Did I make a mistake here - contribution question

[J.P. MoreGains]

Hello all,

If anyone can help or has info it would be appreciated.

I think I may have made a mistake. Here is the scenario:

I have a main job that has a 401k and 457b plan. I am maxing out both of these at 23k so 46k total.

I have a second job that has a 403b plan that I can contribute to.

I have not been contributing because I believed that this would make me go over the limit of 46k. I've been thinking that the 403b wouldn't give me another "bucket" to contribute pre tax to.

However, I'm starting to question this. I read this article here: https://integritywa.net/our-blog/can-i-contribute-to-both-a-403b-and-457-plan#:~:text=A%20question%20I%20get%20often,(and%20max%20out)%20both.

and it says this: " A question I get often is, “Can I contribute to both a 403(b) and 457 plan?” The answer is yes. If your employer offers both, you can contribute to (and max out) both."

Even this IRS doc seems to put 457b in a separate spot.

So I guess the question is: Is the 401k and 403b the same "bucket" that have a combined limit of $23,000 even if they are from different employers?

Or is each one able to be maxed out?

So in my scenario, could I max out all three 401k, 457b, 403b for a total of $69,000 pre tax contributions?

That seems to good to be true - but I'm questioning it now that I've seen this article.

If I made a mistake I've paid around $2,100 in taxes that I could've contributed to a 403b :(

[J.P. MoreGains]

But now I just read this from the IRS:

The amount of salary deferrals you can contribute to retirement plans is your individual limit each calendar year no matter how many plans you're in. This limit must be aggregated for these plan types:

401(k)
403(b)
SIMPLE plans (SIMPLE IRA and SIMPLE 401(k) plans)
SARSEP

If you’re in a 457(b) plan, you have a separate limit that includes both employee and employer contributions.

Make sure you don’t exceed your individual limit. If you do and the excess isn’t returned by April 15 of the next year, you could be subject to double taxation:

once in the year you deferred your salary, and
again when you receive a distribution.

Elective deferral limit

The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $23,000 in 2024 ($22,500 in 2023; $20,500 in 2022; $19,500 in 2020 and 2021; $19,000 in 2021). Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans.

So this makes me think it is too good to be true and I was right in the first place. It seems like the 401k and 403b is the same bucket. So a total of $23,000 and it doesn't matter if it's different employers.

Is this correct?

This can be kind of confusing.

[Sandi_k]

Yes, the 401(k) and 403(b) are the same bucket. The 457(b) is a different one.

Also - the 457(b) does not have an age minimum for w/d - so you can access the funds prior to age 59.5 without penalty.

[J.P. MoreGains]

@Sandi_k

Yes, the 401(k) and 403(b) are the same bucket. The 457(b) is a different one.

Thanks I felt a bit worried about having missed something.

A lot of this is complex so I like the "buckets" way of thinking things.

[charis]

It might help to think of a 457(b) as what it is, a deferred compensation account, while a 401k (generally offered by private companies) and a 403(b) (generally offered by non-profit or government employers) are retirement accounts.

[seattlecyclone]

Right, the elective deferral limit is shared between any 401(k) and 403(b) accounts you have across all employers. Note that this limit is for elective deferrals: where you get to choose the amount. I applied for a job at the state university in my town a while back, and learned their 403(b) plan includes non-elective deferrals where everyone has a mandatory deduction from their paycheck into the retirement plan, and these apparently don't count toward the $23k limit.

[terran]

As others have said, the 401(k) and 403(b) share the same contribution limit while the 457(b) is separate. You should contribute at least enough to both the 401(k) and 403(b) to get a full match from that employer, then contribute the rest up to the limit to whichever plan is better (lower fees, better investment options). You could also see if either plan is set up to allow the so called "mega backdoor Roth": non-Roth after tax contributions and in-service (while still working) withdrawals (which can be rolled over to Roth IRA) or in-plan conversions (which can be converted to Roth 401(k) or 403(b)).

[J.P. MoreGains]

As others have said, the 401(k) and 403(b) share the same contribution limit while the 457(b) is separate. You should contribute at least enough to both the 401(k) and 403(b) to get a full match from that employer, then contribute the rest up to the limit to whichever plan is better (lower fees, better investment options). You could also see if either plan is set up to allow the so called "mega backdoor Roth": non-Roth after tax contributions and in-service (while still working) withdrawals (which can be rolled over to Roth IRA) or in-plan conversions (which can be converted to Roth 401(k) or 403(b)).

Currently I am maxing out which has been great. I won't pay taxes until October this year. Between 401k, 457b and HSA I can contribute around 50k pre tax.

I've asked HR about the mega backdoor Roth and got a "no" but I wasn't really happy with the answer. I'm not sure the person even knew what I was asking so I'll ask around again. I haven't asked about the mega back door at the second employer. That is something I will do. Thanks

[terran]

Don't ask about mega-backdoor Roth -- it's a colloquial name, nothing legal. Ask about non-Roth after tax contributions and in-service withdrawals or in-plan conversions. If it's allowed in should be mentioned in the summary plan description, which they should be able to provide you (I think, but I'm not certain, they're legally required to provide it).