Exceeding Maximum 401k in 2020

CoffeeStainedUniform

Well-Known Member
Hitting top rate and going to max my 401k at that time.

Does UPS (or Prudential) limit my 401k contributions to $19,500 or do I have to be on my toes during peak every year? Can we opt to contribute a flat dollar amount as opposed to a % rate?

I really don't want the 10% penalty so any help in appreciated.
 

pkgdriver

Well-Known Member
Hitting top rate and going to max my 401k at that time.

Does UPS (or Prudential) limit my 401k contributions to $19,500 or do I have to be on my toes during peak every year? Can we opt to contribute a flat dollar amount as opposed to a % rate?

I really don't want the 10% penalty so any help in appreciated.
Im not positive but I think you can only do the %.
I think 40% is the max. Ive usually done 30%. They stopped taking out when I hit the max $ for the year. Usually in August.
 

Gabba

It's a vicious cycle
the only way you could go over the limit is if you had two jobs with 2 different 401k plan providers. within our plan, they'll cut you off at 19500. however if you're planning to max your contributions don't skip the After-Tax 401k part. that is not subject to the 19500 cap. it's subject to the 53000 cap which is completely out of reach so it may as well be infinite.

After-Tax 401k works like this: when you leave or retire you roll over the cumulative total of your contributions to a Roth IRA, and any above that rolls over to a regular IRA. your contributions follow roth rules in that you can take them out at anytime, but your earnings are subject to tax and penalties for early withdrawal. when you do leave UPS roll over as soon as possible because any earnings from your contributions then go into the roth column, unlike before you roll over, staying in the plan they go into the traditional column.
 

DriveInDriveOut

Proud Deplorable
the only way you could go over the limit is if you had two jobs with 2 different 401k plan providers. within our plan, they'll cut you off at 19500. however if you're planning to max your contributions don't skip the After-Tax 401k part. that is not subject to the 19500 cap. it's subject to the 53000 cap which is completely out of reach so it may as well be infinite.

After-Tax 401k works like this: when you leave or retire you roll over the cumulative total of your contributions to a Roth IRA, and any above that rolls over to a regular IRA. your contributions follow roth rules in that you can take them out at anytime, but your earnings are subject to tax and penalties for early withdrawal. when you do leave UPS roll over as soon as possible because any earnings from your contributions then go into the roth column, unlike before you roll over, staying in the plan they go into the traditional column.
The after tax has a 5% limit.

Also I believe the plan allows in service rollovers of the after tax contributions and earnings. So you can pay the taxes on the earnings every year when you roll it into a Roth IRA and then the earnings grow tax free going forward.
 

CoffeeStainedUniform

Well-Known Member
My wife is eligable for a SEPP, but the plan costs associated with those are higher than a 401k or IRA. I'll max out the 401k & IRA's then go to the SEPP for more when I get there.
 

AKCoverMan

Well-Known Member
If you are 50, or will turn 50 by the end of the year, you can also do “catch up” contributions of another $6,500 (in 2020). However, you have to turn this on separately from the “regular” contribution at the 401k website. I wanted to just do 35% till I hit the max including the catch up (total of $26k in 2020) so I set both to 35%. Don’t do that! It tries to take both out st the same time! I had zero take home pay one week 🤬 So I will let regular hit max of $19,500, then I’ll turn on the catch up till it maxes, then I’ll put that extra money in a Roth IRA. 🤑
 

detmaintainer

Detroit Maintenance Rat
the only way you could go over the limit is if you had two jobs with 2 different 401k plan providers. within our plan, they'll cut you off at 19500. however if you're planning to max your contributions don't skip the After-Tax 401k part. that is not subject to the 19500 cap. it's subject to the 53000 cap which is completely out of reach so it may as well be infinite.

After-Tax 401k works like this: when you leave or retire you roll over the cumulative total of your contributions to a Roth IRA, and any above that rolls over to a regular IRA. your contributions follow roth rules in that you can take them out at anytime, but your earnings are subject to tax and penalties for early withdrawal. when you do leave UPS roll over as soon as possible because any earnings from your contributions then go into the roth column, unlike before you roll over, staying in the plan they go into the traditional column.
I pulled this off the IRS website. I have a Co-worker who is at $32,000 between his Roth and Traditional 401k plans. I told him you better ask somebody . It looks like a 5% penalty if you don't have the fund return excess contributions before the end of the tax year. I heard they refund first from the any Traditional 401k contributions so you end up paying taxes on that. If anyone has knowledge that is different than this please let me know where I can look it up.
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Roth 401(k), Roth IRA, and Pre-tax 401(k) Retirement Accounts
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Contributions
Designated Roth employee elective contributions are made with after-tax dollars.Roth IRA contributions are made with after-tax dollars.Traditional, pre-tax employee elective contributions are made with before-tax dollars.
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No income limitation to participate.Income limits:
  • 2020 - modified AGI married $206,000/single $139,000
  • 2019 - modified AGI married $203,000/single $137,000
No income limitation to participate.
Maximum Elective Contribution
Aggregate* employee elective contributions limited to $19,500 in 2020 and $19,000 in 2019 (plus an additional $6,500 in 2020 and $6,000 in 2019 for employees age 50 or over).Contribution limited to $6,000 plus an additional $1,000 for employees age 50 or over in 2019 and 2020. Same aggregate* limit as Designated Roth 401(k) Account
Taxation of Withdrawals
Withdrawals of contributions and earnings are not taxed provided it’s a qualified distribution – the account is held for at least 5 years and made:
  • On account of disability,
  • On or after death, or
  • On or after attainment of age 59½.
Same as Designated Roth 401(k) Account and can have a qualified distribution for a first time home purchase.Withdrawals of contributions and earnings are subject to Federal and most State income taxes.
Required Distributions
Distributions must begin no later than age 72 (age 70 ½ if reached age 70 ½ before January 1, 2020), unless still working and not a 5% owner.No requirement to start taking distributions while owner is alive.Same as Designated Roth 401(k) Account.
* This limitation is by individual, rather than by plan. You can split your annual elective deferrals between designated Roth contributions and traditional pre-tax contributions, but your combined contributions can’t exceed the deferral limit - $19,500 in 2020 and $19,000 in 2019 ($26,000 in 2020 and $25,000 in 2019 if you're eligible for catch-up contributions).
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DriveInDriveOut

Proud Deplorable
I pulled this off the IRS website. I have a Co-worker who is at $32,000 between his Roth and Traditional 401k plans. I told him you better ask somebody . It looks like a 5% penalty if you don't have the fund return excess contributions before the end of the tax year. I heard they refund first from the any Traditional 401k contributions so you end up paying taxes on that. If anyone has knowledge that is different than this please let me know where I can look it up.
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401k and IRA combined limit is 33k if you're over 50, that's probably what he was talking about.
 
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