Options? Maxed 54K 401K limit from all sources limit but couldn't max 18K 401K personal limit

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
tim_3278
Posts: 2
Joined: Fri Nov 17, 2017 8:07 pm

Options? Maxed 54K 401K limit from all sources limit but couldn't max 18K 401K personal limit

Post by tim_3278 »

Hi There,

I have put myself in a weird situation. My 401K provider is Fidelity, and it provides option to do back-door Roth. For this year, I went extra aggressive and realized that I have reached the 54K 401K limit from all sources. But I have still put only 17K in 401K as pre-tax employee contribution. The rest of the 37K is due to post-tax contributions or my employer's match.

The plan supposedly doesn't allow me to put anything beyond 54K. So, I am stuck leaving almost 1K on the table. On top of that I will also lose my employer's match. I spoke to Fidelity and they are looking at options by which I can take some post-tax contribution out, allowing me to put 1K more as pre-tax contribution.

Has anyone else have been in this situation before? If yes, how did you tackle it? Thanks in advance for your help!
ERISA Stone
Posts: 1626
Joined: Tue Jun 24, 2014 8:54 am

Re: Options? Maxed 54K 401K limit from all sources limit but couldn't max 18K 401K personal limit

Post by ERISA Stone »

It's been a while since I've encountered something like this but I don't think the plan should knowingly allow you to exceed a limit. They might allow you to and deal with the 415 limit (the $54k limit) after year end but technically they shouldn't.
ThrustVectoring
Posts: 771
Joined: Wed Jul 12, 2017 2:51 pm

Re: Options? Maxed 54K 401K limit from all sources limit but couldn't max 18K 401K personal limit

Post by ThrustVectoring »

Unless you're trying to limit your taxable income, it doesn't hurt you any. Tax-deferred contributions and mega-backdoor Roth contributions are worth the same to you. Like, you're in the same boat as making the full 18k tax-deferred contribution and converting $1000 of it to Roth, which is theoretically a wash for you on average.

My suggestion is don't worry about it.
Current portfolio: 60% VTI / 40% VXUS
tigerone
Posts: 21
Joined: Wed Feb 03, 2010 12:59 am

Re: Options? Maxed 54K 401K limit from all sources limit but couldn't max 18K 401K personal limit

Post by tigerone »

There are ways to remove excess contributions that either Fidelity or your payroll department can help you with. Payroll groups deal with this all the time due to people switching jobs mid year. But these cases are always excess deferrals above the $18K limit.

the other issue in removing excess contributions is that they will make you take out what you contributed plus some attributed earnings on those contributions. And those earnings will be taxable.

in any case, I think your issue is fairly small. I would calculate how much, if any, match you really missed out on by not making that last $1k of salary deferral. Most company match formulas max out well before $18K of contributions. If you really missed out on match, well, thats free money, so maybe its worth the hassle of figuring out how to get excess contributions refunded.
Topic Author
tim_3278
Posts: 2
Joined: Fri Nov 17, 2017 8:07 pm

Re: Options? Maxed 54K 401K limit from all sources limit but couldn't max 18K 401K personal limit

Post by tim_3278 »

Thankyou @tigerone, @ThrustVectoring and @ERISA Stone for taking the time out and replying to my query.

I checked again and the employer contribution will not be problem because they do a match-up to a percentage, and I have already contributed enough to get the max.

Also, as @ThrustVectoring pointed out, it is theoretically a wash. I hadn't thought about it that way.
Post Reply