How do I actually max my 401k

[lakelife]

So this is probably a super rudimentary question....but how do I actually max my 401k or hit the 18K number. We are trying to max my wifes but the only option we have control over is her deferral rate. So we can defer so much percentage of her pay check. Is the only way to actually get close just to find a deferral percentage that gets close to $750 per pay period(18K divided by 24). Or can you lump sum whatever else you need at the end of a year?

 

Thanks!

[lakelife]

Also will vanguards 401k retirement site let you go over? Or will it stop taking deferrals once you hit the 18K?

[RogueDadMD]

For an employer sponsored plan I'm fairly sure your only option is changing the deduction amount.  Vanguard will stop withdrawals once you max out for the year.  You could set it up to defer 30-40% of her salary or more and max it out in the first half of the year if you don't need the cash flow -- it doesn't have to be spread over the entire year.

[DarrVao777]

Yup, I lump sum it at the beginning of the year

Set it to 100% and understand that cash flow will be tight the first couple paychecks

You can certainly spread it out as well over the year and it should automatically stop once you hit 18k

[DMFA]

If you get matching employer contributions, just be aware that it tends to be from each monthly contribution, so if you max it in 4 months, that's 8 months of matching contributions you won't get.

Mathematically your gains *might* not be as good by maxing early as they would be from maxing your match.

[jfoxcpacfp]

DMFA wrote:

If you get matching employer contributions, just be aware that it tends to be from each monthly contribution, so if you max it in 4 months, that’s 8 months of matching contributions you won’t get.

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Either way, you get a match on $18k, no?

[lakelife]

Aweseome thanks for the responses! No match for her so Ill just bump it up to finish out the year a little early!

[childay]

jfoxcpacfp wrote:

Either way, you get a match on $18k, no?

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Depends on how match is calculated.  If by earnings and not contributions then may miss out on a lot of matching $$ by frontloading.

[jfoxcpacfp]

childay wrote:

Depends on how match is calculated.  If by earnings and not contributions then may miss out on a lot of matching $$ by frontloading.

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Actually, I think what you are talking about is employer matching "per pay period". I don't think it matters if by earnings or contributions. If lakelife's wife's plan has this feature, she needs to find out if the plan has a "true up" provision to accommodate early contributors.

[PhysicianOnFIRE]

jfoxcpacfp wrote:

DMFA wrote:

If you get matching employer contributions, just be aware that it tends to be from each monthly contribution, so if you max it in 4 months, that’s 8 months of matching contributions you won’t get. 

Click to expand…

Either way, you get a match on $18k, no?

Click to expand...

A reputable employer will do a true-up the following spring to give you the rest of the match.

I learned the hard way that my employer will only contribute during pay periods where the employee is contributing, and there is a cap to how much they will contribute each pay period. For me, the only way to receive the full match during the calendar year is to contribute incrementally over the course of about 20 pay periods.

When I lump summed early, I received a small portion of the match over 3 periods, then waited more than a year to get the remainder. This, by the way, was after I asked our plan administrator if I would receive the full match if I front loaded. His answer of "yes" was technically accurate, but he failed to inform me that it would happen some 13 months later.

[jfoxcpacfp]

PhysicianOnFIRE wrote:

but he failed to inform me that it would happen some 13 months later.

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Lol, always be sure to ask what questions you need to ask 

[DMFA]

I know that for government TSP matching, it's only per period, and they specifically advise against maxing early.

Idk how my wife's 403b through Fidelity is done, but we contributed like $17,950 to that, so I didn't get to find out first-hand.  That $50 this year could be one very nice dinner in a few decades...