401k Contributions

[klharrison145]

I am very early in my financial education process although a little late to the game - attending 2nd year out.  I have a few questions about retirement contributing:

1. I qualify for an employer-sponsored 401k. I am maxing this out with my pretax contribution and receive a 4% match through my employer.  This only totals to about $27,000 contributed per year.  Besides profit-sharing (which is not available through my employer), is there any other way to make up the remaining $27,000 that the IRS allows as the max ($54,000 in 2017) contribution to a 401k?  Am I able to make up this difference somehow?

2. My husband is just finishing fellowship in June and will be starting his six-figure attending job in July.  He is not eligible to contribute to his 401k (with employer employer match of 100% of the first 5% deferred and also profit-sharing to reach the $54,000 maximum) until he has been with the group for 12 months.  We plan to do backdoor Roths for each of us this year, but since he is not yet eligible for his employer-sponsored 401k, should we be contributing to a different account in the meantime or just wait until he becomes eligible? I understand compound interested and recognize that time is our greatest asset here, which is why I want to make sure I don't waste it!

 

Thanks in advance for any input - this site/forum are SO helpful!!!!

[Peds]

if you have 1099 income you can open a solo 401k, you wont be able to contribute as an employee, but you can do the employer part as you stated up to 54K.

same for your husband.

dont forget, taxable accounts are still pretty great, and can be set up in a very efficient and low cost manner. for this year, *contribute* 18K out of his paycheck so you get used to contributing.

1 year will not make or break you, relax and good luck!

[jfoxcpacfp]

1. @Peds is correct, you will need a source of self-employment income to contribute more to your 401k account.


2. Focus on building up a taxable account.

Your concern is a common one but it is important to keep your focus in the proper place. Taxes are important, but they take are subordinated to growth of wealth. In other words, don't let the tax tail wag the growth of wealth dog. Contributing to a 401k matters, of course, but in the overall scheme of your comprehensive financial plan, it is arranging your financial affairs so that you are progressing toward your goals that matters most of all, not whether you get to deduct savings this year or next.

[gb]

Dont many 401k plans allow you to make after tax contributions to your 401k up to the $54k limit? No tax deduction, and pay taxes on the other end, but at least it grows tax deferred?

If you've maxed all tax-deductible contributions, backdoor roth IRA, etc - wouldn't this make more sense than putting it in your regular taxable account, assuming you don't need liquidity?

[klharrison145]

This is what I've been trying to figure out - my benefits people thought I lost my marbles when I mentioned the $54k limit even though I clarified that I recognize that contributions past $18k up to this limit would not be "pre-tax."  How do I figure out if my plan will allow me to make post-tax contributions here?

[jfoxcpacfp]

klharrison145 wrote:

This is what I’ve been trying to figure out – my benefits people thought I lost my marbles when I mentioned the $54k limit even though I clarified that I recognize that contributions past $18k up to this limit would not be “pre-tax.”  How do I figure out if my plan will allow me to make post-tax contributions here?

Click to expand...

Ask your HR department or get a copy of your SPD (Summary Plan Description). Doubt this option is available if you have not heard of it yet, but it sure w/b nice for you. Yes, @gb, agree with you that it w/b a better option, if available.

[wolverine41]

Hi Johanna, Quick unrelated Q to this thread

 

I just met with my CPA and he said I cannot deduct 18K for my both my work 401K (W2), and 18K in a solo 401K from 20K in 1099 income from a signing bonus. Is this correct?

 

 

[jfoxcpacfp]

wolverine41 wrote:

Hi Johanna, Quick unrelated Q to this thread

I just met with my CPA and he said I cannot deduct 18K for my both my work 401K (W2), and 18K in a solo 401K from 20K in 1099 income from a signing bonus. Is this correct?

 

 

Click to expand...

This is correct. You get only one $18k discretionary employee contribution across all plans. You can contribute 20% of net profits from your signing bonus as an employer contribution.

[wolverine41]

Ok thanks - but you cannot contribute 18 of the 20 K as the employer portion of the solo 401(k).

 

If not, being that it is a signing bonus and not a profitable business, how much of it can you contribute?

 

 

[jfoxcpacfp]

wolverine41 wrote:

If not, being that it is a signing bonus and not a profitable business, how much of it can you contribute?

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A $20k signing bonus is treated as a profitable business, unless you have > $20k business deductions to write off against the bonus (doubtful). Otherwise, it's back to my original statement: You can contribute 20% of net profits from your signing bonus as an employer contribution.

Net profits = signing bonus (gross receipts) less business expenses (any expenses related to the signing bonus). I'm sure your CPA will be able to advise you on this.