New Poster, Long time reader. have a 401k, in between jobs, question!!!

[Jbird]

HI all-

I've been reading this message board for a long time, really enjoy all your insight.

I just started a new job (as of Oct. 2006) and have to wait one year before I contribute to my new 401k plan. My wife just finished grad. school and will start a job in Feb., 2007. She has to wait 6 months before she starts her new 401k plan. So she will be eligable the first of August and I will be eligalble the first of October. Both of our company have matching programs that are really aggressive (which is nice for us).

If we are able to max out both of our 401K's, can I wait until August/October and still max out our 401k's completely for the 2006 year? Is the cut off date for 2006 contributions April 15th, like IRA's? Not sure what the law allows.


thanks for any advice.

 

[mickeyd]

Hey Jbird, welcome to the fray (finally).

If we are able to max out both of our 401K's, can I wait until August/October and still max out our 401k's completely for the 2006 year?

Your Employee Benefit Plans probably have a maximum per paycheck contribution (like 12%) so you will be limited by this as to how much actual cash you can contribute probably. Whatever you do, make sure to contribute at least as much as possible so that you receive the maximum match. Cut off contributions for 401(k) are the last paycheck that you receive in the year (2006).

 

[Jbird]

wow, that will really limit us this year for our tax-def. investments. I guess we should max out our IRA's as well.

Thanks for the info.

 

[obryanjf]

Make sure you check the max as mine is 50% of each paycheck up to the IRS limit per year.

job

 

[simple girl]

Make sure you check the max as mine is 50% of each paycheck up to the IRS limit per year.

job

Yes, definitely check. DH's 401K allows 30%.

 

[jazz4cash]

Check with your plan(s)...the Summary Plan Description should answer your question. There are subtle differences between plans that are determined by the company, not the IRS..........For example, our plan allowed "lump sum" contributions awhile back, but they changed the rules to only permit contributions by payroll deduction. Sometimes overtime pay is eligible and sometimes only base pay.

 

[Nords]

Welcome to the board, Jbird.

Individual company 401(k) plans have a surprising amount of flexibility & choices (or lack thereof). So in addition to reading about the max paycheck contribution and your match, you'll also have to become an expert on the company documents to help you make the right investment choices.

Be careful about disclosing how much you know. If you start asking too many questions about your company's plan then you may end up "helping" HR with it...

 

[Jbird]

Thanks, good information!

I first tryed to talk to the 401k company, Manulife Financial (John Hancock), and they basically told me that the max. paycheck limits are set by the company, not the plan provider. So I had to go to my HR department and ask for that info (have not heard back yet).

Basically what I am trying to decide is how much I can fill up both our 401ks with the few months that we will have at the end of the year. Then once I calculate the total amount we will be able to get into our 401k's I will put the rest in our IRA's.

I am so used to investing my retirement money monthly it's hard for me to hold out until August/October, but it is the best way to max. out our annual retirement cotribution.

 

[Callie]

I did something similar when I decided to quit my job last year. I decided in April that I would quit at the end of June and since I was turning 50 that year I wanted to get all 20K in.

I was lucky that my company's limit was super high and I was able to load in all 20K (I got almost nothing on my checks of course).

Make sure you sign up right away, most plans say it takes one pay period to implement your deducation.

Good luck!