401k

[Ucsdryder]

AI can’t help me and HR was about as useful, so I came to ask a bunch of gun toting rednecks instead…

401k max contributions for employees are 23500 this year. My employer maxes me out at a percentage that won’t allow me to hit my max, yes they match, but different conversation.

My questions are…. Why would they put a max % and is there a way around it with pre tax dollars, if I’m going to use post tax I’ll just invest that myself?

 

[jolemons]

To be clear, you are saying that your 401k plan administrator has a cap on the % of your salary that they allow you to contribute?

Who organization is the 401k administrator and what is the contribution cap?

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[atmat]

I’m not totally understanding your question. Are you saying that they put a percentage cap on your income contributions? I’ve never heard of that and would be surprised to hear it.

More likely, your employer has a match policy that says something: “If you put in up to X% of your salary, we’ll add up to Y% of your salary.” That is common language, and for most people, the combined (X+Y)% does not contribute enough to hit max contribution.

You can usually contribute a higher percentage of income; your company simply won’t match that.

If you don’t like the plan details (e.g., they only offer trad 401k but you want a Roth), the prudent thing would be to take the extra money you want to invest and choose an IRA of your liking.

Edit: if you want to PM details you’re welcome to.

 

[Ucsdryder]

To be clear, you are saying that your 401k plan administrator has a cap on the % of your salary that they allow you to contribute?

Who organization is the 401k administrator and what is the contribution cap?

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Correct.

It’s through Voya financial.

My understanding is that the % changes depending on income level? Theres is no cap, except % caps.

 

[sodaksooner]

Do you have an option to contribute to a Roth? Ive never heard of an employer max %

 

[Ucsdryder]

I’m not totally understanding your question. Are you saying that they put a percentage cap on your income contributions? I’ve never heard of that and would be surprised to hear it.

More likely, your employer has a match policy that says something: “If you put in up to X% of your salary, we’ll add up to Y% of your salary.” That is common language, and for most people, the combined (X+Y)% does not contribute enough to hit max contribution.

You can usually contribute a higher percentage of income; your company simply won’t match that.

If you don’t like the plan details (e.g., they only offer trad 401k but you want a Roth), the prudent thing would be to take the extra money you want to invest and choose an IRA of your liking.

Exactly. They cap the percentage the EMPLOYEE can contribute. Their match up to X percent is clear and not part of my question.

 

[Ucsdryder]

Do you have an option to contribute to a Roth? Ive never heard of an employer max %

Yes they offer a Roth that I can participate in as well. I just don’t see the value in the Roth since I’m putting post tax money away with an investor already.

 

[Pochuck]

It might be helpful to post what the company's policy is to give people the full view of what they're saying. It does sound like they're only referring to their match though as I don't see why/how they could limit the employee's contributions

 

[atmat]

ChatGPT says company-directed caps on 401k’s are rare but do occur. Bummer, buddy.

Just tuck that money into an IRA or standard brokerage. Or an HSA is really the best investment vehicle if your company offers it.

 

[Ucsdryder]

ChatGPT says company-directed caps on 401k’s are rare but do occur. Bummer, buddy.

Just tuck that money into an IRA or standard brokerage. Or an HSA is really the best investment vehicle if your company offers it.

It sounds like I need to try the 401k helpline again. The girl I spoke with was annoyed she had to answer the phone. Maybe I can get a more helpful person. It just doesn’t make sense to me that they would limit my contributions.

 

[jolemons]

Yes they offer a Roth that I can participate in as well. I just don’t see the value in the Roth since I’m putting post tax money away with an investor already.

Doesn't answer your original question, but the benefit of a Roth is the penalty free liquidity of the account.



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[atmat]

It sounds like I need to try the 401k helpline again. The girl I spoke with was annoyed she had to answer the phone. Maybe I can get a more helpful person. It just doesn’t make sense to me that they would limit my contributions.

 

[bozeman]

HSA....that's the next avenue in my .02 if it is an option.

 

[Dos Perros]

I've seen company caps at like 30% or 40% of paycheck. I'm not sure why they do it, but it can create barriers if you got behind during the year and are trying to catch up with the last few months.

I tend to adjust my % contribution throughout the year.

 

[Dos Perros]

You can setup a Traditional IRA with Charles Schwab or similar pretty easily if you want to contribute and reduce your 2025 income tax liability.

 

[texag10]

It's likely your plan failed non discrimination testing and you are considered a highly compensated employee ($155k/yr for 2024 look back), so you are limited on what you can contribute due to lower earners not participating/contributing.

If the above is correct, and you are a highly compensated employee, you cannot make a deductible Traditional IRA contribution. Depending on earned income levels and what type of health plan you have, options include: contributing to a Roth IRA (not an option if income is above 165k single/246k married filing jointly), making a non deductible contribution to a traditional IRA, then immediately transferring to a Roth IRA (known as a backdoor Roth, if you have a pretax IRA balance this becomes much less attractive), contributing to an HSA if you have a high deductible health plan. If none of those are options, saving money in a regular taxable account, or maybe looking a a deferred variable annuity could make sense.

Source: 15 years of working in financial planning, no AI needed.

 

[atmat]

HSA....that's the next avenue in my .02 if it is an option.

Yes, an HSA is even better than a 401k as it’s the only triple tax advantaged account type in the US.

 

[texag10]

Yes, an HSA is even better than a 401k as it’s the only triple tax advantaged account type in the US.

For anyone with an HSA: you can reimburse yourself for healthcare costs YEARS later. Save your receipts and invest!

 

[atmat]

Roth IRA (not an option if income is above 165k single/246k married filing jointly),…

Source: 15 years of working in financial planning, no AI needed.

AI would’ve clarified that the requirements are based on their MAGI

 

[ColPenguin]

Yes they offer a Roth that I can participate in as well. I just don’t see the value in the Roth since I’m putting post tax money away with an investor already.

The value of a Roth plan is that it is tax sheltered. You never will owe tax on capital gains for the Roth. You put post tax money in, the investment grows, can take those earnings out without paying additional capital gains tax on retirement or after 5 years.

Where a standard, non retirement, brokerage account you're investing post tax money going in, and then paying some capital gains when you liquidate an investment holding to take cash out.

There can be Roth contributions to a 401K, or other employer sponsored retirement plan, and Roth contributions to an IRA. Depending on tax bracket it can be a better option to do Roth contributions to a 401K and frontload tax on retirement investments, because of future growth potential and likely higher tax rates in the future.