time. That is, you will pay income tax on your over-contribution and then again when you go to withdraw it years later.

My understanding of the law was that the overcontribution penalty is 6% every year that the overcontribution remains in the account.  But that is for IRAs; I would think it is for 401(k)s as well but don't know for sure.

401ks also have a 6% overcontribution excise tax.  But the only time I've had to deal with this is when changing jobs mid-year.  Otherwise the company stops contributions or starts putting them in an after-tax 401k.

Interesting, I mistakenly thought that the 1040 caught the over contribution for the tax year that it occurred.