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401k contribution strategy

Posted: Tue Mar 06, 2018 10:34 pm
by krannerd
I'm seeking advice on a contribution strategy for my 401k. My employment with current company will be ending on June 30 and employment with a new company is not yet determined.

I'm trying to think about how to put myself in a position to fully fund a 401k this year but also leave space for future employer match.

Your feedback is requested on options below (or make up your own...I'm open to different ideas)

Option 1: Fully fund 401k by June 30 and potentially forego later funding. Downside is that I may miss some sort of match with a future employer
Option 2: Fund 401k at current contribution rate and try to make up the funding with new employer. Downside is that it may be tricky to participate in a new plan toward the end of the year...or matching contributions may not start right away
Option 3: Fund at an accelerated rate and make assumptions about what a potential employer match may be (4-6%) and leave room at the end of the year for a contribution

I'd like to avoid over-contributing as it seems like a pain to get those contributions back out (is this a fair statement)?

Advice and strategies welcome to ensure a fully funded 401k and optimal company match. Thank you for your thoughts and inputs.

Re: 401k contribution strategy

Posted: Tue Mar 06, 2018 11:58 pm
by mega317
I'd max out at the current employer. If you lose 6 months of match, cest la vie. I'd prefer the chance of that to ending up with less than 18.5k contributed.

Re: 401k contribution strategy

Posted: Wed Mar 07, 2018 1:08 am
by gostars
I'd go with option 3. Give yourself a shot at the match, but make it possible to easily max out even if it takes you a couple months to find the right landing spot. Over-contribution shouldn't be an issue if you're not contributing to both simultaneously. If you inform your payroll/HR/plan administration people of the total elective contributions made at the previous job, they should be able to cap your contributions so you don't go over.

Re: 401k contribution strategy

Posted: Wed Mar 07, 2018 8:17 am
by teen persuasion
DH went with option 3 a few years ago.

He'd been contributing at 50% thru June when he left job 1, and he had a large pot of sick time to he paid out at 50% plus a smaller pot of PTO. He arranged to have it paid out over 5 future pay periods, and put 50% in his 401k from each. I'd calculated how to divide it up to minimize federal withholding, and calculated how much space he'd need to save to capture a match at a future job.

The position he'd hoped to take (had been pitched to him) went poof when the employer instituted a hiring freeze just as he was available. He ultimately was hired by the employer months later for an entirely different position. There were only 2 months left for contributions, rather than the 6 months I'd worked into my calculations, so he just increased contributions to get as close to the max as possible. His employer couldn't take my figure for his space available, to cut off his contributions at exactly the limit. So we just got as close as possible with the last percent.