Author Topic: Those maxing 401k's out... how do you handle a raise?  (Read 2706 times)

bo_knows

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Those maxing 401k's out... how do you handle a raise?
« on: December 20, 2012, 12:20:33 PM »
So, 2012 was the first year that I completely maxed out my 401k (I have been aggressively paying down student debt for years).  I recently got a hey-you're-experienced-enough-now sort of promotion with a 5% bump.  In this day and age, I am not complaining about that.

I did realize however that since my 401k contribution is set to a certain % (you can't enter a dollar amount, how stupid is that?), that my current percentage and new salary will put me over the 401k yearly limit denoted by the IRS.   Whenever your salary goes up, do you keep the % the same, and frontload the 401k toward the first part of the year (assuming HR will put a stop on contributions when you cap out)? Or do you re-adjust accordingly?

I'm just curious because I've never been in this situation.  Really, I'm probably going to call HR and have them change it to an exact dollar amount on the weekly paycheck.

iamlindoro

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Re: Those maxing 401k's out... how do you handle a raise?
« Reply #1 on: December 20, 2012, 12:27:29 PM »
Your payroll system should be sophisticated enough to know when you hit the limit, and your contributions should end automatically.  You can feel free to keep on the same percentage unless you have a reason you really don't want to hit the limit before the end of the year.  That's the way it works for me anyway-- when I hit the limit, the deductions from the check end.

TheDude

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Re: Those maxing 401k's out... how do you handle a raise?
« Reply #2 on: December 20, 2012, 01:52:24 PM »
Here are the accounts I use to shelter money (in the order of preference)

HSA
IRA
Simple IRA/401K
Dependent care account
FSA
Insurance bought through employer
Teacher expenses (wifes a  teacher)

Hopefully my wifes school adds a 457 plan in the spring. I would range right below the HSA. After that I either put money into a taxable brokerage account (through Vanguard) or I pay down the house.

I would check with HR but there software should stop taking out the amount once you hit the limit. Even Quick books will do that.

JohnGalt

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Re: Those maxing 401k's out... how do you handle a raise?
« Reply #3 on: December 20, 2012, 01:55:06 PM »
I redo my percentage with each raise - it's not like raises happen often enough that it's a real hassle. 


sol

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Re: Those maxing 401k's out... how do you handle a raise?
« Reply #4 on: December 20, 2012, 02:15:53 PM »
We adjust the amount to make sure we contribute every pay period.  The way our employer match works is per pay period, not per year, so if we don't contribute during one pay period, we miss out on the match.
« Last Edit: December 20, 2012, 10:35:00 PM by sol »

icefr

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Re: Those maxing 401k's out... how do you handle a raise?
« Reply #5 on: December 20, 2012, 10:13:04 PM »
I re-do the math on the % when I get a raise and update that so that I hit the max in December. I don't want to lose out on any of the matching.

I'm with you on the "why can't it be a $ amount?!"