Here is my biweekly paycheck in Brooklyn, NY. How can I invest more?

[sourcream]

I am starting a new job very soon after being sick for 8 years and working part-time mostly with low pay and working on recovery. Did not invest in anything for past 8-years except some crypto (4k-5k only) and any investments before that were mostly liquidated while I was recovering.

I am getting a decent enough bi-weekly paycheck below. How can I improve it?

I thought I could invest up to 8K per month if I am making around 12k. But seems like I was wrong.

 

[njhowie]

Your 401k contribution is off. You can't do $2300 bi-weekly or you'll max out well before year end - that is $58,800/year - well above the max. That may be an ok amount if your employer lets you contribute the full amount over the remainder of 2020, but it will certainly be reduced when 2021 begins.

If you're under 50 years old, maximum contribution for 2020 is $19,500 - which would be $750 bi-weekly. If you're 50+ then you can do $26,000/year or $1000 bi-weekly.

Same with your HSA amount - $800 bi-weekly is $20,800/year, while the max for individual is $3550/year (+$1000 if 55+) or $7100/year (+1000 if 55+) for a family. For HSA, you can't contribute the full amount over the remainder of the year as may be permitted with the 401k - you must pro-rate by the number of months covered by the plan.

 

[sourcream]

Your 401k contribution is off. You can't do $2300 bi-weekly or you'll max out well before year end - that is $58,800/year - well above the max. That may be an ok amount if your employer let's you contribute the full amount over the remainder of 2020, but it will certainly be reduced when 2021 begins.

If you're under 50 years old, maximum contribution for 2020 is $19,500 - which would be $750 bi-weekly. If you're 50+ then you can do $26,000/year or $1000 bi-weekly.

Same with your HSA amount - $800 bi-weekly is $20,800/year, while the max for individual is $3550/year (+$1000 if 55+) or $7100/year (+1000 if 55+) for a family. For HSA, you can't contribute the full amount over the remainder of the year as may be permitted with the 401k - you must pro-rate by the number of months covered by the plan.

got it..but I did not work rest of year..I was sick. so, I can contribute that much i think. Isn't it?

 

[njhowie]

got it..but I did not work rest of year..I was sick. so, I can contribute that much i think. Isn't it?

Depends if the employer allows it. Technically, yes you can - we did it with my wife last year. She began a new job in October and she made close to nothing in taxable salary for 2019 because she contributed $25,000 to the 401k during the final 3 months of the year.

Keep in mind, not all employers allow participation in their 401k on Day 1. Some may make you wait until you've been working for 3 months, 6 months, or some other amount of time. So be sure to check that out.

 

[Out-to-Lunch]

On your other thread, you said you would be spending a max of $2k/month. So, it looks like you will have a monthly surplus of 2*1679 - 2000 = $1358. If you add that to your monthly pretax deductions delineated above (2*3115), you get $7588. Not quite $8k, but close. (And I am counting 4 weeks = 1 month.)

EDIT: njhowie already covered the ground I was covering below:

Something concerns me, though. Your analysis above has you putting (on an annualized basis) $60k per annum into a 401k. You know that you cannot do that for a year, right? Is that figure just to "catch up" for the duration of 2020?

 

[sourcream]

On your other thread, you said you would be spending a max of $2k/month. So, it looks like you will have a monthly surplus of 2*1679 - 2000 = $1358. If you add that to your monthly pretax deductions delineated above (2*3115), you get $7588. Not quite $8k, but close. (And I am counting 4 weeks = 1 month.)

EDIT: njhowie already covered the ground I was covering below:

Something concerns me, though. Your analysis above has you putting (on an annualized basis) $60k per annum into a 401k. You know that you cannot do that for a year, right? Is that figure just to "catch up" for the duration of 2020?

yeah..I am just trying to hit 19,500 somehow for the whole year. Just before year end, I will send 401k more money just to hit target

 

[sourcream]

Depends if the employer allows it. Technically, yes you can - we did it with my wife last year. She began a new job in October and she made close to nothing in taxable salary for 2019 because she contributed $25,000 to the 401k during the final 3 months of the year.

Keep in mind, not all employers allow participation in their 401k on Day 1. Some may make you wait until you've been working for 3 months, 6 months, or some other amount of time. So be sure to check that out.

i think I can do that after 30 days

 

[sourcream]

On your other thread, you said you would be spending a max of $2k/month. So, it looks like you will have a monthly surplus of 2*1679 - 2000 = $1358. If you add that to your monthly pretax deductions delineated above (2*3115), you get $7588. Not quite $8k, but close. (And I am counting 4 weeks = 1 month.)

EDIT: njhowie already covered the ground I was covering below:

Something concerns me, though. Your analysis above has you putting (on an annualized basis) $60k per annum into a 401k. You know that you cannot do that for a year, right? Is that figure just to "catch up" for the duration of 2020?

and yes, I can increase my contributions as my monthly expense is around 2K. btw, will my employer ask why I am putting so much in 401k in such a small duration and can they say no for it?

 

[njhowie]

i think I can do that after 30 days

Sounds good.

Another thought, totally different topic. Do you rent or own your residence in Brooklyn? If you rent, now is the time to have a talk with your landlord and look to renegotiate a lower rent, maybe a free month, or consider breaking your lease and moving. Rents are plummetting all around the city and renters have the upper hand. It is very easy to get a lower rent and/or more space. DD was living in Woodside/Flushing. A few weeks ago her roommates announced they were moving out and going back to Ohio. They broke the lease and the roommates paid penalties. DD found a much larger place, in a much nicer building for the same as what they had been paying and within a few blocks of where they were.

https://www.cnbc.com/2020/08/13/empty-apartments-in-manhattan-reach-record-high-topping-13000.html

 

[sourcream]

Sounds good.

Another thought, totally different topic. Do you rent or own your residence in Brooklyn? If you rent, now is the time to have a talk with your landlord and look to renegotiate a lower rent, maybe a free month, or consider breaking your lease and moving. Rents are plummetting all around the city and renters have the upper hand. It is very easy to get a lower rent and/or more space. DD was living in Woodside/Flushing. A few weeks ago her roommates announced they were moving out and going back to Ohio. They broke the lease and the roommates paid penalties. DD found a much larger place, in a much nicer building for the same as what they had been paying and within a few blocks of where they were.

https://www.cnbc.com/2020/08/13/empty-apartments-in-manhattan-reach-record-high-topping-13000.html

I rent right now. I have a great month to month deal in a great neighborhood. I am paying 30% lower rent than usual. Got rental using my connection a month agoand owner is very cool guy. probably gave me great deal as place was empty for a while. so best going on from rental point of view.

 

[njhowie]

I rent right now. I have a great month to month deal in a great neighborhood. I am paying 30% lower rent than usual. Got rental using my connection a month agoand owner is very cool guy. probably gave me great deal as place was empty for a while. so best going on from rental point of view.

Great!

 

[cathy63]

yeah..I am just trying to hit 19,500 somehow for the whole year. Just before year end, I will send 401k more money just to hit target

and yes, I can increase my contributions as my monthly expense is around 2K. btw, will my employer ask why I am putting so much in 401k in such a small duration and can they say no for it?

Your employer might ask why you are putting so much into the 401k, but you don't have to answer. Most likely they will only ask to confirm that you really meant to defer as much as you requested and that you didn't make a typo or mathematical error.

They can only say no if your proposed contribution would not conform to the plan's requirements. For example, if they have a requirement that the maximum you're allowed to defer from your salary is 50% and you try to defer 70%, they will not allow that. Or if you try to defer so much that there's not enough left to pay for your health insurance, then they could disallow that as well. They can also have rules about how many changes you're allowed to make during a year, so it may not be possible to change your deferral in December.

You should also think about what you want to do in January. If you do nothing, then your existing deferral settings will probably carry over and you might find that you've maxed out your contributions for 2021 very early in the year. In some 401k plans this can cause you to miss out on part of the company match. You really have to read the plan docs to find out what the specific rules are.

 

[Sunset]

OP - Your employer will love that you are contributing heavily for the rest of the year as it helps their safe harbor regarding contributions from high earners. My employer loved that I Maxed my 401K every year.

Also, I tell everyone this: You should pay for your own disability insurance through the employer if they give you the option (you pay all vs they pay). Reason is if you pay (after tax) and collect it is tax free. If they pay for it (maybe even some) then you get taxed on it if you collect.
Normally disability insurance is really cheap.

Here is a site that might explain it more:
https://www.cookmaran.com/blog/case-employer-paid-long-term-disability-coverage/

 

[sourcream]

OP - Your employer will love that you are contributing heavily for the rest of the year as it helps their safe harbor regarding contributions from high earners. My employer loved that I Maxed my 401K every year.

Also, I tell everyone this: You should pay for your own disability insurance through the employer if they give you the option (you pay all vs they pay). Reason is if you pay (after tax) and collect it is tax free. If they pay for it (maybe even some) then you get taxed on it if you collect.
Normally disability insurance is really cheap.

Here is a site that might explain it more:
https://www.cookmaran.com/blog/case-employer-paid-long-term-disability-coverage/

problem is I am still recovering from my health condition. Is my disability insurance application valid? they will have some baseline health requirements. When I was not working due to health reasons, I did not claim Short term Disability or LTD though I was eligible. Reason was that I was out country for recovery and also my manager asked me to resign as I was sick. He probably broken law in NY.

 

[sourcream]

OP - Your employer will love that you are contributing heavily for the rest of the year as it helps their safe harbor regarding contributions from high earners. My employer loved that I Maxed my 401K every year.

Also, I tell everyone this: You should pay for your own disability insurance through the employer if they give you the option (you pay all vs they pay). Reason is if you pay (after tax) and collect it is tax free. If they pay for it (maybe even some) then you get taxed on it if you collect.
Normally disability insurance is really cheap.

Here is a site that might explain it more:
https://www.cookmaran.com/blog/case-employer-paid-long-term-disability-coverage/

will they verify that my $19500 is pending in 401k? if so, how?

 

[Sunset]

will they verify that my $19500 is pending in 401k? if so, how?

Most employers have an accounting dept. The accounting dept knows all your deductions since they do all the company payments.

As long as you contribute no more than the maximum 401K amount allowed, it's all good.
Only if the company is small and sharp will your manager/boss even consider how great it is you contribute so much.
If everyone else contributes a lot, then it doesn't make any difference anyway, and they might notice folks that don't contribute much.

 

[Sunset]

problem is I am still recovering from my health condition. Is my disability insurance application valid? they will have some baseline health requirements. When I was not working due to health reasons, I did not claim Short term Disability or LTD though I was eligible. Reason was that I was out country for recovery and also my manager asked me to resign as I was sick. He probably broken law in NY.

If you were eligible you should have claimed STD and LTD, since you were sick for 8 years. Does not matter what your manager asked.

I worked with a young girl, she told me she had to quite due to illness, I sat in with her when she told the boss she was quitting. Which was going to mean I had to run everything (I was the new guy 1 week on the job).
Naturally boss didn't want her to quit and pressed her as to why...
The girl explained her medical reason.
Boss immediately told her don't quit, go on LTD. So she did.
That was a great Boss that looked out for employee's.

 

[sourcream]

Most employers have an accounting dept. The accounting dept knows all your deductions since they do all the company payments.

As long as you contribute no more than the maximum 401K amount allowed, it's all good.
Only if the company is small and sharp will your manager/boss even consider how great it is you contribute so much.
If everyone else contributes a lot, then it doesn't make any difference anyway, and they might notice folks that don't contribute much.

thanks. my question is how will this employer's account dept know what I contributed in last employer? I did not contribute anything though.

 

[cathy63]

thanks. my question is how will this employer's account dept know what I contributed in last employer? I did not contribute anything though.

They would not know. If you have multiple employers, then it is your responsibility to keep your total contribution below the annual limit and to make a withdrawal from one plan or the other if you accidentally put too much in.

Since you didn't contribute anything at any other employer this year, then you don't have to worry about it.

 

[Rex]

Can you work from home?

If you move to Florida, you'd see a 3.8% raise because there is no state or local income tax.

 

[copyright1997reloaded]

and yes, I can increase my contributions as my monthly expense is around 2K. btw, will my employer ask why I am putting so much in 401k in such a small duration and can they say no for it?

Your employer won't care. I've done this in my old mega-corp job (where between 401K and exec comp plan I had my take home at about $50/pay). I did it this year at my college gig - only issue is that I didn't have enough pay to pay faculty dues, so my school payroll had to do a manual adjustment (I simply explained I wanted a net $0 paycheck if possible).

 

[sourcream]

Can you work from home?

If you move to Florida, you'd see a 3.8% raise because there is no state or local income tax.

I like working from home. WFH is my next job. There was a company florida who was interested in me. They were offering much less...like 50k less and that they reasoned lower taxes too.

 

[sourcream]

Your employer won't care. I've done this in my old mega-corp job (where between 401K and exec comp plan I had my take home at about $50/pay). I did it this year at my college gig - only issue is that I didn't have enough pay to pay faculty dues, so my school payroll had to do a manual adjustment (I simply explained I wanted a net $0 paycheck if possible).

Wow..net zero. who was paying your bills?