mispoken

I was hoping jughead would chime in!

Put another way; my personal limit is $18,500 between Delta and TSP, correct?

I could essentially put ALL of my funds into Fidelity as 401a funds and leave my TSP open to the $18,500 contributions. Is that correct?

So here is my personal scenario;

-Delta DPSP contributions
-My Contributions To DPSP

-My contributions to TSP
-Government match (5%) To TSP

Let’s assume I want all military income to go to TSP; let’s also assume I make $18,500/yr from military income.

I could put 100% of that income into my TSP (or Roth TSP)

I could then continue to make ALL of my contributions to the DPSP as 401a funds, Delta would continue to make pre tax contributions until I hit $55k in that account and it would then be pushed to DPSP_CASH.

No way I’d hit $55k in TSP, however I am slated for a CZTE deployment this year, all of which will Be tax free which could then be put into a Roth TSP and withdrawn tax free at 59.5. HOWEVER, that CZTE doesn’t even count towards my $18.5k! The remaining income from the military outside of CZTE would be subject to the 18.5k limit.

Does my grasp of this seem about right?

Just when you think you have this stuff figured out, Jughead comes along. Thanks!

crewdawg

If you're contributing to 401k and TSP then yes, you would have to watch these funds because they both fall under 402g contributions. These contributions are limited to 18.5k, across all plans/employers. The 401a contribution limit is 55k, which also happens to be the 415 limit. Since the 415 limit is applied per employer, you now have another 55k available to you if you have multiple employers. However to make this happen in our case, you must contribute to your 401a and NOT your 401k at Delta. This leaves your full 18.5k available to contribute to your 401k/TSP.

Multiple plans - Financial Planning Body Of Knowledge

Plus all of what jughead said!

mispoken

Oh man! This is gold!

Does my scenarios I presented above seem accurate?

crewdawg

On the move and reading on my phone but your post looks correct.

Then you can take your 401a funds and roll them over into a Roth IRA and these funds do NOT count toward the $5,500 Roth IRA contribution limit. This year, I contributed my $5,500 via the "back door Roth IRA." Then I rolled over another 8k to my Roth IRA via the 401a option...some call this the "Mega back door Roth."

mispoken

Yes, I’ve been on the back door and mega back door plan for a few years now, it’s really a great thing.

The 415c rules PER EMPLOYER is completely new to me. Thanks for that info, time to do some reading!

Also need to correct what I said above. My combat zone tax free income would need to be contributed to a TRADITIONAL TSP, Not Roth. Roth TSP contributions count towards the individual max while traditional contributions don’t. Since I probably won’t make more than $18,500 in the reserves this year, it’s probably a moot point for me and Tax free ROTH contribuitons make more sense. I think......

DeadHead

I'm sure it's been asked somewhere on here, but any benefit to maxing out 401k contributions through ones's profit sharing payout as opposed to monthly salary deductions?

I believe profit sharing is considered a bonus and therefore taxed at a higher income tax level (federal/state), so effectively you'd be paying the higher bonus tax rate on a lesser amount of income.

Curious if anyone has had any experience with this.

GogglesPisano

It all washes out on April 15.

Of course, that's a 10-month interest-free loan to the IRS.

GucciBoy

Profit sharing is withheld at a higher rate, not taxed at a higher rate. It counts as earned income.

There is no advantage to maxing out your 401(k) with PS. Many people would argue that it is not advantageous as it prevents dollar-cost averaging.


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TED74

And others would argue that on the eve of a spectacular market crash it would be wise to hold off until later in the year when stuff's gonna be CHEAP! Place your bets, ladies and gentlemen!

[or just dollar cost average]

mispoken

Short term, most certainly. Long term, just a blip on the radar. If you have time, 8-35 years, probably won’t make a big difference. If you have a couple years until retirement, probably worth looking at something a little more conservative.

As far as I’m concerned, with a long time horizon there is no better time to invest than the present.