Question for those that max out 401k

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Or do you low-ball it a few $k assuming you'll be refunded and have to pay taxes on said monies refunded?

Assuming I understand this correctly

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i don't see the advantage


if they are giving you the money that will be taxed, than you aren't having to come up with anything on the spot, right?

i was just guessing

i havent gone through the situation

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I assume it hits next year's return

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It hits returns in the year you earned it. I made that assumption because I didnt get the check until after my taxes were done. I had to pay a penalty. By the way I always max out my 401K.

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Highly conpensated employee

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Oh...then I don't have a problem...or maybe I do.

Well crap...I just looked at the definition. I guess I qualify. But I have for the last 5 or so years and there's been no "refunds" of money I've put into my 401k. Maybe I haven't been paying close enough attention.

This is horse shite for people in high cost of living areas. 100k ain't shite in NYC.

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If you are a HCE, do you max out your 401k every year?

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Yes.

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Or do you low-ball it a few $k assuming you'll be refunded and have to pay taxes on said monies refunded?

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No.

I have no idea year over year whether my 401(k) will pass the HCE test. If I get refunded extra money, so be it, I'm not out anything in the end. But I might be out something if I try to outguess things. So I just max it and let the chips fall where they may.

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No "refunds" of money

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You have to be HCE and the employees who are not must be participating at a low level to trigger it. Don't know the details but it works on a percentage basis of contributions of HCE vs other employees. It hit me once and everything but my first 6% of salary got kicked out.

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401k participation and our company's participation numbers are pretty high.

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I am always amazed at how many people do not take the free money. This will be the first year I am in this situation. Talking to a co-worker of mine, that makes roughly the same as I will now, he has been refunded roughly $3-4k the past couple of years. Based off of that, I elected to set my 401k up to reach a contribution limit of $14k.

Now that I step back and look at that, it seems foolish to think that way. Utilize bigger, compounding contributions throughout the year and just deal with the refund if it comes.

ETA: Maybe I am doing the right thing though. A year that takes a big loss, then a refund would suck. I just talked to him and he said it was closer to $5k refunds also.

I am over 50 so I can also do the catchup amount on top of the normal 401k contribution . I also get bonus money in March and it puts me at the limit for the year right there. I can change my contributions every paycheck so the smart thing would be to reduce contributions at bonus time and spread it out over the year. I don't feel like fooling around with it so I contribute a high percentage early in the year and hit the $21-22k cap and keep putting money in a tax efficient mutual fund after that