[quote=dumbrenter]You cannot put money in 2 401k plans in the same year.
Something I found out the hard way because the employer assholes never told me that (they have no incentive to tell you that).
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That’s a rule that your employer made up, it’s not a general rule for all 401k plans for all companies. My two previous employers and my current employer have both a traditional 401k and roth 401k plan, and allowed you to allocate any percentage between the two. The only thing that my previous employers stipulate is the annual 5% base salary company match they give you gets deposited in the traditional 401k portion, not the Roth portion. I thought this was some IRS rule, but one person here mentioned that her employer deposits 401k matches in her Roth 401k, so I guess that’s not an IRS rule either, but a varies depending on company.
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What I ended up doing few years ago (when still a wage slave)was to max out the 401k in the first 2 months. You can do that by setting 99% of your wage to go to 401k. It automatically stops once you hit the limit for 401K that year.
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That strategy many not work if your employer does a company match and limits the maximum match per pay period to the maximum amount prorated based on each month… For example, my employer matches 5% of your annual salary, but the maximum they will contribute per pay period is 5%/26 (we’re on a bi-weekly pay period). So if you contributed 99% into the first few weeks of the pay period, I don’t believe you will get the full 5% match for the remaining months, just the months you actually contributed to the 401k.
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That way you de-risk yourself from having a taxable event with larger income + any signing bonus you might have gotten for your new job this summer!
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The maximum tax deferral you can take is $18k. It makes no difference if you take it up front, or spread it out over the months. It might make a difference if you believe there are certain months that tanks market tanks, like for instance if you believe in the sell in may, go away until october. But what people usually do there is to just change the investment elections during those month to be more heavy in cash positions versus stock poitions. It also might make a difference if you have a cash flow issue because you’re trying to max out your 401k AND trying to max out your after tax ESPP stock plan, since those withholdings are with after tax dollars and you won’t get them back for a quarter or in some cases 6 months, until the share purchase, when you can sell.
