does 401k contributions automatically stop at $18k

Archived From: Finance
  • Text Only
Voting History
rated:
my company uses fidelity for 401k and you type the contribution as a %, not a number, for 401k contributions. so I typed in a % that should be greater than 18k for year . will it automatically stop contributing when I hit 18k for the year?

Member Summary
Most Recent Posts
Nobody said all companies have to match after you max out. As has been covered several times, some do, some don't. Do wh... (more)

cleanbeat (May. 23, 2017 @ 10:42a) |

That's not really true. Most major employers that I have heard of match up to a percentage of salary. To get that match ... (more)

sfchris (May. 23, 2017 @ 5:34p) |

Companies who play games like this quickly find they have trouble retaining top talent. People aren't stupid - they know... (more)

sfchris (May. 23, 2017 @ 5:38p) |

Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

Yes. It will automatically stop at the max.

Yes. The only catch is that the limit is per year per person, regardless of how many jobs you've had. If you contribute to a 401k at Company A, then move to Company B, you need to make sure you tell Company B how much you contributed at Company A so they can stop the contribution at $18K total.

The other piece to consider is how your employer matches your contributions. If they contribute a lump sum after the end of the year, you are fine if you hit $18k before end of year.

But say they match 50% up to 8% of your contribution each check, you'll leave contributions on the table by hitting the $18k max before the end of the year

Read #2 below for a more eloquent description

http://www.doughroller.net/retirement-planning/should-you-max-ou...

Good job, guys. I think you hit all the key points.

gergles said:   Yes. The only catch is that the limit is per year per person, regardless of how many jobs you've had. If you contribute to a 401k at Company A, then move to Company B, you need to make sure you tell Company B how much you contributed at Company A so they can stop the contribution at $18K total.
  I wouldn't trust this to a 401k provider....make sure you watch for it yourself while maximizing matches etc.

My Fortune 500 employer doesn't stop contributions when they reach $18k. Any excess is contributed as after-tax into the 401k.

Pipboy said:   My Fortune 500 employer doesn't stop contributions when they reach $18k. Any excess is contributed as after-tax into the 401k.
  Do they match on the amount you contribute in excess of $18k?

nope; sadly no way to rollover after-tax contributions & earnings into a Roth IRA either

Call your payroll services for most definitive answer.

Pipboy said:   nope; sadly no way to rollover after-tax contributions & earnings into a Roth IRA either
  
If they also allow in-service withdrawals you can.  Or you can when you leave the company:
http://www.madfientist.com/after-tax-contributions/

just be very careful if you've switched jobs . You need to ensure the combined contributions stay below 18K .

Pipboy said:   nope; sadly no way to rollover after-tax contributions & earnings into a Roth IRA either
My company allows in service withdrawals, so I contribute the 401k + after tax money. I can roll over the after tax money to my Roth IRA every 2 weeks.

is there a reason to contribute more at the beginning or end of year, versus equal amounts thruout the year?

and it seems like if your employer, like mine with fidelity, asks for % of income to contribute, you have to keep tweaking that number whenever your salary changes, which is probably every year even with just market adjustment.

I stopped using a percentage a long time ago. You know you want to contribute 18k every year so make your contributions a fixed amount.

qcumber98 said:   I stopped using a percentage a long time ago. You know you want to contribute 18k every year so make your contributions a fixed amount.
  I don't think fidelity (at least my company's implementation) has that option.

rufflesinc said:   
qcumber98 said:   I stopped using a percentage a long time ago. You know you want to contribute 18k every year so make your contributions a fixed amount.
  I don't think fidelity (at least my company's implementation) has that option.

  
Fidelity is brain dead - it won't even let me select 3.5% - it forces me to go 3% or 4%.

rufflesinc said:   
qcumber98 said:   I stopped using a percentage a long time ago. You know you want to contribute 18k every year so make your contributions a fixed amount.
  I don't think fidelity (at least my company's implementation) has that option.

  Well that's dumb. 

rufflesinc said:   is there a reason to contribute more at the beginning or end of year, versus equal amounts thruout the year?
 

  
For investment returns, buying sooner works out better than stretching out contributions. But the time-span and dollar amount for a year's 401k contributions aren't huge, the slight risk increase for early payments isn't worth checking for full advantage of matching to me. 

qcumber98 said:   
rufflesinc said:   
qcumber98 said:   I stopped using a percentage a long time ago. You know you want to contribute 18k every year so make your contributions a fixed amount.
  I don't think fidelity (at least my company's implementation) has that option.

  Well that's dumb. 

  do you have a solution?

rufflesinc said:   
qcumber98 said:   
rufflesinc said:   
qcumber98 said:   I stopped using a percentage a long time ago. You know you want to contribute 18k every year so make your contributions a fixed amount.
  I don't think fidelity (at least my company's implementation) has that option.

  Well that's dumb. 

  do you have a solution?

  Check with your employer on Monday.

The real question is:
Does your employer know you post so much to FW during the work day?

BostonOne said:   The real question is:
Does your employer know you post so much to FW during the work day?

Best post of the thread.

BostonOne said:   The real question is:
Does your employer know you post so much to FW during the work day?

Obviously, he gets paid by the post. 

BostonOne said:   The real question is:
Does your employer know you post so much to FW during the work day?

  the directors and VPs also post 

many matches are not optimized... At my company, I hit my max within 3 months (luckily, cash flow is not as important to me as it used to be). They executed their percentage match each paycheck, but it was focused on an annualized match (not an accelerated match - math annoying, but understandable). I've already hit the limit, but my match was less than 30% of what it should have been. Luckily, same thing happened to my boss and he's fighting the good fight...

BTW - it was with Fidelity...

vwoaj said:   many matches are not optimized... At my company, I hit my max within 3 months (luckily, cash flow is not as important to me as it used to be). They executed their percentage match each paycheck, but it was focused on an annualized match (not an accelerated match - math annoying, but understandable). I've already hit the limit, but my match was less than 30% of what it should have been. 
  I'm confused 

rufflesinc said:   
BostonOne said:   The real question is:
Does your employer know you post so much to FW during the work day?

  the directors and VPs also post 

  Can you tell me the company so I can short it?

gergles said:   Yes. The only catch is that the limit is per year per person, regardless of how many jobs you've had. If you contribute to a 401k at Company A, then move to Company B, you need to make sure you tell Company B how much you contributed at Company A so they can stop the contribution at $18K total.
  Agree.  If your employer's software is programmed correctly, it should stop.  Adding in any over 50 catch-up contributions (if you're eligible) those should also stop when they hit the annual limit.  I basically have deducted $700 for every two week pay period.  The last pay period is automatically less, so I don't go over the $18K limit. 

A co-worker of mine also teaches part-time online at a local university.  She needs to make sure both together don't go over $18K, as the two plans have no way of knowing about each other.

Remember, it usually makes sense to spread out your contributions over the entire year, then do big ones that stop your contributions sometime before the end of the year.  If you do that (make big ones), you miss some of your employer matching contributions for the remainder of the year.

Anyway, most people (by a wide margin) aren't in the financial position of making contributions that hit these limits, so they never need to worry about it.

Pipboy said:   My Fortune 500 employer doesn't stop contributions when they reach $18k. Any excess is contributed as after-tax into the 401k.
  
Not everybody wants to contribute to the after-tax thing. My understanding is that you have to separately elect contribution % for after tax contributions.

PrincipalMember said:   
Pipboy said:   My Fortune 500 employer doesn't stop contributions when they reach $18k. Any excess is contributed as after-tax into the 401k.
  
Not everybody wants to contribute to the after-tax thing. My understanding is that you have to separately elect contribution % for after tax contributions.


It's dependent on how your plan is run. Mine is like others' where I can only contribute whole percentages. I have to track carefully so I max out the before-tax contributions, and always end up with a few dollars extra that go in after tax. I don't voluntarily contribute to after tax.

Here's how the math worked... Say I made $100K and it was a 6% match, you'd expect I'd get $6K of match - the let's assume I'm paid monthly, so $500 / month.  They way the were actually executing the match was to give me 6% (in this example, $500) each paycheck when I contributed.  If I contribute the entire year, this works perfectly.  Since, in reality, I stopped contributions early in the year (in this example, let's say March 31), I would have only received $1,500 of my $6K match.  Since I didn't contribute after that time (because I hit the max), neither did my company.

If you're paid by DFAS, it stops automatically.

Some companies provide an option on whether your contributions continue on after tax basis once 18L limit is reached. Some don't.

For those that do, they typically provide a percentage over like 10% over the MAX that will continue once your 18K is reached.

These allow for maxing like you want. So if you reach your 18K sooner in the year by contributing higher percent initially, you can either adjust percent later on when close to max or let it go over on after tax basis so your company match can continue to get full benefit of allowed match

Some plans esp 403(b) are administered on shoestring by 3rd party and have very inflexible way to contribute like fixed amount only and here employees with changing pay checks can suffer non-contribution if amount of pay check is less that month than specified deduction amount.


Hope that helps.

Slider said:   The other piece to consider is how your employer matches your contributions. If they contribute a lump sum after the end of the year, you are fine if you hit $18k before end of year.

But say they match 50% up to 8% of your contribution each check, you'll leave contributions on the table by hitting the $18k max before the end of the year

Read #2 below for a more eloquent description

http://www.doughroller.net/retirement-planning/should-you-max-ou...

  This is not true for all employers.  I worked for a couple of companies that kept matching after I hit the max.

Same problem here - Finance+HR typically run true-up sometime next year to catch up with all those missing company matches.
 

vwoaj said:   many matches are not optimized... At my company, I hit my max within 3 months (luckily, cash flow is not as important to me as it used to be). They executed their percentage match each paycheck, but it was focused on an annualized match (not an accelerated match - math annoying, but understandable). I've already hit the limit, but my match was less than 30% of what it should have been. Luckily, same thing happened to my boss and he's fighting the good fight...

BTW - it was with Fidelity...

  
Same problem here - Finance+HR typically run true-up sometime next year to catch up with all those missing company matches.

Always assume they will not true-up, unless explicitly stated that they will.

rufflesinc said:   
BostonOne said:   The real question is:
Does your employer know you post so much to FW during the work day?

  the directors and VPs also post 

  And you are still all misty-eyed about how equal you seem?  You somehow think that they won't hold it against you while they do the exact same thing?  That's cute.

Skipping 34 Messages...
dcwilbur said:     In fact, as a business owner, it would be in my favor to wait until the end of the year to make the additional contribution on the employee's behalf - 1) I get to keep the money longer, and 2) if the employee leaves, I wouldn't make the contribution at all.  
  Companies who play games like this quickly find they have trouble retaining top talent. People aren't stupid - they know when benefits aren't as good as the competition.

Actually, come to think of it, companies that play games like this probably don't bother matching the 401k in the first place.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017