401k question

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Topic Author
Newbogel
Posts: 40
Joined: Sat Jan 20, 2018 10:21 am

401k question

Post by Newbogel »

I recently changed jobs. In my previous employment I managed to contribute 18k of my 2021 allowance. My new company only allows 401k contributions after 90 days which means I can only contribute next year. If I want to max out my 2021 contribution should I open a 401k and contribute after tax? Is that even possible? Then I am guessing when I report taxes I will get an adjustment for the after tax contribution? Or am I way off? I am eligible for catch up so I should be able to contribute 26k.
exodusNH
Posts: 1426
Joined: Wed Jan 06, 2021 8:21 pm

Re: 401k question

Post by exodusNH »

Newbogel wrote: Wed Nov 24, 2021 12:37 pm I recently changed jobs. In my previous employment I managed to contribute 18k of my 2021 allowance. My new company only allows 401k contributions after 90 days which means I can only contribute next year. If I want to max out my 2021 contribution should I open a 401k and contribute after tax? Is that even possible? Then I am guessing when I report taxes I will get an adjustment for the after tax contribution? Or am I way off? I am eligible for catch up so I should be able to contribute 26k.
401ks are employer-sponsored.

You can contribute to a traditional IRA, up to $6,000 for 2021 ($7,000 if you're over 50.) Whether or not that's deducible depends on your income level. If not deductible, consider the backdoor Roth process.
retiredjg
Posts: 46074
Joined: Thu Jan 10, 2008 12:56 pm

Re: 401k question

Post by retiredjg »

Newbogel wrote: Wed Nov 24, 2021 12:37 pm I recently changed jobs. In my previous employment I managed to contribute 18k of my 2021 allowance. My new company only allows 401k contributions after 90 days which means I can only contribute next year. If I want to max out my 2021 contribution should I open a 401k and contribute after tax? Is that even possible? Then I am guessing when I report taxes I will get an adjustment for the after tax contribution? Or am I way off? I am eligible for catch up so I should be able to contribute 26k.
If you have some income from self-employment, I suppose you could open an individual 401k and contribute the rest of the 2021 amount. Not sure that is worth the trouble for 1 year. I'd just put the extra $8k into a taxable account and call it good.
dkeeney
Posts: 17
Joined: Thu May 24, 2018 1:50 pm

Re: 401k question

Post by dkeeney »

Newbogel wrote: Wed Nov 24, 2021 12:37 pm If I want to max out my 2021 contribution should I open a 401k and contribute after tax? Is that even possible?
Establishing a 401K requires the filing of legal documents via a regimented process that has significant upfront costs (I believe Vanguard charges in the $500 range; I paid about $1,000 back in 2004 to my solo administrator) that would make doing it for just a single year cost prohibitive. It also only applies to self-employed income. I suggest getting this out of your head.
Topic Author
Newbogel
Posts: 40
Joined: Sat Jan 20, 2018 10:21 am

Re: 401k question

Post by Newbogel »

Thanks for the answers. It all makes sense now....
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