Author Topic: DW's new employer doesn't provide a 401(k) plan until she's there a year  (Read 3197 times)

ashwihi

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Title says it all....

Anyone else ran into this before? Yikes.  Sounds like she might be SOL for the $18K pre-tax max? IRA limit is what? $5,500?  Any ideas?  My 401K is maxed, collectively we make ~$135K annually.  No kids and no other deductions so the pre-tax 401K benefit is huge for us. 

Proud Foot

  • Handlebar Stache
  • *****
  • Posts: 1027
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #1 on: October 29, 2015, 12:25:44 PM »
That really stinks.  Makes sense from the employers side if they are in an industry that experiences high employee turnover.  What time next year will she be eligible to contribute? I have no suggestions for this year, but you use this year to prepare for putting all of her paycheck in the 401k next year once she can begin contributing.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 2974
  • Age: 81
  • Location: The laboratory
  • Typical Ghoul Next Door
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #2 on: October 29, 2015, 01:07:02 PM »
I've worked many places that had a wait period of 6 months-year. It's pretty common.

In the meantime, yes, she's out of luck until she hits 1 year for maxing that account. But she could make sure she can kick over every cent of her paychecks as soon as she's eligible to be in the 401k to try to load as much as she can into her 2016 contributions (meaning she might not have any pay coming to her towards the end of next year if the company does allow this, so plan accordingly. She can then set her 2017 and forward contributions to be spread out over the whole year.).

If you both aren't over the income limits, you can still both open traditional IRAs and max out those this year and going forward. It is 5,500 each, so if both of you do it, you'd have 11k into tax deferred and if you can do the traditional route, you can get credit on your taxes for the traditional IRA contributions. And come January 1, you can throw in another 5,500 each and get 22K into tax deferred within a few months' time. The tax credit does not apply if you are doing Roth IRAs, so be aware of the advantages/disadvantages for your situation before jumping on one or the other.

AZDude

  • Handlebar Stache
  • *****
  • Posts: 1298
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #3 on: October 29, 2015, 01:30:08 PM »
Yep, one IRA for each of you and then save up the money so you can contribute 100% of her paycheck once she is eligible.

ashwihi

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #4 on: October 29, 2015, 02:09:03 PM »
From what the IRS site is telling me... https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-NOT-Covered-by-a-Retirement-Plan-at-Work

It looks like that she would be eligible for the $5,500 IRA max contribution but that I wouldn't ?

Thanks for the suggestions all.  I wonder if she's eligible for the full $5,500 this year since she was covered under an employers 401k up until last week? next year it seems like she would for sure. 

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 2974
  • Age: 81
  • Location: The laboratory
  • Typical Ghoul Next Door
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #5 on: October 29, 2015, 02:14:25 PM »
From what the IRS site is telling me... https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-NOT-Covered-by-a-Retirement-Plan-at-Work

It looks like that she would be eligible for the $5,500 IRA max contribution but that I wouldn't ?

Thanks for the suggestions all.  I wonder if she's eligible for the full $5,500 this year since she was covered under an employers 401k up until last week? next year it seems like she would for sure.

So your MAGI is more than 193K and you're phased out of taking even a partial deduction? Then wow, and I wouldn't worry about saving a piddly little $5,500... ;)

But if you make below 183K MAGI, then you BOTH can get a full deduction up to the amount of your contribution limit even with one or both of you having access to a 401k according to the chart you linked to. So yes, BOTH of you contribute to a traditional IRA if that is the case.

You can play with the numbers here: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
(check out the retirement tab to see how the deduction works out for you)
« Last Edit: October 29, 2015, 02:16:40 PM by Frankies Girl »

ashwihi

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #6 on: October 29, 2015, 02:18:08 PM »
From what the IRS site is telling me... https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-NOT-Covered-by-a-Retirement-Plan-at-Work

It looks like that she would be eligible for the $5,500 IRA max contribution but that I wouldn't ?

Thanks for the suggestions all.  I wonder if she's eligible for the full $5,500 this year since she was covered under an employers 401k up until last week? next year it seems like she would for sure.

So your MAGI is more than 193K and you're phased out of taking even a partial deduction? Then wow, and I wouldn't worry about saving a piddly little $5,500... ;)

But if you make below 183K MAGI, then you BOTH can get a full deduction up to the amount of your contribution limit even with one or both of you having access to a 401k according to the chart you linked to. So yes, BOTH of you contribute to a traditional IRA if that is the case.

You can play with the numbers here: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
(check out the retirement tab to see how the deduction works out for you)

Thanks, that makes sense now... Hard to read through the IRS mumbo-jumbo, I was thinking that chart would only apply to HER, not both of us.  We're definitely under the 183K.  ~135K with base salaries, even with bonus and stock options we're not over 183K (yet!) :)

JLee

  • Walrus Stache
  • *******
  • Posts: 5557
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #7 on: October 29, 2015, 03:51:28 PM »
Yep, one IRA for each of you and then save up the money so you can contribute 100% of her paycheck once she is eligible.

Not all companies offer a true-up at the end of the year so by doing this, they might be sacrificing the employer match once they hit the $18k limit.

stlbrah

  • Bristles
  • ***
  • Posts: 430
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #8 on: October 29, 2015, 03:56:28 PM »
All 4 of my full time jobs had this requirement.

My current company worked with me though. I worked for 15 months through a 3rd party as a contractor, and then they wanted me to leave the 3rd part and work for them, so they offered to count the contractor time as time with them.

Lady Fordragon

  • Stubble
  • **
  • Posts: 172
  • Location: Midwest
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #9 on: October 29, 2015, 09:56:16 PM »
My previous job had a 6 month requirement.
« Last Edit: October 30, 2015, 09:06:55 PM by Lady Fordragon »

Malum Prohibitum

  • Pencil Stache
  • ****
  • Posts: 677
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #10 on: October 30, 2015, 02:43:15 PM »
From what the IRS site is telling me... https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-NOT-Covered-by-a-Retirement-Plan-at-Work

It looks like that she would be eligible for the $5,500 IRA max contribution but that I wouldn't ?

Thanks for the suggestions all.  I wonder if she's eligible for the full $5,500 this year since she was covered under an employers 401k up until last week? next year it seems like she would for sure.

So your MAGI is more than 193K and you're phased out of taking even a partial deduction? Then wow, and I wouldn't worry about saving a piddly little $5,500... ;)

But if you make below 183K MAGI, then you BOTH can get a full deduction up to the amount of your contribution limit even with one or both of you having access to a 401k according to the chart you linked to. So yes, BOTH of you contribute to a traditional IRA if that is the case.

You can play with the numbers here: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
(check out the retirement tab to see how the deduction works out for you)

Thanks, that makes sense now... Hard to read through the IRS mumbo-jumbo, I was thinking that chart would only apply to HER, not both of us.  We're definitely under the 183K.  ~135K with base salaries, even with bonus and stock options we're not over 183K (yet!) :)

I hate to be abrasive with my first post, but you were correct the first time around.  You and Frankies Girl are looking at the wrong chart.  That chart applies only to her.  Read the title of the chart.

Your chart, since you are covered, is very different.  The phaseout is $98,000 to $118,000 for the partial deduction.  Your MAGI must be under $98,000 for a full deduction if you are covered by a retirement plan at work.

https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work

I hope everybody will please overlook my first post on this web site being argumentative.

StacheInAFlash

  • Stubble
  • **
  • Posts: 137
  • Location: Midwest
Re: DW's new employer doesn't provide a 401(k) plan until she's there a year
« Reply #11 on: October 30, 2015, 07:44:40 PM »
I had a pretty harsh 3-year waiting period before my work plan kicked in finally. Of course, the 14% match to my required 2% contribution makes up for the wait...:) Plus it is Vanguard index funds!