Maximum deferrals for working 3 months?

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Jfet
Posts: 1081
Joined: Tue Dec 21, 2010 6:20 pm

Maximum deferrals for working 3 months?

Post by Jfet »

If a married couple both under age 50 with single earner who decided to quit/retire a few months into a new year, what is the maximum tax deferral they could get?

I come up with $17,500 for 401K, $11,000 for tIRA, and $6650 for HSA (the new limit for 2015).

So $35,150?

Thus they could earn $66,000 in W2 wages and perhaps some interest income and have a MAGI under $31,000 for 2015?
The Wizard
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Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Maximum deductions for working 3 months?

Post by The Wizard »

It might depend on what the employer allows one to contribute to the 401(k) each pay period. Are you really allowed to contribute 100% until you hit the limit?
And for people with 403(b) plans instead of 401(k), the limit is lots higher, up to $51K per year or thereabouts...
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livesoft
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Re: Maximum deductions for working 3 months?

Post by livesoft »

401(k) limit would be $23,000 if they reached age 50 by year-end even if they were age 49 during the first 3 months of the year. My plan and my spouse's plan allow 75%/90% of compensation to go into the plan, so one could reach $23,000 with a decent salary.

The HSA limit is tricky because it would depend on the couple maintaining an HDHP for the rest of the year. For instance, I switched from an HDHP/HSA plan on June 1, so that my maximum HSA contribution is 5/12ths the normal limit.
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Topic Author
Jfet
Posts: 1081
Joined: Tue Dec 21, 2010 6:20 pm

Re: Maximum deferrals for working 3 months?

Post by Jfet »

Yes, we can contribute I think up to 100% of our income to 401K (will double check that, but I know it is at least 90%). Income is enough that a couple of months W2 wages would exceed all the deferrals combined.

Good point about the HSA. We are allowed to lump it in, as that is what we did for 2013, 2014 since we are using it like a Roth IRA and paying medical bills out of pocket. We plan on going with a ACA silver plan for the remaining 8 months of 2015 and I think? that would qualify as a HDHP?
Spirit Rider
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Re: Maximum deferrals for working 3 months?

Post by Spirit Rider »

Just a note: You maximum contribution is somewhat variable. It is really 100% of your net income, less if a company has a lower % of gross income.

If you are getting all of you net income there would be no income tax withholding. If you have HSA contribution that would also reduce your FICA withholding. However, any employee cost sharing of benefits on a cafeteria plan would also reduce your net income. This is not a problem even if for example your company allows 90% contribution and your FICA withholding plus employee cost sharing was 12%, the payroll system just limit the contribution to what is available.

You will have to check the exchange for the ACA plans. Some are HSA qualified plans and some are not. You should really compare the ACA plans with subsidies against whatever COBRA option you have.
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