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401k 100% paycheck deduction
Old 11-03-2019, 08:32 PM   #1
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401k 100% paycheck deduction

So, as I'm trying to figure out my strategy for pre-tax/Roth/maxed after-tax (for in-plan conversion), I see that Megacorp allows a 100% paycheck deduction for over-55 catch up contributions.

Has anyone ever done this? I assume it's 100% after all other pre-tax contributions? But Medicare and SS taxes still have to be paid, right?
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Old 11-03-2019, 09:48 PM   #2
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I haven't done it, but usually, yes, FICA has to be paid regardless. That's why some companies have a limit of 75% or 90% or whatever.
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Old 11-03-2019, 09:51 PM   #3
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Iíve done this and it worked fine at my previous employer. It just was made after all the mandatory withholding. But one thing to look out for is that sometimes an employer match is capped per pay period and doing large contributions can mean you miss out on some part of that match.
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Old 11-03-2019, 09:55 PM   #4
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We did this during the last years of employment, maxing out my wife's 401k saving that zeroed her paycheck out. As SecondCor521 mentioned, FICA is still paid. The strange thing was, if your net paycheck was $0 at the company she worked for, a paper pay stub was generated. And mailed to our house. Every two weeks. Maybe there is a rule about that, or maybe the payroll system was just odd. If your net pay was greater than zero, the pay stub was electronic, accessed via the employee services website. Weird.
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Old 11-03-2019, 10:28 PM   #5
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I wanted to do 100%, but our payroll person didnít know how to zero out my paycheck with ss/Medicare, so IIRC I settled at around 90%. I still had a few dollars deposited into my checking account. Since I was paid hourly, and I worked a different number of hours per week, I would have had to do a different pct each week to end exactly at $0 deposited while paying the required amount of ss/Medicare in our payroll software.

I didnt do this until we converted to a safe harbor plan. Prior the the safe harbor plan, there were several years that I wasnít allowed to max out, and it wasnít known until year end how much I would be allowed to put in my 401k.
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Old 11-04-2019, 06:17 AM   #6
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Quote:
Originally Posted by googily View Post
So, as I'm trying to figure out my strategy for pre-tax/Roth/maxed after-tax (for in-plan conversion), I see that Megacorp allows a 100% paycheck deduction for over-55 catch up contributions.

Has anyone ever done this? I assume it's 100% after all other pre-tax contributions? But Medicare and SS taxes still have to be paid, right?
Sounds like a question for your payroll department. Is 100% based on the gross income or after mandatory deductions or something else?

My old employer use to allow up to 50% where the balance, I assume, was reserved for other mandatory deductions.

They were one of the biggest employers, back in the day, so I suspect that the 50% limit was in place so they wouldn't have to spend time dealing with employees who didn't think it through as thoroughly.

If I were doing this, I would probably just start with 50% for a pay period or two and then look at how the 50% was calculated. Once I thought that I understood how they were doing it, I could then make a 2nd change up to 100% or whatever maximum would make sense.

-gauss
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Old 11-04-2019, 06:31 AM   #7
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DW does this with her hobby job. It is 100% after SS tax.
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Old 11-04-2019, 07:50 AM   #8
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Thanks, everybody! I would have asked the benefits guy, but I've been bugging him a lot lately trying to understand a bunch of stuff and don't want to wear out my welcome. On the bright side, I told him about how some companies give employees an option to have their after-tax contributions immediately converted to Roth, and he was intrigued and said he'd ask Vanguard about it.
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Old 11-04-2019, 03:15 PM   #9
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We do the same for DW's paycheck...roughly $5 is left for direct deposit every two weeks.
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