Author Topic: Best way to capitlize on additional 401k account  (Read 512 times)

PJC74

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Best way to capitlize on additional 401k account
« on: November 30, 2019, 09:27:09 PM »
I recently started a side hustle job as a personal trainer sub for a large health corp.

The great thing about this job is that it is located at my main job's gym, so I either fill-in in the morning before my regular job or after. Could be 3 hours a month or 30.

Megacorp's 401k is great. They match 100% of the first 6% vested immediately, offer very low cost fund options with after tax option and true up.

The side hustle has nice choice of low cost vanguard funds, but the match and vesting are not as good. They match the first 3% at 100% and the next 2% at 50% and it vests 50% after 1 year and 100% after 2 years.

My plan is to just do 5% to the side hustle 401k and the rest to my main 401k.

There may be something I'm missing, so I figured I would post it to all you wise guys and gals.

seattlecyclone

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Re: Best way to capitlize on additional 401k account
« Reply #1 on: November 30, 2019, 11:10:51 PM »
Does either job offer the mega backdoor? That can be a nice way to shove a large quantity of cash into a tax shelter. Unlike the pre-tax/Roth limit that is shared across all 401(k) plans you may have access to, the after-tax contributions used for the mega backdoor are subject to the annual additions limit that is separate for each 401(k) plan.

MustacheAndaHalf

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Re: Best way to capitlize on additional 401k account
« Reply #2 on: December 01, 2019, 01:09:22 AM »
Each company will assume you can contribute the max of $19,000.  But it's an annual limit, not per company.  So you should make sure you're not exceeding that annual limit.

PJC74

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Re: Best way to capitlize on additional 401k account
« Reply #3 on: December 01, 2019, 08:34:54 AM »
Does either job offer the mega backdoor? That can be a nice way to shove a large quantity of cash into a tax shelter. Unlike the pre-tax/Roth limit that is shared across all 401(k) plans you may have access to, the after-tax contributions used for the mega backdoor are subject to the annual additions limit that is separate for each 401(k) plan.

Primary 401k does allow mega Backdoor. The side hustle 401k does not.

seattlecyclone

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Re: Best way to capitlize on additional 401k account
« Reply #4 on: December 01, 2019, 12:04:41 PM »
Does either job offer the mega backdoor? That can be a nice way to shove a large quantity of cash into a tax shelter. Unlike the pre-tax/Roth limit that is shared across all 401(k) plans you may have access to, the after-tax contributions used for the mega backdoor are subject to the annual additions limit that is separate for each 401(k) plan.

Primary 401k does allow mega Backdoor. The side hustle 401k does not.

Your limit for these mega backdoor after-tax contributions in 2019 is $56,000 minus any pre-tax contributions, Roth contributions, and employer matching, unless your employer imposes a lower limit for some reason.

Therefore if you're in a position to save this much, you may want to prioritize putting as much into your second job's 401(k) as possible in order to maximize the amount you can do for the mega backdoor in your primary employer's plan.