Somewhat of a unique situation but it's the first time I have ever come across this so I figured I'd pose the question to the group. My question is in regards to being able to fund your TSP AND a 401(k) from a different employer. I understand the TSP and 401(k) are essentially the same. Just curious about tax implications if I max both accounts and the max on the amount that can be matched.
I'm currently a federal employee and planning to put in my retirement paperwork in about 4 years. I have been contributing the max to my TSP and ROTH IRAs for the past 20+ years. I was recently approached by a former colleague of mine that works for a contractor, who wants to offer me a part-time consulting gig. Two days a week, no traveling involved, all work from home, with the occasional visit to headquarters once a quarter. The salary (low six figures) and 401k match (around $30k yearly) is hard to pass up. The intent is to do this consulting gig for the next few years to supplement my retirement savings. I have looked into the 401k plan which is administered my Charles Schwab, and they have all the Vanguard Index funds available in it.
I would continue to max out my TSP ($22.5k this year) that has a $10k match. The minimum contribution required to get the $30k max match from the new employer is only $4k for the year.
As far as the IRS and taxes are concerned, I would have to either withdraw the excess contribution of $4k or pay a penalty on this excess contribution, is that correct?
Also, what about the taxes on the employer match, is there is a combined max that employers can match towards your 401(k)? This includes employer non-elective and employer matching. In my case, it would end up being about $40k total (TSP and 401k). What if you go over that max match limit, are there penalties? I have searched the IRS site, but all I could find was IRC 415c which talks about excess deferrals. So I'm unsure if I'm looking at the correct tax code.
Additionally, I have already spoken to the prospective employer and there is no way of getting the match added to my salary, it is separate and is part of their company retirement plan.
Thanks for any help
I'm currently a federal employee and planning to put in my retirement paperwork in about 4 years. I have been contributing the max to my TSP and ROTH IRAs for the past 20+ years. I was recently approached by a former colleague of mine that works for a contractor, who wants to offer me a part-time consulting gig. Two days a week, no traveling involved, all work from home, with the occasional visit to headquarters once a quarter. The salary (low six figures) and 401k match (around $30k yearly) is hard to pass up. The intent is to do this consulting gig for the next few years to supplement my retirement savings. I have looked into the 401k plan which is administered my Charles Schwab, and they have all the Vanguard Index funds available in it.
I would continue to max out my TSP ($22.5k this year) that has a $10k match. The minimum contribution required to get the $30k max match from the new employer is only $4k for the year.
As far as the IRS and taxes are concerned, I would have to either withdraw the excess contribution of $4k or pay a penalty on this excess contribution, is that correct?
Also, what about the taxes on the employer match, is there is a combined max that employers can match towards your 401(k)? This includes employer non-elective and employer matching. In my case, it would end up being about $40k total (TSP and 401k). What if you go over that max match limit, are there penalties? I have searched the IRS site, but all I could find was IRC 415c which talks about excess deferrals. So I'm unsure if I'm looking at the correct tax code.
Additionally, I have already spoken to the prospective employer and there is no way of getting the match added to my salary, it is separate and is part of their company retirement plan.
Thanks for any help
