Direct Contribution ???
01-19-2020, 02:44 PM
#32
Banned
Joined APC: Mar 2013
Posts: 384
Originally Posted by cesnacaptn
Do you work for a company that doesn’t pay “cash over cap?”
If you work for a company that pays cash over cap, it doesn’t matter if you max out your 401(k) contributions, if you will reach the 415(c) combined contribution limit (57k in 2020) one way or another.
At least that’s the case if your company DC plan is greater than 13% and you will make the 401(a) limit or more (285k in 2020)
If you work for a company that pays cash over cap, it doesn’t matter if you max out your 401(k) contributions, if you will reach the 415(c) combined contribution limit (57k in 2020) one way or another.
At least that’s the case if your company DC plan is greater than 13% and you will make the 401(a) limit or more (285k in 2020)
01-19-2020, 02:46 PM
#33
Gets Weekends Off
Joined APC: Feb 2007
Posts: 357
Originally Posted by gollum
I was referencing specifically company contributions to your 401K. Different contacts handle above cap money differently. Some pay it in cash, some dont pay a dime, some put it into a retirement health account. So if you are at one of the companies that does not pay anything once you hit the limit, then you need to be conscious of this limits because you could be leaving thousands on the table every year.
The HRA that UA has is a great way to defer income and avoid taxes. I wish we had that.
01-19-2020, 02:50 PM
#34
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Joined APC: Mar 2013
Posts: 384
Originally Posted by ackeight
You must have a special plan that allows Roth contributions above 19.5. We can’t. You can convert your non Roth, but pay the taxes out of your own bank account.
Look-up Backdoor 401k Roth.
https://www.betterment.com/resources...01k-after-tax/
01-19-2020, 02:53 PM
#35
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Joined APC: Mar 2013
Posts: 384
Originally Posted by cesnacaptn
It looks like we were typing at the same time, but what difference does it make if you don’t contribute the full $19,500?
You’re still paying taxes on money that’s over the $57,000 limit, whether it comes in the form of cash over cap or income you didn’t contribute into your 401(k).
You’re still paying taxes on money that’s over the $57,000 limit, whether it comes in the form of cash over cap or income you didn’t contribute into your 401(k).
Our company pays the excess to a retirement health account which is tax excluded and can be used for health related expenses in retirement (or in case of long term disability) with no taxes paid on the gains. So if I don't get my full 19,500 in , I am paying taxes on the money I didn't get to put in so there is a difference.
01-19-2020, 02:57 PM
#36
Gets Weekends Off
Joined APC: Feb 2007
Posts: 357
Originally Posted by gollum
Our company pays the excess to a retirement health account which is tax excluded and can be used for health related expenses in retirement (or in case of long term disability) with no taxes paid on the gains.
01-19-2020, 03:17 PM
#37
Line Holder
Joined APC: Jan 2008
Posts: 84
Originally Posted by gollum
I didn't say it was Roth that allowed contributions above 19.5. There is a difference between a Roth 401K and Traditional 401K that allows after-tax contributions. The later, in most cases is a normal 401K but once you hit 19,500, you can continue to make after-tax contributions.
Look-up Backdoor 401k Roth.
https://www.betterment.com/resources...01k-after-tax/
Look-up Backdoor 401k Roth.
https://www.betterment.com/resources...01k-after-tax/
Im not trying to chase my tail, but for most here 19.5k max personal and 47,500 from the company is already more than the irs max. That’s why I said it doesn’t matter Roth or pretax. We get every overage in cash or a 415c deferred fund.
01-19-2020, 03:18 PM
#38
Banned
Joined APC: Mar 2013
Posts: 384
Originally Posted by cesnacaptn
In that case, my point stands. If you make more than $285k this year and your company is going to contribute at least $37,500, it doesn’t matter if you max out your $19,500. You’re either going to pay taxes on the cash over cap or you pay taxes on the money you weren’t able to contribute because you reached the $57,000.
let’s say I make $285,000 exactly;
IF I max my 401k contribution at 19,500 The company contributions will be limited to 37,500 and the remaining 8,100 goes into my retirement health account which is is not only tax free going in, it’s also tax free (including gains) when you used it for qualified heath expenses.
if I allow my company contributions to max out before I get my 19,500 in not only am I paying this year on my 8,100 in a year I will likely have a higher income level than when I retire, I have also lost the tax free advantage gained from the RHA.
if you can’t see the difference, I don’t know how else to help.
01-19-2020, 03:25 PM
#39
Banned
Joined APC: Mar 2013
Posts: 384
Originally Posted by ackeight
Im not trying to chase my tail, but for most here 19.5k max personal and 47,500 from the company is already more than the irs max. That’s why I said it doesn’t matter Roth or pretax. We get every overage in cash or a 415c deferred fund.
the back door Roth options is also available to IRAs which fall under different rules and are also an option even when you are at the 415c limits.
01-19-2020, 03:46 PM
#40
Gets Weekends Off
Joined APC: Feb 2007
Posts: 357
Originally Posted by gollum
You are correct that it doesn’t matter In a cash over cap situation, but it does matter in the case of a retirement health account.
let’s say I make $285,000 exactly;
IF I max my 401k contribution at 19,500 The company contributions will be limited to 37,500 and the remaining 8,100 goes into my retirement health account which is is not only tax free going in, it’s also tax free (including gains) when you used it for qualified heath expenses.
if I allow my company contributions to max out before I get my 19,500 in not only am I paying this year on my 8,100 in a year I will likely have a higher income level than when I retire, I have also lost the tax free advantage gained from the RHA.
if you can’t see the difference, I don’t know how else to help.
let’s say I make $285,000 exactly;
IF I max my 401k contribution at 19,500 The company contributions will be limited to 37,500 and the remaining 8,100 goes into my retirement health account which is is not only tax free going in, it’s also tax free (including gains) when you used it for qualified heath expenses.
if I allow my company contributions to max out before I get my 19,500 in not only am I paying this year on my 8,100 in a year I will likely have a higher income level than when I retire, I have also lost the tax free advantage gained from the RHA.
if you can’t see the difference, I don’t know how else to help.
All good. I’m finally on the same page as you.
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