Contributing more than $17k to 401k

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
soccerdad12
Posts: 378
Joined: Thu Jan 19, 2012 7:52 am

Contributing more than $17k to 401k

Post by soccerdad12 »

I know it has been discussed before how companies set up 401ks where you can personally contribute over the max $17k in a 401k. I searched on it but couldn't find what I was looking for. Does anyone know where to point me to how this is done?

Thanks!
User avatar
doug91
Posts: 279
Joined: Tue Feb 12, 2008 4:47 pm

Re: Contributing more than $17k to 401k

Post by doug91 »

After-tax contributions to a 401(k) are pretty commonly available. What you can actually *do* with those contributions (example: sheltering them from additional taxes via a Roth rollover) varies widely. Here's a recent-ish Forbes-hosted article: http://www.forbes.com/sites/financialfi ... -heard-of/

And here's a more recent thread from this forum:
http://www.bogleheads.org/forum/viewtop ... st=1511358
Topic Author
soccerdad12
Posts: 378
Joined: Thu Jan 19, 2012 7:52 am

Re: Contributing more than $17k to 401k

Post by soccerdad12 »

great info! thanks Doug!
bkslainte
Posts: 173
Joined: Tue Aug 21, 2012 6:37 pm

Re: Contributing more than $17k to 401k

Post by bkslainte »

After reading a few threads on this topic, I looked into this since I was interested in contributing more and then rolling these after tax contributions into a Roth IRA. I checked with my company's 401K provider and they replied thay my company's plan did not allow for after tax contributions.

Perhaps a silly question but has anyone encountered a similar situation and is there any other way to make an after tax 401K contribution? Could I simply send the 401K provider a check? Set up a separate 401K somehow?
User avatar
doug91
Posts: 279
Joined: Tue Feb 12, 2008 4:47 pm

Re: Contributing more than $17k to 401k

Post by doug91 »

bkslainte wrote:After reading a few threads on this topic, I looked into this since I was interested in contributing more and then rolling these after tax contributions into a Roth IRA. I checked with my company's 401K provider and they replied thay my company's plan did not allow for after tax contributions.
If they don't allow after-tax contributions, they're virtually certain not to allow rolling the after-tax contributions into a Roth IRA. Not sure it'd be worth your time investigating alternatives.
bkslainte
Posts: 173
Joined: Tue Aug 21, 2012 6:37 pm

Re: Contributing more than $17k to 401k

Post by bkslainte »

Ok, thanks for the reply!
HiAlphaLowBeta
Posts: 83
Joined: Mon May 09, 2011 2:55 pm

Re: Contributing more than $17k to 401k

Post by HiAlphaLowBeta »

I would suggest submitting a formal letter to your HR department and ask that they make changes to allow after-tax contributions. My employers plan didn't have many low-cost funds and I was able to convince them to add a few Vanguard index bond and stock funds. I'm now trying to convince them to offer a Roth 401k alternative.

I would advise explaining how it would be worthwhile for the employees as a whole and your company. I believe there is advice either in the forum, in the wiki or both. Good luck!
hlfo718
Posts: 808
Joined: Wed Dec 01, 2010 8:17 am
Location: NYC

Re: Contributing more than $17k to 401k

Post by hlfo718 »

Your company can help you put in additional, up to 50k this year and 51k next year, under section 415. Google it.
HiAlphaLowBeta
Posts: 83
Joined: Mon May 09, 2011 2:55 pm

Re: Contributing more than $17k to 401k

Post by HiAlphaLowBeta »

I'm stoked. I just got an email from my HR department. They are going to add two new funds. One is an Oppendheimer EM fund (ER .89%) which I don't care about but I'm really happy that they are adding the VG total bond fund. I suggested that they add VG index funds and they took it to committee and had them added. Just goes to show you that the squeaky wheel gets the grease! :sharebeer

Also, I work for a bank that employs several thousands of people and has $17 billion in assets. Sometimes the little guy is actually heard....
natureexplorer
Posts: 4207
Joined: Thu Sep 03, 2009 10:52 am
Location: Houston

Re: Contributing more than $17k to 401k

Post by natureexplorer »

doug91 wrote:After-tax contributions to a 401(k) are pretty commonly available.
Really, (non-Roth) after-tax 401k contributions are common?
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Contributing more than $17k to 401k

Post by Default User BR »

natureexplorer wrote:
doug91 wrote:After-tax contributions to a 401(k) are pretty commonly available.
Really, (non-Roth) after-tax 401k contributions are common?
Another Forbes article stated:
As for younger folks, the law permits them to get in-service distributions of money rolled over from previous 401(k)s; of employer (but not employee) pretax contributions; of employee aftertax contributions; and of account earnings. Here companies are less accommodating--only 16% allow this option, the 2006 survey found.
There are actually several things lumped into "this", and it's addressing being able to take in-service distribution. It's difficult to say how prevalent being about to make after-tax contributions is. I would suspect it's below 10%, but I don't know. I don't recall if we ever had a poll on the subject.


Brian
natureexplorer
Posts: 4207
Joined: Thu Sep 03, 2009 10:52 am
Location: Houston

Re: Contributing more than $17k to 401k

Post by natureexplorer »

Default User BR wrote:
natureexplorer wrote:
doug91 wrote:After-tax contributions to a 401(k) are pretty commonly available.
Really, (non-Roth) after-tax 401k contributions are common?
Another Forbes article stated:
As for younger folks, the law permits them to get in-service distributions of money rolled over from previous 401(k)s; of employer (but not employee) pretax contributions; of employee aftertax contributions; and of account earnings. Here companies are less accommodating--only 16% allow this option, the 2006 survey found.
There are actually several things lumped into "this", and it's addressing being able to take in-service distribution. It's difficult to say how prevalent being about to make after-tax contributions is. I would suspect it's below 10%, but I don't know. I don't recall if we ever had a poll on the subject.
OK. I don't consider 10% common, so we are in agreement. However, I am taking a poll: http://www.bogleheads.org/forum/viewtop ... 1&t=104829 :D
User avatar
22twain
Posts: 4030
Joined: Thu May 10, 2012 5:42 pm

Re: Contributing more than $17k to 401k

Post by 22twain »

bkslainte wrote:I was interested in contributing more and then rolling these after tax contributions into a Roth IRA.
Keep in mind that even if you could make after-tax contributions to your 401(k), you wouldn't be able to roll (convert) only those after-tax contributions into a Roth. My understanding is that when you convert part of a "traditional" retirement plan to a Roth, you have to pro-rate the pre-tax and after-tax contributions. That is, if (say) 80% of your 401(k) money is pre-tax, then 80% of your converted money will be deemed to be pre-tax and you'll have to pay income tax on that amount.
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
SpecialK22
Posts: 844
Joined: Tue Sep 01, 2009 3:16 pm

Re: Contributing more than $17k to 401k

Post by SpecialK22 »

Actually you are able to do precisely that. Since only after-tax contributions/earnings may be taken as in-service distributions before reaching an applicable age (if the plan allows), you can effectively isolate the after-tax amounts for conversion.
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Contributing more than $17k to 401k

Post by Default User BR »

22twain wrote:
bkslainte wrote:Keep in mind that even if you could make after-tax contributions to your 401(k), you wouldn't be able to roll (convert) only those after-tax contributions into a Roth. My understanding is that when you convert part of a "traditional" retirement plan to a Roth, you have to pro-rate the pre-tax and after-tax contributions. That is, if (say) 80% of your 401(k) money is pre-tax, then 80% of your converted money will be deemed to be pre-tax and you'll have to pay income tax on that amount.
The pre-tax contributions are not eligible for distribution, so don't take part in pro-rata. The after-tax contributions and a share of taxable earnings can be distributed. Some of us take advantage of that.


Brian
User avatar
22twain
Posts: 4030
Joined: Thu May 10, 2012 5:42 pm

Re: Contributing more than $17k to 401k

Post by 22twain »

SpecialK22 wrote:Since only after-tax contributions/earnings may be taken as in-service distributions before reaching an applicable age (if the plan allows), you can effectively isolate the after-tax amounts for conversion.
Aha! I missed the significance of the in-service status because the discussion of Roth conversions that I've seen so far has involved people who were eligible to withdraw/convert all the assets in their traditional tax-deferred accounts.
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
Post Reply