TLDR: How do you set percentages on your employee 401k contribution to max out the annual $19,500 limit if you can only use whole percentage numbers for your paycheck contributions?
If the annual limit is $19,500 for contribution to an employer plan 401k and you can only choose whole-percentage increments to contribute from your paycheck, how do you actually hit the exact $19500 number? Do you guys actually go and change the contribution % for certain paychecks so it all comes out as close as possible (e.g. setting it too high for most of the year then scaling back the last few paychecks)?
I don't think I can contribute a lump sum or anything like that, and the 401k portal says I can only use whole percentage amounts. In past years I've just been rounding down, but I'm wondering if there is a better way as I end up missing by 1k. This is kind of edge case but it's bothering me now since I realized I was not actually 'maxing' out the last couple years.
Math example to help illustrate:
To max out $19,500 contribution on a $55,000 salary, you would need to pitch in 35.4545% of your income. If your plan only allows you to choose either 35% or 36%, what are you supposed to do to hit the ceiling, or do most people just pick 35% and let the extra go? (in this case, contribute $19,250 and miss $250)
Also, bonus question--I switched employers in 2020 midway through and just now realized I could have accidentally gone over since I wasn't factoring in my previous contributions at the last employer. HR never mentioned anything to me and I don't think there was some kind of check for it. I added it all up and I luckily was fine, but what would have happened if I had accidentally gone over? Would the money have been rejected somehow (doubtful since the 401ks are separate with Fidelity and Vanguard) or would I be in some kind of tax trouble?
Thanks in advance!
Submitted January 08, 2021 at 11:55PM by sintralin https://ift.tt/3q6FbTQ
