Author Topic: maxing out paycheck to 401k  (Read 1070 times)

Retiring_early_in_EastTN

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maxing out paycheck to 401k
« on: August 09, 2019, 05:29:03 PM »
Hi all, so I have a side job teaching community college through December. It works around my full time job which covers all my bills. I've got my emergency savings so that's not a worry and basically no debt. I basically don't need any of these paychecks right now.

Does it make sense to put 100% of paycheck into their no match 401k? I currently am set to contribute 3600 to Roth with my systematic withdrawal and contribute 1800 to 403b.

Thanks in advance!

Duke03

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Re: maxing out paycheck to 401k
« Reply #1 on: August 09, 2019, 05:53:00 PM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

erutio

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Re: maxing out paycheck to 401k
« Reply #2 on: August 09, 2019, 06:22:50 PM »
Your 403b and 401k contribution limits are pooled together, so that the max you can contribute to all of your 401k or 403b plans is $19,000 combined for a year. If you have a 457 plan, however, that counts as a separate bucket of $19,000 contributions limit.

frugaliknowit

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Re: maxing out paycheck to 401k
« Reply #3 on: August 10, 2019, 06:38:18 AM »
IRA (roth or tira) is usually preferable to an unmatched 401k because you have TOTAL CONTROL until death.  Whether you choose Roth or TIRA would be a long debate.  I would fill up the IRA first, before going unmatched 401k.  After the IRA, yes, I would max out the 401K. 

SlowAndSteady

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Re: maxing out paycheck to 401k
« Reply #4 on: August 10, 2019, 12:45:49 PM »
IRA (roth or tira) is usually preferable to an unmatched 401k because you have TOTAL CONTROL until death.  Whether you choose Roth or TIRA would be a long debate.  I would fill up the IRA first, before going unmatched 401k.  After the IRA, yes, I would max out the 401K. 

One caveat to this is if you qualify for the Earned Income Tax Credit.  Traditional 401k contributions decrease your earned income, but traditional IRA contributions only reduce AGI.  So 401k contributions will increase your EITC, but IRA contributions will not.

Freedom2016

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Re: maxing out paycheck to 401k
« Reply #5 on: August 11, 2019, 11:30:54 AM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

Interesting! Why would an employer put a limit like that on? [scratching head]

Duke03

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Re: maxing out paycheck to 401k
« Reply #6 on: August 11, 2019, 01:53:46 PM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

Interesting! Why would an employer put a limit like that on? [scratching head]


I have no idea, but it's a hard limit they have.  My only guess is they don't want people living in the parking lot and showering in the onsite gym lol.

dandarc

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Re: maxing out paycheck to 401k
« Reply #7 on: August 11, 2019, 02:14:14 PM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

Interesting! Why would an employer put a limit like that on? [scratching head]


I have no idea, but it's a hard limit they have.  My only guess is they don't want people living in the parking lot and showering in the onsite gym lol.
They likely do this to avoid having to get their payroll system to do more complicated math - gotta leave room for social security, health insurance and any other deductions there might be as well.

aetheldrea

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Re: maxing out paycheck to 401k
« Reply #8 on: August 11, 2019, 04:57:27 PM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

Interesting! Why would an employer put a limit like that on? [scratching head]


I have no idea, but it's a hard limit they have.  My only guess is they don't want people living in the parking lot and showering in the onsite gym lol.
They likely do this to avoid having to get their payroll system to do more complicated math - gotta leave room for social security, health insurance and any other deductions there might be as well.
Iíve always assumed this was the reason. Pre-tax 401k contributions are still subject to Social Security and Medicare withholding. My employer caps contributions at 84%

mistymoney

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Re: maxing out paycheck to 401k
« Reply #9 on: August 12, 2019, 07:16:21 AM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

Interesting! Why would an employer put a limit like that on? [scratching head]


I have no idea, but it's a hard limit they have.  My only guess is they don't want people living in the parking lot and showering in the onsite gym lol.

I thought it had to do with ensuring that someone didn't go into a deficit after taxes, benefits, etc. especially if there were changes on state/local taxes or benefit rates, and then if they were near 0 take home, they are pushed into a deficit.

mistymoney

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Re: maxing out paycheck to 401k
« Reply #10 on: August 12, 2019, 07:17:04 AM »
Check your plan limits.  My employer limits my max paycheck contributions to 75% of my pay check!!!

Interesting! Why would an employer put a limit like that on? [scratching head]


I have no idea, but it's a hard limit they have.  My only guess is they don't want people living in the parking lot and showering in the onsite gym lol.
They likely do this to avoid having to get their payroll system to do more complicated math - gotta leave room for social security, health insurance and any other deductions there might be as well.
Iíve always assumed this was the reason. Pre-tax 401k contributions are still subject to Social Security and Medicare withholding. My employer caps contributions at 84%

see I wasn't the first to note this!

Proud Foot

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Re: maxing out paycheck to 401k
« Reply #11 on: August 12, 2019, 08:40:14 AM »
How does the 401k plan compare to your 403b? Plan fees, investment options, etc. Since there is no match you aren't really losing out on anything by contributing more to your 403b instead of the 401k. Are you contributing enough to your 403b to receive the full match? Make sure you are doing this then if the 401k is better, invest as much as you can into it.