Author Topic: Maxing 401k contributions through job switch  (Read 547 times)

new mustache city

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Maxing 401k contributions through job switch
« on: August 14, 2018, 07:02:06 AM »
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« Last Edit: January 04, 2019, 09:18:40 AM by new mustache city »

Zacharias

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Re: Maxing 401k contributions through job switch
« Reply #1 on: August 14, 2018, 07:06:29 AM »
I believe the ability to contribute to the previous year is until tax filing is only available for IRAs.

The employer may be able to make profit sharing contributions to your account but employee deferrals need to happen during the calendar year.

If you are eligible to contribute to the new plan this year I'd try to plan on leaving enough room to contribute and receive the 4% match.
« Last Edit: August 14, 2018, 07:09:20 AM by Zacharias »

beattie228

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Re: Maxing 401k contributions through job switch
« Reply #2 on: August 14, 2018, 07:46:10 AM »
401k contributions end 12/31 of the tax year. The April of the following year is only for IRA contributions if my memory serves me.

I'd bump up your remaining few checks to max out 401k at job 1, then just remember to initiate 401k contributions on 1/1/19 when eligible at job 2.

Cat_Race

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Re: Maxing 401k contributions through job switch
« Reply #3 on: August 14, 2018, 01:57:20 PM »
Employers have until tax day to fund matching for the prior year, as an employee your contributions end 12/31 of that year.

Most 401ks plans have a max on the % of your paycheck you can bump contributions to, for example, its 65% of paycheck where I work now.  Have seen 80%.

Most employers match per paycheck, meaning you won't get any serious match benefit if you were already doing at least 8% before.  Maxing out early aka front-loading only works if the employer does a  "true up" match.  Mine does, I know of others that do not. It's in their benefit from a tax perspective to do so, but its also a hassle for them to go through and calculate.  My true-ups from front-loading are deposited March of the following year (before tax day) (somewhat negates benefits of frontloading because you receive match later).  If you won't still be employed there you probably won't get the true-up match deposit to your account.

A few things to consider: 1) your single employer will cut you off at 18.5k.  A new emoloyer will have no prior knowledge of your contributions so you'll need to tell them to cut you off at your remaining contribution, or manage it very carefully yourself. 2) Figure out what you want to do with your old 401k.  Rolling it into an IRA has implications for back door roths if you ever expect to be earning over the Roth contribution cap.  Rolling into the new employers 401k preserves back-door-ROTH flexibility, but may have worse investment options/fees.

mschaus

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Re: Maxing 401k contributions through job switch
« Reply #4 on: August 15, 2018, 02:01:54 PM »
Most employers match per paycheck...

I'll second that it's important to understand exactly how your employer does matches. I had a previous employer that only matched my contribution per paycheck, so if I wanted to max the 401k that year I had to very carefully calculate what percentage to contribute so that the last paycheck of the year had a contribution big enough to get the whole match, but not too big for my paycheck. Silly how hard that was. Current employer much simpler.

OP -- you may as well contribute more on your final paycheck if you can afford it. It'll be slightly easier to get in your contributions into 2018 since after your 3 month waiting period, there won't be many months left!