75% income into 401k?

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michaeljc70
Posts: 2966
Joined: Thu Oct 15, 2015 3:53 pm

75% income into 401k?

Post by michaeljc70 » Mon Jun 04, 2018 7:48 pm

I started a new job 2 months ago. I left consulting/contracting to take something more stable. The job has turned out to be not a great fit and the company announced they are being bought and there will be no jobs in 9-12 months. I am looking for a new job and considering just leaving and taking some time off. I am wondering if I should opt for the maximum 401k contribution of 75% when I am eligible 7/1.

I would do this to 1) maximize my 401k contribution for the year and 2) reduce MAGI for ACA subsidies if I need to get my own healthcare for the rest of the year. There is the possibility I hang in there the rest of the year and see what happens or get a new job with a 401k.

My question is, should I do the max (75%) contribution to get in as much as I can and should I elect a conservative investment choice (my overall AA is 75/25) to avoid putting a bunch in the market over a shorter time period? I can live off the 25% income left no problem (using savings in cash) and have made no 401k contributions this year (I made a 2018 Roth contribution at the max already).

Easy Rhino
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Joined: Sun Aug 05, 2007 11:13 am
Location: San Diego

Re: 75% income into 401k?

Post by Easy Rhino » Mon Jun 04, 2018 7:57 pm

if you can live off the 25% (including some possible job uncertainty after the job ends) then sure, go for it. But if you're going to need the money sooner don't lock it away in a retirement account.

But as for the specific investment, I would invest according to your long term goals for your 401k and retirement savings in general.

livesoft
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Re: 75% income into 401k?

Post by livesoft » Mon Jun 04, 2018 8:05 pm

A possible negative is that if you find a new job and you are eligible to contribute and it has a better match than your current job, then you will have used up your annual contribution on this 401(k).
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michaeljc70
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Joined: Thu Oct 15, 2015 3:53 pm

Re: 75% income into 401k?

Post by michaeljc70 » Mon Jun 04, 2018 10:23 pm

livesoft wrote:
Mon Jun 04, 2018 8:05 pm
A possible negative is that if you find a new job and you are eligible to contribute and it has a better match than your current job, then you will have used up your annual contribution on this 401(k).
Good point. I do think I am close to retirement and doubt I would stay at any company long enough to become fully vested.

megabad
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Re: 75% income into 401k?

Post by megabad » Wed Jun 06, 2018 11:14 pm

Depending on your tax bracket you may want to consider a max Roth 401k contribution. Personally I would jump at the opportunity to dump in a year's worth of Roth contributions at say 12% marginal rate, but not sure of you situation. You will need to weigh this against COBRA/ACA costs.

michaeljc70
Posts: 2966
Joined: Thu Oct 15, 2015 3:53 pm

Re: 75% income into 401k?

Post by michaeljc70 » Thu Jun 07, 2018 7:52 am

megabad wrote:
Wed Jun 06, 2018 11:14 pm
Depending on your tax bracket you may want to consider a max Roth 401k contribution. Personally I would jump at the opportunity to dump in a year's worth of Roth contributions at say 12% marginal rate, but not sure of you situation. You will need to weigh this against COBRA/ACA costs.
If I knew for sure I would be not working the rest of the year, I'd do that. My concern is if I continue to work the rest of the year then I'll be in the 24% bracket. I think it is safer to do the regular 401k and then convert in future year at 12%.

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