401k

[sodaksooner]

Oh, don't forget, once you hit 50 you can contribute an additional $7500 to "Catch Up" . With my employer you have to spead the pmts across all 26 pay periods. Like others have said, if you max out before the end of the year mine pays by the pay period on the match, so if you don't have a withdrawl for the last period or two, there is no match. I have not been burned by that yet, but have had a paycheck or two at the end of the year that is larger due to a smaller contribution on my part.

 

[getcervid]

Yelp, you can get booted out of FSA also every year, for same IRS reasons


Only thing I have to add to this is With Roth 401k you can loose the pre tax capital appreciation over the life span of your 401k. You may come out a head that way, but you may not. Paying taxes up front means less money invested.

Particularly in regards to your last sentence: (You may well already understand this) If you stay in the exact same tax rate throughout your career and into retirement, it’s my understanding that you will come out with the same exact amount of money. You do not get “extra” gains by putting in pretax money. $10 pretax that doubles while invested and then gets 20% taken in taxes is $16 (Traditional). $10 that gets taxed 20% then invested and doubles is $16 (Roth). All things being equal, Roth is not “losing” anything.

Roth vs Traditional 401k decisions should be based on your current and (predicted) retirement tax bracket. You come out ahead if you correctly predict your tax brackets and take advantage of a tax rate arbitrage oppurtunity. If you expect to owe more taxes in the future than you currently do (ie young, low income, etc) Roth is typically your best choice.

 

[wind gypsy]

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.

This. I remember being presented with that being a risk by an employer previously and we were encouraged to make sure lower earners were aware of the benefits of contributing at least up to the company match..

 

[cuerro viejo]

Particularly in regards to your last sentence: (You may well already understand this) If you stay in the exact same tax rate throughout your career and into retirement, it’s my understanding that you will come out with the same exact amount of money. You do not get “extra” gains by putting in pretax money. $10 pretax that doubles while invested and then gets 20% taken in taxes is $16 (Traditional). $10 that gets taxed 20% then invested and doubles is $16 (Roth). All things being equal, Roth is not “losing” anything.

Roth vs Traditional 401k decisions should be based on your current and (predicted) retirement tax bracket. You come out ahead if you correctly predict your tax brackets and take advantage of a tax rate arbitrage oppurtunity. If you expect to owe more taxes in the future than you currently do (ie young, low income, etc) Roth is typically your best choice.

It’s can go either way depending on current tax bracket at contribution time and withdrawal, but Roth isn’t always the best choice,

 

[AKBorn]

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.

This. I ran into this at a small business when working there...

 

[SteveAndTheCrigBoys]

I switched my contribution to be a fixed $$ amount in lieu of a percentage since my paychecks fluctuate based on expense report reimbursements. So much easier than a percentage!

 

[SDHNTR]

Sounds like you got it handled. Good on Txag10! Another suggestion I would have is to get with your HR and suggest that they look into a Safe Harbor plan. That would solve your problem.

A Roth is an entirely different matter and without knowing more about your income tax situation, no one here should be giving you “advice” as to which is more optimal.

 

[Kroach]

Mine can. I fully fund the HSA every year never use it and will use it for "insurance."

When did this change? When I looked into it a couple years ago HSA could NOT be used to pay for insurance premiums. I though it never made sense then. Im still a couple years from calling it quits but always wanted that to be part of my early out plan.

 

[BCDJR]

I have no idea compared to the professionals who commented. However my wife once worked for a smaller company that had very highly compensated individuals. Because of that for some reason she could not contribute the max allowed by government.

 

[Wprinkle]

When did this change? When I looked into it a couple years ago HSA could NOT be used to pay for insurance premiums. I though it never made sense then. Im still a couple years from calling it quits but always wanted that to be part of my early out plan.

I should have been more specific in my OP.. By "insurance" I did not mean pay premiums I mean you use your HSA as the insurance.. More for everything out of pocket with it.. or COBRA..

 

[Foot756]

You can put up to a max of $23000 (+$7500 if you're 50 or older). The employer contribution is extra (not part of these limits). However, the money must come from your paycheck... you can never put more than your paycheck in. If you can afford it, divide $23K by the # of pay periods left in the year and that, or your gross salary, is the most you can contribute per pay period.

Obviously, it's best to contribute $23K over the year instead of playing catch-up towards the end, but if you're making near the average salary putting almost $2K per month away is not viable, and not advisable. You need some post-tax savings for emergencies and for larger purchases, e.g., an eventual downpayment on a house or car.

Google Dave Ramsey for good advice on setting up sustainable financial strategies that will enable you to retire wealthy, and enjoy your life along the way.

 

[Shell587]

If you are just starting out the key is to start and keep it going. Not everybody is able to or have the discipline to do so. II have been investing in my retirement since 1980. I am retired military and working on my second retirement from the civil service. I have been maxing out my TSP since 2007. I can retire now, but my soonest target date is April 2027; that would give me 40 years of mil-civ combined service. Good luck!