Bonus - waive contribution to 401k?

[jeromedawg]

Hey all,

Was just curious if there's an reason to waive contributions to my 401k on a bonus from work. If not, they'll just take the percentage that I've specified out of the bonus check and direct it towards my 401k. Thing is, I setup the % with the intention of having it 'evenly' come out of each paycheck until the 401k is maxed out at the end of the year. Would it be better just to let the contribution come out of the bonus check anyway so that I hit the max earlier though? Does it really matter if I don't need the money, etc?

[Joel]

I would make sure you get the matching contribution on all paychecks throughout the year. That may mean you need to lower the percentage for the rest of the year.

[jeromedawg]

I would make sure you get the matching contribution on all paychecks throughout the year. That may mean you need to lower the percentage for the rest of the year.

Yep, I'm definitely contributing enough to get and max out the matching contribution (it's up to 6% of your salary). I don't think matching deposits occur on any bonus checks though.

[terran]

I would make sure you get the matching contribution on all paychecks throughout the year. That may mean you need to lower the percentage for the rest of the year.

Yep, I'm definitely contributing enough to get and max out the matching contribution (it's up to 6% of your salary). I don't think matching deposits occur on any bonus checks though.

The key here is that you need to make sure the match will "true up" at the end of the year. Some companies only contribute a match when you contribute, and only up to the match for each contribution. So, at those companies, if you hit the limit before the end of the year then you'll miss out on the match. You need to make sure that won't happen, or you need to skip the contribution on the bonus so that you contribute enough to get the match throughout the year as you had planned without hitting the limit.

[jeromedawg]

I would make sure you get the matching contribution on all paychecks throughout the year. That may mean you need to lower the percentage for the rest of the year.

Yep, I'm definitely contributing enough to get and max out the matching contribution (it's up to 6% of your salary). I don't think matching deposits occur on any bonus checks though.

The key here is that you need to make sure the match will "true up" at the end of the year. Some companies only contribute a match when you contribute, and only up to the match for each contribution. So, at those companies, if you hit the limit before the end of the year then you'll miss out on the match. You need to make sure that won't happen, or you need to skip the contribution on the bonus so that you contribute enough to get the match throughout the year as you had planned without hitting the limit.

So they match dollar for dollar and up to 6% of eligible pay per quarter apparently. But in a separate email for the bonus they said that if we want to opt out we need to let them know by the 24th. I'm not used to this structure of company 401k match contributions (where it occurs quarterly) and am used to the match occurring per paycheck (at least to my recollection). Also, the first two paychecks of the year I contributed a crazy amount because I had upped the percentage before year end for 2016 (to max out the 401k for 2016) and ended up forgetting to change the contribution % back to what it originally was for 2017 until the middle of the last pay period. Not sure how that will impact all this.

[tomsang]

Talk to HR and tell them what you want to do.  As mentioned some companies only allow 6% of your pay per pay period.  If you max out before year end you might be shorting the amount of the match.  Hard to advise without knowing exactly how your plan works.

[jeromedawg]

Talk to HR and tell them what you want to do.  As mentioned some companies only allow 6% of your pay per pay period.  If you max out before year end you might be shorting the amount of the match.  Hard to advise without knowing exactly how your plan works.

So I just called and confirmed that they do "true up" - they do this per quarter, so even if I max the 401k out in the first quarter or two, they will match the 6% for the remainder of the year. So whether or not I waive the bonus seems to have no bearing. I guess it will just depend on if I want to max out the 401k earlier or if I want/need the cash from the bonus.

[yachi]

This is why I have mine set to $17,600 or so.  Just in case I have a bonus or a weird paycheck.

[BigHaus89]

Are you able to contribute a dollar amount instead of a percentage i.e. $1500/month? I was able to do this with my employer and it simplified things greatly by not having to change the contribution % every time I get a raise/bonus/weird paycheck.

[jeromedawg]

Are you able to contribute a dollar amount instead of a percentage i.e. $1500/month? I was able to do this with my employer and it simplified things greatly by not having to change the contribution % every time I get a raise/bonus/weird paycheck.

Unfortunately, this doesn't look to be possible - seems they only allow you to change contribution by percentage.

[Shwaa]

I don't change my contribution % at all for my bonus. I get paid 26x a year (every 2 weeks) and have it equally divided so it comes out to $18,000 a year.  With the bonus thrown in there (and raise sometime in April) it hits 18k before December 31st usually, but once it hits the max it just stops contributing automatically, which is nice. I don't need to do anything on my end.

[JLee]

I don't change my contribution % at all for my bonus. I get paid 26x a year (every 2 weeks) and have it equally divided so it comes out to $18,000 a year.  With the bonus thrown in there (and raise sometime in April) it hits 18k before December 31st usually, but once it hits the max it just stops contributing automatically, which is nice. I don't need to do anything on my end.

That's what I do as well.  My last check of 2016 was about $300 more than usual and it took me a minute to figure out that it was because I had reached my 401k limit on the last check.