2019 401K Limit

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
harrad
Posts: 64
Joined: Mon Sep 29, 2014 6:50 am

2019 401K Limit

Post by harrad » Mon Dec 02, 2019 3:06 pm

My employer has the option to allow us make after tax contributions which can be converted to Roth 401k immediately. In 2019, the $56,000 limit is broken down as:

$19,000 401k/Roth
$25,950 After-tax
$11,050 Match (4.25% employer match presuming $280,000 salary).

The way the plan is designed, you can only reach the $56,000 if you achieve the full company match. The only way to achieve the full match is to have $280,000 per year in eligible earnings. I, of course do not have a full match. So I end up not being able to reach the limit.

Is the 401k split methodology common among employers?

bloom2708
Posts: 6953
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: 2019 401K Limit

Post by bloom2708 » Mon Dec 02, 2019 3:17 pm

$19,500 is the 2020 401k limit (pre-tax or Roth 401k).

Are you sure match dollars go past the first $19,500? I'm not following your math, but you can certainly get to the $56,000 limit. Just put more in Post-Tax.

If your salary is $150k, you get $6,375 in match. That leaves 56,000 - 19,500 - 6375 = $30,125.

If you put 30-35% in post-tax you should get close. The percentages are a bit tricky because you go off your net check after all deductions and taxes to get post-tax numbers.

Now, many need a paycheck to pay bills, so putting in 20% pre-tax and 35% post-tax may not leave you with enough check. Or, if you have other cash, use that to live on while you stuff your pre-tax and post-tax 401k.

Post-tax is nice when the company does conversions to Roth 401k. Commonly known as "mega-back door Roth". If they don't allow conversion, then I would just do taxable investing. Or if the match extended to post-tax which I have not seen before.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

aristotelian
Posts: 6453
Joined: Wed Jan 11, 2017 8:05 pm

Re: 2019 401K Limit

Post by aristotelian » Mon Dec 02, 2019 3:21 pm

Usually post tax dollars are funded separately by voluntary contributions, so you would not need to make the max to achieve 56,000 total contributions.

If you made 100K, you would do:

19,000 pretax
4,250 pretax employer match
32,750 after tax
--------------------
Total = 56,000

mtbill
Posts: 1
Joined: Wed Dec 04, 2019 5:39 pm

Re: 2019 401K Limit

Post by mtbill » Wed Dec 04, 2019 6:10 pm

My Megacorp also has this limit:

$19,000 401k/Roth
$28,600 After-tax
$8,400 Match (3% employer match presuming $280,000 salary).

It prevents me from reaching the full 56k IRS limit as well. The 401k provider is Vanguard. I actually questioned both Vanguard as the 401k provider and my internal benefits people in 2018 when I hit the limit and my paycheck deduction stopped unexpectedly. Vanguard stated that it is Megacorp's plan implementation that enforces this limit. At the beginning of 2019 there was a Megacorp communication stating that the After-tax limit for 2019 was 28,600, I don't remember seeing it in previous years (but I probably wouldn't have noticed).

User avatar
LadyGeek
Site Admin
Posts: 57757
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: 2019 401K Limit

Post by LadyGeek » Wed Dec 04, 2019 7:34 pm

This thread is now in the Personal Finance (Not Investing) forum (employer retirement plans).

mtbill, Welcome!
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Post Reply