HELP!!! 401k/403b questions....

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Topic Author
Cody6136
Posts: 262
Joined: Tue Apr 16, 2019 10:54 am

HELP!!! 401k/403b questions....

Post by Cody6136 » Fri May 17, 2019 2:13 pm

Hi all,

Just getting my financial life in shipper-shape. Single and extreme saver (though income of only 80k) and no debt. 58 y.o. Net worth around 700k, not counting home equity of 375k (paid)

Those are solid things but the wild card is my new(er) job, where I've worked for 3 years. It's at a university and we have a 403b with TIAA. University matches 7 percent and I'm enrolled but I want to save more.

I asked the plan administrators at the University, who told me that I could not do more than 7 percent in the 403b.

Does anyone know what the reason for this is?

Then, they let me know that I could do another 401K "alongside this." Which I did, and I rolled an old 401k ....of over $100k into it.

I regret doing that, but I would think I could wait a period of time (because I'm finding this exhausting) and roll that $100k into lower fee funds at Vanguard.

My question is whether I can "max out" my own 401K, established alongside the existing 403b plan, and why I would be limited in this way in terms of pre-tax dollars.

I don't know if I need to go back to the TIAA plan administers (unhelpful so far), my tax accountant (need a new one of these) or whether anyone here can point me in the right direction.

I worked hard for decades and saved and invested through a series of 401ks and other investment instruments, but this whole TIAA 403b plan is a labyrinth of confusion, in my experience. I don't know where to turn.

mhalley
Posts: 7255
Joined: Tue Nov 20, 2007 6:02 am

Re: HELP!!! 401k/403b questions....

Post by mhalley » Fri May 17, 2019 2:33 pm

I believe the maximum you can contribute to your 403b AND 401k is 19k plus the catch up of 6k. So subtract the amount you put in the 403b from 25k, and that is what you can put in the 401k.
https://thefinancebuff.com/401k-403b-ir ... imits.html
I don't know why they have a 7% limit. It is legal for them to do it, per IRS.gov

Employees who also participate in another plan
Employees must combine contributions made to their 403(b) accounts with contributions made to all other plans in which they participate (other than 457 plans): 401(k)s and other qualified plans, and SIMPLE IRAs. The employee's total elective deferrals to all of these plans combined cannot exceed the annual deferral limit ($19,000 in 2019

Plan-based limits on elective deferrals
Although rare, your plan may limit the amount you can defer to an amount less than the allowed deferrals for that plan type for the year.

A plan with a 401(k) feature may also reduce the amount you can defer to ensure that the plan meets nondiscrimination requirements. The plan may return some of your deferrals even if they don’t exceed your individual limit.

Topic Author
Cody6136
Posts: 262
Joined: Tue Apr 16, 2019 10:54 am

Re: HELP!!! 401k/403b questions....

Post by Cody6136 » Fri May 17, 2019 2:51 pm

mhalley wrote:
Fri May 17, 2019 2:33 pm
I believe the maximum you can contribute to your 403b AND 401k is 19k plus the catch up of 6k. So subtract the amount you put in the 403b from 25k, and that is what you can put in the 401k.
https://thefinancebuff.com/401k-403b-ir ... imits.html
I don't know why they have a 7% limit. It is legal for them to do it, per IRS.gov

Employees who also participate in another plan
Employees must combine contributions made to their 403(b) accounts with contributions made to all other plans in which they participate (other than 457 plans): 401(k)s and other qualified plans, and SIMPLE IRAs. The employee's total elective deferrals to all of these plans combined cannot exceed the annual deferral limit ($19,000 in 2019

Plan-based limits on elective deferrals
Although rare, your plan may limit the amount you can defer to an amount less than the allowed deferrals for that plan type for the year.

A plan with a 401(k) feature may also reduce the amount you can defer to ensure that the plan meets nondiscrimination requirements. The plan may return some of your deferrals even if they don’t exceed your individual limit.

Aha! I thought they could not limit this...they also mandatorily enroll you. I've gone from an organization where hardly anyone enrolled (which struck me as mind-BOGLing) to one in which everyone is enrolled, even against their wishes.

What a strange world it is! :twisted:

22twain
Posts: 1952
Joined: Thu May 10, 2012 5:42 pm

Re: HELP!!! 401k/403b questions....

Post by 22twain » Fri May 17, 2019 3:24 pm

Is the 401k also with TIAA?

As for why they restrict 403b contributions like that, you'd probably have to ask the university's benefits office. This is the first time I've ever heard of such a thing.
My investing princiPLEs do not include absolutely preserving princiPAL.

TXprof
Posts: 1
Joined: Fri May 17, 2019 3:42 pm

Re: HELP!!! 401k/403b questions....

Post by TXprof » Fri May 17, 2019 3:55 pm

You likely have a 403a for employer contributions and can set up a 403b for your contributions. This is often what TIAA does. You would be able to contribute $19k to the 403b but the other account would be limited to employer contributions. Seems the administrator may have given you the right answer but left out the details.

Topic Author
Cody6136
Posts: 262
Joined: Tue Apr 16, 2019 10:54 am

Re: HELP!!! 401k/403b questions....

Post by Cody6136 » Fri May 17, 2019 4:05 pm

22twain wrote:
Fri May 17, 2019 3:24 pm
Is the 401k also with TIAA?

As for why they restrict 403b contributions like that, you'd probably have to ask the university's benefits office. This is the first time I've ever heard of such a thing.

yes the 401k is also with TIAA. I had two former 401k's. One is about 50k and that is going from American Funds to Vanguard; the other went from Merrill Edge to TIAA. I wish I could turn back time ....(Cue the Cher song) and have them both go to Vanguard. Sheesh!! :oops:

Yes, I just bugged the University's contact again, and they do restrict it, in addition to making it mandatory. It's strange, isn't it?

Topic Author
Cody6136
Posts: 262
Joined: Tue Apr 16, 2019 10:54 am

Re: HELP!!! 401k/403b questions....

Post by Cody6136 » Fri May 17, 2019 4:07 pm

mhalley wrote:
Fri May 17, 2019 2:33 pm
I believe the maximum you can contribute to your 403b AND 401k is 19k plus the catch up of 6k. So subtract the amount you put in the 403b from 25k, and that is what you can put in the 401k.
https://thefinancebuff.com/401k-403b-ir ... imits.html
I don't know why they have a 7% limit. It is legal for them to do it, per IRS.gov

Employees who also participate in another plan
Employees must combine contributions made to their 403(b) accounts with contributions made to all other plans in which they participate (other than 457 plans): 401(k)s and other qualified plans, and SIMPLE IRAs. The employee's total elective deferrals to all of these plans combined cannot exceed the annual deferral limit ($19,000 in 2019

Plan-based limits on elective deferrals
Although rare, your plan may limit the amount you can defer to an amount less than the allowed deferrals for that plan type for the year.

A plan with a 401(k) feature may also reduce the amount you can defer to ensure that the plan meets nondiscrimination requirements. The plan may return some of your deferrals even if they don’t exceed your individual limit.
Thank you for posting this information. :D

BarbBrooklyn
Posts: 328
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: HELP!!! 401k/403b questions....

Post by BarbBrooklyn » Wed May 22, 2019 11:29 am

This is interesting. Where I worked, we were able to have both a 403b AND a 457 and were able to contribute the max to both. So a combined 46k deferral if you were of catch up age.

I wonder if you can campaign for your university to change this? It's not costing THEM money that I can see.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

cuendillar
Posts: 19
Joined: Tue Mar 19, 2019 2:44 pm

Re: HELP!!! 401k/403b questions....

Post by cuendillar » Wed May 22, 2019 11:45 am

Many university retirement plans have multiple retirement options (e.g. pension, 403b, deferred comp/457, ROTH and traditional IRAs, etc.). I would ask specifically for what options are available, and ensure you are speaking to someone with the correct knowledge. For example, calling the HR where I currently work will often get me less than accurate responses when I ask more detailed questions (e.g. fees). The benefit of this many options allows some pretty hefty tax-advantage savings. For example, 403b/401k ($19.5k or current yearly amount), plus deferred comp (about $20k), plus traditional IRA allows for about $45k in tax deferred savings. Plus there are rules to each one that may make it more attractive beyond the tax savings. For example, with my deferred comp, I can withdraw money with no penalty once I separate from the current employer. While I wouldn't do this lightly, I could conceivably see where an unexpected event could cause me to need those funds and I would prefer no penalty to the 10% penalty (in addition to taxes of course) incurred if withdrawn from a 403b/401k.

Topic Author
Cody6136
Posts: 262
Joined: Tue Apr 16, 2019 10:54 am

Re: HELP!!! 401k/403b questions....

Post by Cody6136 » Wed May 22, 2019 5:02 pm

cuendillar wrote:
Wed May 22, 2019 11:45 am
Many university retirement plans have multiple retirement options (e.g. pension, 403b, deferred comp/457, ROTH and traditional IRAs, etc.). I would ask specifically for what options are available, and ensure you are speaking to someone with the correct knowledge. For example, calling the HR where I currently work will often get me less than accurate responses when I ask more detailed questions (e.g. fees). The benefit of this many options allows some pretty hefty tax-advantage savings. For example, 403b/401k ($19.5k or current yearly amount), plus deferred comp (about $20k), plus traditional IRA allows for about $45k in tax deferred savings. Plus there are rules to each one that may make it more attractive beyond the tax savings. For example, with my deferred comp, I can withdraw money with no penalty once I separate from the current employer. While I wouldn't do this lightly, I could conceivably see where an unexpected event could cause me to need those funds and I would prefer no penalty to the 10% penalty (in addition to taxes of course) incurred if withdrawn from a 403b/401k.
I am pursuing this now and realize that you are correct and that my HR department is NOT on the ball here. Thank you for the input!

BarbBrooklyn
Posts: 328
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: HELP!!! 401k/403b questions....

Post by BarbBrooklyn » Wed May 22, 2019 5:44 pm

Cody; I'm glad you are pursuing this. I was at my job for 26 years before I found out about the 457 option that had been there all along. Seriously.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

DoTheMath
Posts: 300
Joined: Sat Jul 04, 2015 1:11 pm
Location: The Plains

Re: HELP!!! 401k/403b questions....

Post by DoTheMath » Wed May 22, 2019 8:43 pm

I don't think I quite understand the structure of your university's plan. What makes sense to me is if when you said 401k you meant 403b, and that "along side" just meant that for internal accounting purposes they have your 403b divided into two accounts: one which has their contribution and your required contribution, and second which would be your contributions alone. But if both of these are 403b's, then your contributions to both should be added together and treated as one when considering limits and such.

As others said 403b + 401k = 19k/year (or 25k/year for those over 50). The employer contributions do not count towards those limits.

In any case, be persistent and don't give up until you are sure you have a clear understanding of things, and definitely ask for written documentation over verbal assurances. My HR has more than once given me incomplete or erroneous information.

In addition you can put another 19k/year (or 25k/year for those over 50) into a 457b, if that is available. If not and you are working for a public university you might look into if there is one available for state employees for which you are eligible. I've heard of situations where this is the case.

And of course everyone has the option of an IRA which is another $6k ($7k if you're age 50 or older), and potentially an HSA (yet another $3,500 for an individual, $7,000 for a family) would be yet another tax advantaged option if available.

P.S. You're killing it. A millionaire+ at 58 is something to be proud of.
“I am losing precious days. I am degenerating into a machine for making money. I am learning nothing in this trivial world of men. I must break away and get out into the mountains...” -- John Muir

is50xenough
Posts: 48
Joined: Sat Jul 28, 2018 1:37 pm

Re: HELP!!! 401k/403b questions....

Post by is50xenough » Wed May 22, 2019 9:27 pm

Did you mention what state this is? Does the plan only use TIAA or are there other companies you could have picked?

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