Author Topic: What Does "I Max My 401(k)" Mean Here?  (Read 8180 times)

sabertooth3

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What Does "I Max My 401(k)" Mean Here?
« on: February 04, 2015, 02:34:01 PM »
I see a lot of people here saying they max their 401k and I'm just trying to get some clarity on what that means. Does that mean that you contribute the maximum amount that you will receive a match on? Or does that mean you contribute to the full $18,000 IRS individual contribution max?

Sorry if this is a dumb question, thanks.

ShoulderThingThatGoesUp

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #1 on: February 04, 2015, 02:37:27 PM »
$18,000

My match is private company stock that I can't sell until I leave my job, so it's crap.

dandarc

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #2 on: February 04, 2015, 02:38:45 PM »
18K for me (plus 18.5% as an employer match as I'm self-employed).

401Ks are wonderful things.

ZiziPB

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #3 on: February 04, 2015, 02:44:30 PM »
$18K would be the max that most people talk about.  Last year I upped my game and decided to go for the max MAX which was $52,000 for 2014 (mine and employer contributions combined).  Came in at $51,743 :-)  Planning for $53,000 this year.

boognish

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #4 on: February 04, 2015, 02:45:47 PM »
Mustachians about dat 18k full contibution

Gone Fishing

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #5 on: February 04, 2015, 02:50:50 PM »
24k if you are over 50

Blonde Lawyer

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #6 on: February 04, 2015, 03:01:53 PM »
The IRS max is just for your personal contribution, right? Your employer contribution doesn't count towards that max?  So hypothetically, my employer puts $10k in my 401k.  Can I contribute $18k still or just $8k?

UnleashHell

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #7 on: February 04, 2015, 03:04:21 PM »
The IRS max is just for your personal contribution, right? Your employer contribution doesn't count towards that max?  So hypothetically, my employer puts $10k in my 401k.  Can I contribute $18k still or just $8k?
18k

thats your share.

10k from the company is a huge bonus. nice.

Cheddar Stacker

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #8 on: February 04, 2015, 03:05:27 PM »
The IRS max is just for your personal contribution, right? Your employer contribution doesn't count towards that max?  So hypothetically, my employer puts $10k in my 401k.  Can I contribute $18k still or just $8k?

It doesn't count toward your $18K max, but it does count toward the $53K max. Your total deferred compensation can't exceed $53K in qualified plans.

2Birds1Stone

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #9 on: February 04, 2015, 03:30:47 PM »
20% of base salary (company policy) which is only ~1/2 of the IRS imposed limit. Bull crap

Blonde Lawyer

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #10 on: February 04, 2015, 05:05:12 PM »
The IRS max is just for your personal contribution, right? Your employer contribution doesn't count towards that max?  So hypothetically, my employer puts $10k in my 401k.  Can I contribute $18k still or just $8k?
18k

thats your share.

10k from the company is a huge bonus. nice.

Wishful thinking.  It was a hypo with easy numbers.  :)

MrMoogle

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #11 on: February 04, 2015, 05:13:29 PM »
It typically means 18k, but it can mean less if there are other limits on their 401k.  Like if are only allowed to contribute 20%, then your max can be less. 

I'm trying to hit the 53k mark this year with the backdoor Roth too, but that's most of my paycheck.  Although my company pays for most of my living expenses, so it's possible...  I wouldn't consider that "max my 401k" though.

kpd905

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #12 on: February 04, 2015, 06:19:16 PM »
I would assume that around here if anyone says they max it, they mean $18k per year.

dunhamjr

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #13 on: February 04, 2015, 10:08:03 PM »
To me it means contributing the full amount allowed by the IRS.

18k this year.

boarder42

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #14 on: February 05, 2015, 05:59:01 AM »
Yeah in the general population maxing usually means up to company match

here its the IRS maximum. 18k this year 36k if youre dual income

sabertooth3

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #15 on: February 05, 2015, 07:25:11 AM »
Thanks all, I thought it was the full $18k, but good to get confirmation.

wtjbatman

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #16 on: February 05, 2015, 10:03:28 AM »
Funny you bring this up. Here it means 18k, but when I was talking to a coworker recently about "maxing" our 401k, she mentioned she maxes hers out. I told her "Wow, that's great, I'm up to 20% but I'm hoping to go higher soon."

Her eyes bugged out and she said "Uh, I put in 5% (which is what our company matches at), that's what I thought you meant by maxing it out."

Damn mustachian ideas skewing our perspectives.

JLee

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #17 on: February 05, 2015, 10:10:13 AM »
Funny you bring this up. Here it means 18k, but when I was talking to a coworker recently about "maxing" our 401k, she mentioned she maxes hers out. I told her "Wow, that's great, I'm up to 20% but I'm hoping to go higher soon."

Her eyes bugged out and she said "Uh, I put in 5% (which is what our company matches at), that's what I thought you meant by maxing it out."

Damn mustachian ideas skewing our perspectives.
Haha, yeah I generally refer to that as 'maxing 401k match'.

slugline

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #18 on: February 05, 2015, 10:10:41 AM »
I think the other well-worn phrase you're after is "get the full employer match."

Otherwise, when people "max" their 401K in the MMM sense, they are contributing until they hit the IRS limit.

Glenstache

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #19 on: February 05, 2015, 10:18:06 AM »
"Maxing out" at the employer match is a parallel paying off your credit cards by making the minimum monthly payment. It hits a mark, but misses the point.

trailrated

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #20 on: February 05, 2015, 10:23:19 AM »
"Maxing out" at the employer match is a parallel paying off your credit cards by making the minimum monthly payment. It hits a mark, but misses the point.

+1 maxing should mean you put in the most possible for you to contribute, any matches etc. are just added perks

RunHappy

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #21 on: February 05, 2015, 10:47:42 AM »
$18k, but my employer doesn't match. I like the funds that are provided and have great growth since starting.  Since my employer doesn't match I am planning to max out my 401k before I go on maternity leave in September.
« Last Edit: February 05, 2015, 10:49:33 AM by RunHappy »

Schaefer Light

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #22 on: February 05, 2015, 10:56:34 AM »
I wish I could really max mine out (i.e. $53k), but after-tax contributions are not allowed in my plan.

ikonomore

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #23 on: February 05, 2015, 07:35:16 PM »
24k if you are over 50

Actually, it's the year you turn 50 that you can do the catchup contribution.

This works out for me because my birthday is in November.

lizzie

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #24 on: February 06, 2015, 06:58:27 AM »
Funny you bring this up. Here it means 18k, but when I was talking to a coworker recently about "maxing" our 401k, she mentioned she maxes hers out. I told her "Wow, that's great, I'm up to 20% but I'm hoping to go higher soon."

Her eyes bugged out and she said "Uh, I put in 5% (which is what our company matches at), that's what I thought you meant by maxing it out."

Damn mustachian ideas skewing our perspectives.

That's funny, I just had the same experience. A coworker was talking about how he unexpectedly owed a bunch to the IRS and was bummed about it. As we were talking he said that there aren't any fancy tax-avoidance strategies for him to take advantage of (I guess because he's a renter with no kids). So I said you could always max out your retirement account, and he said he already did. I was like, wow, you contributed $17,500 last year? No, he meant only that he maxed out the employer match.

Mrs. Frugalwoods

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #25 on: February 06, 2015, 10:33:53 AM »
Funny you bring this up. Here it means 18k, but when I was talking to a coworker recently about "maxing" our 401k, she mentioned she maxes hers out. I told her "Wow, that's great, I'm up to 20% but I'm hoping to go higher soon."

Her eyes bugged out and she said "Uh, I put in 5% (which is what our company matches at), that's what I thought you meant by maxing it out."

Damn mustachian ideas skewing our perspectives.

That's funny, I just had the same experience. A coworker was talking about how he unexpectedly owed a bunch to the IRS and was bummed about it. As we were talking he said that there aren't any fancy tax-avoidance strategies for him to take advantage of (I guess because he's a renter with no kids). So I said you could always max out your retirement account, and he said he already did. I was like, wow, you contributed $17,500 last year? No, he meant only that he maxed out the employer match.
Hah! I had a confusing and protracted conversation with my HR dept. because they kept thinking that by "max" I meant the employer match. I have to keep remembering that we're not like other people...

To answer the original question, my husband and I both do $18K to our respective 401ks.

I'm a red panda

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #26 on: February 06, 2015, 10:55:50 AM »
20% of base salary (company policy) which is only ~1/2 of the IRS imposed limit. Bull crap

What's the logic behind that?

2Birds1Stone

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #27 on: February 06, 2015, 11:00:01 AM »
I wish I knew :/ it discriminates against sales positions since we tend to have lower salary  and half of income comes from commission which for some reason is non deferrable

ShoulderThingThatGoesUp

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #28 on: February 06, 2015, 11:00:16 AM »
20% of base salary (company policy) which is only ~1/2 of the IRS imposed limit. Bull crap

What's the logic behind that?

I don't know about the quoted case, but I know that my company stopped allowing people to contribute from bonuses into their 401k. No stated reason, but my guess is that they don't want people incurring more of a match, while still seeming like their match isn't quite as reduced.

2Birds1Stone

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #29 on: February 06, 2015, 11:03:48 AM »
Our match is 50% of the first 5%. No extra match if they let us defer more than 20%

CestMoi

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #30 on: February 06, 2015, 11:06:03 AM »
What kind of plans allow one to contribute 53k? I'd so jump on that.

Is it a specific type of plan, or can any 401(k) plan decide to allow one to contribute that much per year?

I'm a red panda

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #31 on: February 06, 2015, 11:06:31 AM »
Our match is 50% of the first 5%. No extra match if they let us defer more than 20%

Oh, so they aren't prohibiting you from maxing your 401k, they just aren't giving you incentive to.

I thought you were saying the company doesn't allow you to contribute up to the IRS max.

2Birds1Stone

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #32 on: February 06, 2015, 11:09:50 AM »
That is what I am saying.  They cap us at 20% of base salary. I was just talking about the match because another poster mentioned that additional  contributions  would effect the match,  which they would not.

ShoulderThingThatGoesUp

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #33 on: February 06, 2015, 11:11:30 AM »
Our match is 50% of the first 5%. No extra match if they let us defer more than 20%

That's just flabbergasting then. Have you asked HR?

2Birds1Stone

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #34 on: February 06, 2015, 11:20:49 AM »
Our match is 50% of the first 5%. No extra match if they let us defer more than 20%

That's just flabbergasting then. Have you asked HR?

I have, no rhyme or reason behind it. And it only really effects sales people, median salary at my company is six figures. However sales people are paid half salary half commission. So we get shafted. 

coppertop

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #35 on: February 06, 2015, 11:26:32 AM »
I max at $24,000.  It makes my paychecks very small; but with a paid-off house and no rugrat tax deductions in the house, it's better to keep the money than pay it to Uncle Sam, even if I can't touch it until I am retired. 

I'm a red panda

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #36 on: February 06, 2015, 11:54:10 AM »

I have, no rhyme or reason behind it. And it only really effects sales people, median salary at my company is six figures. However sales people are paid half salary half commission. So we get shafted.

Have you complained?  I didn't know it was legal for an employer to not allow you to use your 401k if they offer one.

nawhite

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #37 on: February 06, 2015, 12:07:28 PM »
I max at $24,000.  It makes my paychecks very small; but with a paid-off house and no rugrat tax deductions in the house, it's better to keep the money than pay it to Uncle Sam, even if I can't touch it until I am retired.

If you are over 55, you can quit your job today and start using that money penalty free (there is an exception to the 59.5 rule if you leave a job after 55). Since you're over 50, setting up a 5 year Roth pipeline isn't really worth it because you don't have the time to prime the pump. However, assuming you have no other savings to live on for the <5 years until 55 (Roth contributions, taxable accounts etc), depending on your marginal tax rate before retirement and your effective tax rate after, it may still be worthwhile to take the penalty.

For instance lets say you have a 50% savings rate. You and your spouse combine for 100k per year. Marginal rate = 25%. In retirement, you'll only have an income of 50k per year (remember the 50% savings rate). Effective tax rate on 50k of income is about 8%. So even with the 10% penalty on that 50k you're still at 18% taxes rather than the 25%.

All I'm saying is don't use the fact that the default case says you can't take money out of a traditional 401k before age 59.5 prevent you from retiring when you want.

irishbear99

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #38 on: February 06, 2015, 12:20:07 PM »
To me, maxing out my TSP means contributing the maximum I'm allowed under the law, which is $18k since I'm under 50.

irishbear99

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #39 on: February 06, 2015, 12:21:57 PM »
It typically means 18k, but it can mean less if there are other limits on their 401k.  Like if are only allowed to contribute 20%, then your max can be less. 

Sorry for the thread hijack, but I'm wondering why companies would impose additional limits on 401(k) contributions. How does that benefit them?

nawhite

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #40 on: February 06, 2015, 12:38:07 PM »
It typically means 18k, but it can mean less if there are other limits on their 401k.  Like if are only allowed to contribute 20%, then your max can be less. 

Sorry for the thread hijack, but I'm wondering why companies would impose additional limits on 401(k) contributions. How does that benefit them?

There are federal rules for 401k plans that are supposed to make 401ks available to everyone and not just "Highly Compensated Employees" (HCEs). By definition an HCE is anyone who owns more than 5% of the business or makes more than 115k per year or is in the top 20% of earners in a company depending on which definition is most advantageous for the employer.

The federal rules are something like: "Percentage contributed by HCEs must be within 2% of the percentage contributed by non-HCEs." I don't have the details. In any event, the employer rules are usually put in place to make sure they don't violate the federal rules. If they violate the federal rules, it usually means that the HCEs have some of the money they tried to put in the 401k pulled out in December which sucks for everyone. These federal rules are also the reason the management will push employees to contribute more to their 401ks through Opt-out programs and others. It allows the HCEs to put more money in too.

SF Semi-Mustache

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #41 on: February 06, 2015, 02:16:03 PM »
There are federal rules for 401k plans that are supposed to make 401ks available to everyone and not just "Highly Compensated Employees" (HCEs).

I work at a law firm, where about half the employees are attorneys ($160k+) and half are support staff who mostly earn much less.  The result is that HCEs get no match and the retirement plan is never mentioned, while support staff get a very generous match and the plan is hyped to them.  HCEs can only enter/increase contributions during a specified time (but can decrease whenever), while other employees can increase/decrease/enter whenever.

And as much as I gripe about the lack of employer match, I understand that my secretary needs the match a lot more than I do.  The rules seem more or less equitable. 

randommadness

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Re: What Does "I Max My 401(k)" Mean Here?
« Reply #42 on: February 06, 2015, 02:41:40 PM »
What kind of plans allow one to contribute 53k? I'd so jump on that.

Is it a specific type of plan, or can any 401(k) plan decide to allow one to contribute that much per year?

Looks like no one answered you - 53k is the max for ALL 401(k)'s.

This total includes your $18k + anything your company puts in.

It's especially useful for the self-employed or those with access to a Roth backdoor contribution.