Author Topic: Bonus - SS taxes and 401k question  (Read 2825 times)

Daisyedwards800

  • Bristles
  • ***
  • Posts: 303
Bonus - SS taxes and 401k question
« on: December 02, 2016, 09:04:38 AM »
Last year, I got a bonus of $7500 and allocated the entire thing to my 401k.  However, they still took out $573.75 for Social Security.  So my question is whether the $7500 all counts towards my $18,000 limit, or if only the $6926.25 counts? 

For this year, I have the same question.  Currently I have put in $11,418.75 with another $568.75 coming out of 3 more paychecks = $1706.25  So that leaves $4875 to put in.  I believe I'm getting the same bonus as last year but it might be a little more (we won't know until after we have to decide what % to allocate to our 401k's).  I put 75% allocated to 401k, but I am not sure whether that amount should include the SS and Medicare tax as mentioned above or not.

Help!

plog

  • Stubble
  • **
  • Posts: 235
Re: Bonus - SS taxes and 401k question
« Reply #1 on: December 02, 2016, 09:09:40 AM »
SSI on you regular income throughout the year doesn't count against your 401k limit, nor does this.  Only what you put into your 401k ($6926.25) gets counted against your limit.   

Daisyedwards800

  • Bristles
  • ***
  • Posts: 303
Re: Bonus - SS taxes and 401k question
« Reply #2 on: December 02, 2016, 09:11:54 AM »
Thanks, follow-up question is how to I get to exactly 18,000 and not go over if I don't even know what my bonus is :/

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2137
  • Location: Cleveland
Re: Bonus - SS taxes and 401k question
« Reply #3 on: December 02, 2016, 09:16:00 AM »
Thanks, follow-up question is how to I get to exactly 18,000 and not go over if I don't even know what my bonus is :/

Plan for the 18,000 without the bonus. Also, many payroll systems will simply cut off the deposits when you hit the max, but check with your employer.

Counting_Down

  • 5 O'Clock Shadow
  • *
  • Posts: 73
Re: Bonus - SS taxes and 401k question
« Reply #4 on: December 02, 2016, 09:16:22 AM »
Your HR or Plan Administrator should cut off contributions at 18k so you don't need to worry about hitting it exactly.  Confirm with them, but thats usually how it is.
I keep my 401k contributions set to 25% of my paycheck to frontload.  This results in me hitting the 18K max before the end of the year, at which point I'm cut off.  I don't do a thing to my contribution amounts, and they pick back up with the first paycheck of the year.
Slightly off topic but perhaps helpful: http://www.madfientist.com/front-loading/

Daisyedwards800

  • Bristles
  • ***
  • Posts: 303
Re: Bonus - SS taxes and 401k question
« Reply #5 on: December 02, 2016, 09:20:37 AM »
Thanks very helpful!  I'm going to try front-loading this coming year.

tweezers

  • Stubble
  • **
  • Posts: 204
Re: Bonus - SS taxes and 401k question
« Reply #6 on: December 02, 2016, 09:25:29 AM »
Your HR or Plan Administrator should cut off contributions at 18k so you don't need to worry about hitting it exactly.  Confirm with them, but thats usually how it is.
I keep my 401k contributions set to 25% of my paycheck to frontload.  This results in me hitting the 18K max before the end of the year, at which point I'm cut off.  I don't do a thing to my contribution amounts, and they pick back up with the first paycheck of the year.
Slightly off topic but perhaps helpful: http://www.madfientist.com/front-loading/

Note that if you receive any sort of match (e.g. employer contributes 3% of your salary if contribute 6%), front loading to maximum might reduce your employer contribution if they won't also front load the matching contribution.  I max my contribution, but need to contribute at least 6% per paycheck in order to receive the match.

Counting_Down

  • 5 O'Clock Shadow
  • *
  • Posts: 73
Re: Bonus - SS taxes and 401k question
« Reply #7 on: December 02, 2016, 11:15:08 AM »
Note that if you receive any sort of match (e.g. employer contributes 3% of your salary if contribute 6%), front loading to maximum might reduce your employer contribution if they won't also front load the matching contribution.  I max my contribution, but need to contribute at least 6% per paycheck in order to receive the match.

Most if not all employers do a true up in March or whenever before their own corporate taxes are due and they'll make adjustments for example: if you over contributed your 18k they'll pull the extra funds up, or they'll do a true up and correct their match if you frontload.  Remember, them doing a match for you is a tax benefit for them, so they're somewhat interested in capturing it if they can, or avoiding penalties for not administering your plan correctly.  At the three  companies I've worked for, each always trued up so I could capture the full match even with a frontload.  This year, my new company over contributed my match % due to me making changes with my contribution % that obviously confused someone.  I fully expect to see them pull out some $ during their true up checks early next year.

Daisy- this is another thing you can confirm with your HR.  They'll be able to clarify for you.
« Last Edit: December 02, 2016, 11:18:48 AM by Counting_Down »

Need2Save

  • Bristles
  • ***
  • Posts: 340
  • Location: Maryland (USA)
Re: Bonus - SS taxes and 401k question
« Reply #8 on: December 02, 2016, 12:07:28 PM »
"Many" employers do a true-up but it is not fair to say "most".  Our company does not, neither does my husband's or any company either of has worked for. 

Please check with your HR or payroll dept (whoever handles 401k administration) if you have any questions about how match is calculated, deposited, and adjusted by your employer. There are no standards when it comes to employer match.  Employers can use a very wide variety of methods but do need to be clear in their plan documents so employees have something to refer to for planning purposes.  Always best to verify with the people who actually operate your plan.

Good luck to all with your 401k savings! 

ZiziPB

  • Magnum Stache
  • ******
  • Posts: 3327
  • Location: The Other Side
Re: Bonus - SS taxes and 401k question
« Reply #9 on: December 02, 2016, 12:10:44 PM »
"Many" employers do a true-up but it is not fair to say "most".  Our company does not, neither does my husband's or any company either of has worked for. 

Please check with your HR or payroll dept (whoever handles 401k administration) if you have any questions about how match is calculated, deposited, and adjusted by your employer. There are no standards when it comes to employer match.  Employers can use a very wide variety of methods but do need to be clear in their plan documents so employees have something to refer to for planning purposes.  Always best to verify with the people who actually operate your plan.

Good luck to all with your 401k savings!
Mine doesn't true up either, so I would definitely caution against relying on "most, if not all".

JoJo

  • Handlebar Stache
  • *****
  • Posts: 1627
Re: Bonus - SS taxes and 401k question
« Reply #10 on: December 02, 2016, 04:54:32 PM »
I way overfund my 401K such that deductions for 401k stopped in September.  I just discovered today my company doesn't do the true-up since then until 12/31.  I wonder what would happen if I terminated work before 12/31.  Makes me think I need to be careful in the year I retire to not overfund too much.