I Could Get Fired for this 401k Front Loading Video
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- Опубликовано: 8 сен 2024
- 401k Front End loading is generally to max out your 401k early on in the year. However, there are some subtle tricks you can use to obtain more than what you would normally get from your salary and matching. There are some tests to see if this will work for your 401k plan and also some precautions to take. It's a probabilistic play here and for those who set it up this way will on average be gaining thousands of dollars of untapped income.
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*Another benefit of front loading even if you do not switch jobs is that the matched money is invested earlier and you benefit from an entire year of investment growth. Over several years, this compounding will add up!*
What if market goes high during first months of the year and then drops down? You will be buying at high cost. It is better to spread contributions across whole year to dollar cost average.
Generally, this is what people consider when front loading it. But this video skips that and rakes in cash instead.
Edge HODL statistically the market goes up 10%/yr and the best time to get the money in is as early as possible.
So, yes, some years you’ll have benefited more by dollar cost averaging throughout the year, but on average, over decades, having put the money in at once at the start of the year will outperform the dollar cost averaging method.
Do the math yourself if you don’t agree.
@@ThomasFoolery8 I did the math, and it proves that dollar cost averaging throughout all year significantly outperforms maxing out 401k in beginning of year.
Edge HODL lol no it doesn’t. You don’t even need to do math if you have a logical mind you can instantly see the answer.
Dollar cost averaging isn’t more +EV than putting money in as one lump sum. Dollar cost averaging is intended to smooth out variance in your pnl. First off, do we agree with the above statement?
Once you do some research and realize the above statement is true, then you can move to the next statement: putting money into the broad market early outperforms putting money in later.
Is that a true statement or not? We are choosing arbitrary 12mo windows. Perhaps this concept will solidify for you if we choose 12yr windows. Is putting a lump sum in at the beginning of a 12yr window going to outperform putting it in at the end of it? Now don’t try to cherry pick a small handful of historic cases by starting at tippy tops and ending in a bear market. I mean if you used a random number generator between the years 1900 and 2019 and it spit out a random year, will you have done better ON AVERAGE at that year, or by starting 12yrs later?
The answer is completely obvious.
Now understand that the +EV of the market is a positive slope that remains positive regardless of the time unit. That means that investing today outperforms investing tomorrow and investing this hour outperforms investing the next hour. That’s how math works.
I'm in the industry and I'm not aware of a single 401k plan that matches everything up front. It's always based on the percentage each paycheck.
I did this a few years ago and thought I was so smart. I was 26 at the time. I stayed at a company just over a year and got 3 years worth of match. Now I know there's a term for it. 👍
Most companies have vesting cycles that prevent this from happening
Vesting has nothing to do with when matching is applied. Vesting determines when the match actually becomes yours
I don't know what they call it, but my company does that. They will match a percentage every quarter up to a limit. So if I was rich and maxed my 401k the first quarter I would actually lose out, as the match is divided by 4.
OMG, this actually works! I never did the calculation before. I always thought that the company will only contribute 6 percent of my gross income but it's 6 percent of my contribution! That's huge! It's also important to note that it's not possible to 100% of your income for each paycheck because HR/ payroll may deduct your other deductions first like health insurance, transit, fsa, etc. Of course, this may depend on your company's policy. I tried doing at 100% before or 90% plus before, and my company took taxes of the minimum income salary which is about 10 or 12/hr.
My company changed their 401k match payout to December 15th. The requirement is you had to be employed on December 14th. If they lay you off on December 1st they don't pay any match for the whole year. Apparently the word got out on front loading and they turned it around on us
We have to find you a wife. This kind of genius must procreate! ☀️
beat the bush she wants...Beat the bush should try dating outside his race. A lot of girls would find his nerdiness interesting.
He is trying to to keep his money.
He doesn't need a wife to procreate. Sperm banks exist.
Only marry and join life with another person if you are ready.
Like he wants some bitch to take half his shit
BTB just killed it! I would have never thought of this brilliant idea! Great vid man! 👍🏽👍🏽
That's what I do all day. Think of these crazy schemes.
doesn’t work in most companies because they level load the match for the whole year.
Makes sense to get the full match as early as possible if allowed 👏🏾👏🏾
=D
Yes! This puts your time to work for you. Increases the likelihood of making 1/12* # of Yrs because you are adding in a lump sum instead of a fractional 1/12 step way.
This is true for HSA and FSA too. Companies pay it in advanced to avoid having medical expenses not convered by the funds in the account. Example, implants or surgery in January or February and you paid with your HSA or FSA.
Really good one.
Can you share some insight for self employed 401k. More specifically how you maximized your own since becoming a youtuber 🙏
Yes, I will be covering more of this soon.
+1 thank you
Great tip Bush! My company matches 1 to 1 up to 3k a year...at any time. I put all my Q1 bonus into my Roth401k to get it out of the way and get the full match. I stop contributing after the match has been fulfilled since im saving for the down on a house. Glad to hear my plan has been beneficial for me.
Interesting take on that. Definitely getting all the match as early as possible is a great way to go.
$100 can match $3 for $103 which can make $1.03 or $10,000 can match $300 for $10,300 which can make $103. Only difference is compound interest for the entire amount over one year, or a small amount fluctuating every month. That's like quantum years. Instead of investing in your early years, do that, then invest early in your years.
Bush : “2-4 paychecks might hit that 19k already”
Me : .... 😢
Yup. This is for crazy silicon valley engineer types. It's pretty crazy what they pay over here.
That’s tech baby! Woot woot
Byte Size Budget what do you do? I make around 45k a year pretax. Can’t afford to max out my 401k.
Byte Size Budget I’m sorry, I meant what is your career? I’m a histotech in Texas and maxing out my 401k is not an option. I can only max out my IRA and that would take me 7 months.
Do you also gain more interest through compounding if you get all your company match money in the early months of the year such as February?
Possibly, but this video didn't focus on the typical definition of 'front loading'. It was something I believe is 100x better.
For companies that limit the matching at say 3% of your paycheck, make sure to verify whether they perform what is called a "true up" at the end of the year. If not, you'll miss out on all the later matching if you hit the yearly max too soon.
Yes, that sounds like it's harder to find out and not guarantee they will do it.
I work for Microsoft these days. I participate in a company distribution list that discusses how to maximize benefits like this. Some of the company's 401(k) plan team know my name... :-)
It's okay though. Microsoft encourages employees to learn about and make the most of their company-sponsored benefits.
no comment on vesting period on a company match. Also IRS limit is based on annual amount, not per job or 401k. I can't front load one quit and then go participate in another.
Never known an administrator match more than the limit per paycheck.
1.most of the company does match by pay period
2.not all the match you received will actually belong to you unless you meet the vesting schedule
3. most of the company have 401k administrator to help them do year end testing to calculate if anyone recieve unreasonable amount of money, that where the true up report applied.
Unreasonable? I suppose those are the things that can keep you from doing what I outlined. But this video is not theory, I performed it.
Broooo you keep on doing these great videos. You're like a free financial advisor!
=D Isn't that what RUclips is for?
My company matches 6% at the end if the year, so to use the loophole, I contribute like 5% then I put in in 70% a few weeks before year end to make sure I get the whole matching first week of the new year.
Omg thank for posting this. My company does this too. I was wondering how to do this at the end of the year!
You should get all 6% early on the year. But this all only works if they pay it out early.
As someone who spent the last 20+ yrs helping design these plans - you have no idea what you're talking about. Without a true up match contribution by the company at the end of the year, you're totally screwing yourself out of matching dollars by front end loading, and a vast majority of companies don't do the year true up match contribution at the end of the year because it costs them that much more to fund it. Spread your contributions across every payroll period to get the full match you're entitled to and take advantage of dollar cost averaging those share's you're buying every payroll period.
Ouch!
My company matches at the end of the year.....lame
Not lame haha its pretty much the same thing. Other than you have to wait for the first payment is all
@@stewitruck No, totally lame, haha. First off, you lose any potential investment gains, and second, and more importantly, you have to be employed at the end of the year.
Lose your job, lose your match.
*Didn't I watch this already? Thought I was traveling back in time!*
Probably. A bit of a glitch.
Omg took me 3 times to understand this but finally get it !
Very interesting! It would definitely depend on your company and most aren’t that generous but definitely a possibility for those whose companies do do that!
I don't think I've ever had an employer that didn't have an annual vesting cycle on 401K match; now, I have had 4 year equity vesting periods, but I wonder how common non-annual vesting periods for 401K contributions would be.... That means if you leave in the middle of the year, you lose the employer match. I've also never worked for an employer that didn't match based on percentage of current paycheck. So, I can see how this would be awesome, but I think it's incredibly rare.
I can make this video because I had plans that did this before. So if you have it, you struck gold!
Not only are there vesting schedules, but you could lose optimization on the match because once the 415 limit is reached (IRS mandated) you can’t contribute anymore for the calendar year and in fact lose out on “free” employer match money. Most companies top out at 5% per paycheck anyway....
This also works with flex spending accounts too. Opt in for the highest allowable amount, get all your healthcare procedures done early on and then switch to new job. Since the flex spending account is paid back on a monthly basis, but the sum is effectively immediately on the year, you can theoretically use all the benefits and then quit for a new job before you even make your first monthly payment on the flex spending account.
Bahsaq Tibagh but don’t some companies make you payback the sum if you quit your job?
@@MyGragg Not for this specifically, however there are signing bonuses that stipulate if you leave before 12 months you will have to pay back either the full or prorated amount.
I agree that it's good to get what benefits you are entitled to as early as possible but there are some risks to this as well. For instance, suppose the stock market gets really hot during those first few months of the year but then not so hot for the rest. You lose out on dollar cost averaging and are stuck with some expensive investments you bought into early on. Also, I personally wouldn't play that two employer game having to take an early withdrawal specifically because of penalties and tax implications.
Had the same thought on dollar cost averaging.
Front loading only works if you do it consistently year after year for a long time. I recommend Dollar Cost Averging, where equal amounts of contributions hit the stock market
throughout the year hitting the high’s and the lowest to average out (you come out a little bit higher). My company match is based on my gross pay for that
check, I can’t get more or less if I put in 100% of my check, it’s a simple 6% match of that check. I maxed out year a few years ago and lost my employer
match ☹
Ohhh, yeah gotta watch out for that cap.
Wait didnt I see this yesterday or am I from the future?
No. We are from the future.
It’s been re-named.
ahahahha I thought I was traveling back in time!
Yes you did. Technical difficulties on my side.
Wow, you did such a good job explaining and extremely confusing concept. You are in your element!
That's like contributing early. Like you can wait till your 60 then contribute 100% for 5 years while living on savings. Or 5% from your 20s till your 65. Or 100% while your 25 then live paycheck to paycheck until your 35 with savings that early compound interest will cover any early withdrawal penalty.
In your example of the front loading monthly 3% APR with a pre tax income of 100k, there is a slight mistake:
Your 2nd month (Feb.) should have been a contribution of a little more than $8400.00 to include the $10,300 from Jan. and the 3% match to equal $19k for the year.
You didn't mention that you can invest the extra money way earlier .
I can binge watch your videos! At my work they match up to 6% depends on the person's experience at the job.But they wait till I reach 1000 hrs since I am not a full time employee😞
Yup... 6% or even 9-10% for 25year workers sometimes. You should watch if they do a tiered vesting not 0% before 1000 hrs and then suddenly 100%.
ADP allows you to contribute 90% while Insperity only allows 80% of your paycheck to 401k.
I’ve already put $20k in my 401k so far this year.
Total of $50k this year with matching by end of year.
My company does front loading and it's really helpful as well because I get to invest my money other ways for the rest of the year. Still at my company, i's a good one but gives me half a year to use my $$. And yes, thanks for mentioning the tiered vesting, nobody ever does and it's important to keep in mind.
Ha! You see everyone! It does work at some places. =D Thanks for your comment!
Working with a company who invest 100% of my 5% of my weekly pay. Roth 401k best way to go
My match is per pay period, not annual salary. And also I can only put in 50% of my salary max from each paycheck even if I wanted to go higher.
Interesting limit. You cant really do this trick then.
BeatTheBush you kind of can. I have the same situation. 50% max per pay period with 6% matched 100%. Just spread out over first “x” pay periods. (Dependent on income) Also, Annual bonus is early in the year and that 50% contribution could be a significant contribution all at once.
I also think of my front loading contributions as dollar cost averaging on a yearly time frame, instead of biweekly. I still have 20 years to go for retirement. We’ll see! :) Thanks for the video’s!
Darn - you're a guru.
My question is. Does the government has a program that sets US citizens to accumulate points on how many hours you worked in the US and then gives you some kind of benefits after 65yrs. Reason I ask is because I remember getting a Social Security benefits papers saying I will get this or that etc and you get even more if you worked more hours and or are disabled. These papers are given to everyone and I do not think this is a scam because papers are legit and I even see them mentioning it on tv etc.
I found it, it's called Social Security Statement. Just googled it. What's the difference between this and 401k.
*Played this on 1.75x. You'd be a great rapper.*
Asian rapper... uhhh.
i did it...BARS ARE SICK! Drop. Mixtape!!!
Lol. He does not talk that fast to me.
@@OneMinute4You only on 1.75x speed
Not allowed 100% of paycheck . Max 30%
50%
put in thirty percent and work a ton of overtime lol
For me, overtime doesn't count towards 401(k).
Yo tell me what I am missing here.... If you put up $19k in the first two months and quit in March, you cannot then go put $19k, or any money for that matter, in your 401k for the rest of the year at the new job. How would you be unlocking any extra money?
It's true. I didn't contribute that much last only 5 percent. By the time I file tax I was in a different bracket. So cpa said I have to file tax 32 percent instead of 24 percent
My job thought of this and only matches up to 4 percent every pay period
Yes. I know a few that does that as well.
Also if you max out early, the employer has already covered you should you get fired sometime during the year or leave the job
Thanks for this great idea I will try it out
I front-load because my company doesn't match and also I want to max out early in case I leave. It's pretty awesome when you max out for the year and then your take-home pay explodes. The opportunity cost is that you could miss out on a dip late in the year...aka dollar cost averaging. When they used to match I would start the year at 40% and calculate when I had to switch to 6% in order to get the match the entire year.
Nice one! Sounds like you know what is going on. =D You could also keep the money in the 401k in a cash like fund if you really want to spread it out during the year.
Company match does not count towards your personal contribution limit up to something super high like $50,000
Most employers don’t allowed you to contribute more than 50% of the pay period. Mostly weekly or biweekly.
You can still do as much as you can within the bounds of their criteria.
I wouldn't be able to do this for a couple of reasons.
1) my company matches contributions only once at year by January of the following year. Meaning you have to be employed by Dec 31 of the previous year so they can make the deposit on your 401k by the 3rd week of January. (No complain since they match 5% of your paycheck plus a 3% bonus, so 8% total!)
2) MY company caps you at 50% of your paycheck to be contributed to your 401k.
But thanks for the idea! Maybe I'll give this a shot if I switch company anytime soon.
At least you can time it to get the most of your match if you decide to leave. Which is right after the matching.
If they cap it at 50% of your paycheck, you are only getting 2.5% and 1.5% bonus or 4% total.
@@BeatTheBush well, not really. They don't take your paycheck to paycheck contribution into account. As long as you make 5% of your contribution into the 401k before December 31, they'll make two payments into your 401k. One equal to 5% of your salary that is the matching contribution, and the bonus 3% which used to be for a pension that we don't qualify for anymore. I've done the math and it does come up to 8% of my salary. They changed the policy to have you employed by December 31 since they realize they can save some money if you quit before the year ends since they don't have to put that 8% into your 401k.
This is nuts. It's a way for them to keep you there long term. Some employer will take their whole match back if you don't meet all the contribution % and frequencies in the year.
Yeah... some are pretty terrible at it. Some wont start contributing until 1 year AFTER you work there.
This concept is called True-Up 401k. Most big employers don't list this or talk about it but if your company supports it you should use it. - Definition of True-Up for a 401(k) If your employer has a "true up" feature on the company 401(k) plan, you're sitting on a valuable extra benefit to your retirement dollars. An annual true up means your plan should always get the maximum amount of possible matching funds under the plan's contribution guidelines.
The biggest way to take advantage of this is to changing your contribution amounts around bonus payouts to avoid taxes.
Better look it up and make sure this feature is in writing.
Seeing you run with the cup gimbal makes my soul happy
=D
Interesting, never thought about maxing the during 1st month and get all matching at once..hmmm.. let me check..thanks..great insight!
=D
But if you front load and max out the 401K and then move to another company, you won't be able to use their company match as the 401k is already maxed out to 19K? You mentioned that you can, that seems incorrect?
The max you can contribute is 19k to a 401k. So you might need to withdrawal and pay taxes on it. Or you can contribute only matching early and the remainder in December.
This may have worked in 1946
Does it Matter works for plenty of people today, including me
My company doesn't contribute the matching until the following year and they do it all at once. Interesting idea though! I'll have to keep that in mind in case there are changes.
So they delay it. Hence the best time to change jobs is right after that if you are thinking about switching.
For those wanting to dive into the deepest details of your employers plan you will want to request the "Plan Adoption Agreement" if it's held through one of the main 401k/403b plan providers. It will have all the choices your employer made when setting up the plan. It's 10x longer and harder to read than the Plan Summary, but it will give you the full details. I will guarantee no other employee has requested it and you might not get it. I was once a plan admin and it's the only reason I know about it.
Take note of the vesting policy for the match and any other voluntary employer contributions when planning your contribution strategy.
Interesting. But do you need the choices and rather just look at what was chosen instead?
@@BeatTheBush The adoption agreement will show everything available and what was chosen. For the proactive employee, perhaps they could lobby for more desirable options once they are able to see how the plan could be changed with an update. The plan summary is only going to give you so much information and can leave out a lot of the detail. This would be what you might receive in your new hire paperwork.
That's what I go by and it was enough for me to ascertain how they match and vest.
Good information to know... Thanks a lot 🙏🏻
=D
BeatTheBush, I love your videos and expertise!!
Thank you!
my 401 , did 47℅ yesterday and 40 today . I don't understand why people do this
Not sure what you just said.
I worked for a company that doubled whatever I put in
Nice! Some are pretty generous with the matching.
Looks like a new shirt! Very clever idea! I'm going to look into it!
=D Oh.. that. I got it for free. XD
I wonder if pushing all the investment into the first month of the year would increase risk due to the fact you are no longer distributing the investment continuously over the full year.
Basically if the share price is high in January, but then drops off in the following months you have put all your eggs into that basket rather than only 1/12 at the high price. Just a thought.
This video isn't about what you implied it to be but more about getting double the match at a certain rate of success. So it is about 100% gain vs. the expected gains of 0.5% when typically front loading early in the year.
My employer doesn’t offer a 401 k :(
Run.
Open a Roth IRA asap
Get another job. I'm not trying to put you down but you need to find one..
Oh come on folks. There's a lot more to evaluating a job than whether there's a 401k or not. "Leave the company" is terrible advice without knowing more. What matters is the total compensation bottom line... plus a lot of intangibles, like how much a person likes their work, their boss, their coworkers, their commute... You cannot boil it down to presence/absence of a 401k.
@@sharonminsuk poor sharon. Unless she has inherited money . She'll be asking neighbors for air . She doesn't get it .
I tried this and understand the concept but how do you over come the taxes that increase. I'm in the 26% tax bracket, when I put my normal 8% to 401 k my taxes equal 18% now when I didn't put anything my taxes jumped to 30% according to my pay check. I'm not smart enough to weigh the difference between maxing my 401k early and assuming my return rate and how much money I lose by paying more in taxes.
I also had one more question at what point in your 401k does the money you have make more money on interest that you pay in?
Your math is a little fuzzy. First, there is no 26% tax bracket. Second, you can't add/subtract a 401k contribution % to a tax bracket % and get anything the makes logical sense. Your tax liability doesn't change based on when you put money into your 401k. Your withholding on each paycheck might be different, but you can control that by filling out a W4 - claim more exemptions and they take less out. Claim less exemptions and they take more out.
For your second question, the answer is dependent on the investment's balance, it's rate of return, and how much you contribute each year. You can easily do this math. For example, assuming an account returns 10% in a specific year, it would have needed to be $190,000 or more at the beginning of the year to grow more than you could have contributed. 10% growth on $190k is $19k which also happens to be the 2019 max contribution.
Even if you get fired in December, money from your employer has been in your account all year collecting interest - that is a win.
That is the aspect most talked about.
We usually get a raise in April. I'm thinking about front end loading it right after that for more benefit! Thanks for the advise. :)
You're welcome!
Mind explain the second job front loading part in finer details again? since you have already contributed 19k in your first job. Then in your second job, you should not be able to contribute anything for that year any more, isn't it?
That's correct....hopefully that second job's matching isn't better than the first, cause if it is, you just lost out since you can't contribute anymore. And if the first company had a vesting schedule, when you left, they kept all that match so you're really in the hole... :-(
That infinate vacation quip was pretty good gotta admit
=D
I've watched the video 2x or 3x times over, haha, & I'm still confused with the 2 companies doing full-year matching.
If you've already maxed out the calendar year @ $19K, received the maximum amount from the 1st company.
You can't contribute more to your 401K in that same calendar year, and have the 2nd company''s matching contribution.. correct?
Or alternatively, you can max out the $19K, receive their match & start again/all over with the 2nd company? Thanks BeatTheBush!
You can have the second company match, but becuase you have maxed out your IRS limit for the year, you will have to take that money back out at the end of the year, taking the early withdrawal penalty. So if your new company allowed the front loading and you maxed out the IRS limit with them, you would have about 19K that you would have to pay the penalty on at I think 10%, so 1900. The company would have paid for half of that 19K though, so you made an extra 7600 (19000/2-1900). This all assuming this is even allowed or possible, which I don't know. One other comment suggested that the second company would be aware you were already maxed out and not allow you to contribute.
@@court2379 Thanks Court for taking the the time to explain & insight. Appreciate the clarification!
I think my employer goes by paycheck. They match 3% so if you contribute in 15% of your paycheck they will still match 3% of your paycheck. Example $1000 is your paycheck you contribute $150 and they match $30. They don't have a vesting schedule though which is nice. Still brilliant video
Same here , as we have to put a max of 6% for them to give you 3%. Anything above 6% is still 3% . So I only put 6% and the rest of my left over cash I invest in dividends
I really needed to see this vid🏋🏾Thanks a lot 🙏🏾
You're welcome!
Clever! Thanks, Mr. BTB. :-)
=D
It's a great idea, but I doubt how many companies would maximize their annual match in your first paycheck or two. It makes no sense for them, exactly for the reasons mentioned: If you leave, laid off - why would they want to give you free money for job not earned, not to mention they also can invest it for the company until they must match in every paycheck. I'll be surprised many companies do that. How many would you estimate will allow matching early?
If you are lucky, you would get it. Surprisingly I have seen it much more often than not. Hence why I make this video, for those that have it.
@@BeatTheBush Cool! It's a real good video.
=D
January - half of entire 401k invested
February - other half of entire 401k invested
March - Backdoor Roth IRA it all (Or just Roth 401k in the first place.)
Is this the best strategy? Now I just have to work for a company that has a 401k, lol.
I don't think most companies allow rollovers out of the 401k plan while you're still employed.
which companies match 100% upto 19500?
A lot of companies these days don't let you keep the match unless you work for them for at least a year or sometimes more.
Yup. Watch that vesting period before you make rash employment change decisions.
Depends if they have vesting periods
Nice man, you be thinkin!
I understand the concept - but disagree with the “potential” return on investment. If you FEL, it will limit your potential for lower cost purchases later on the year. Proceed with extreme caution! This advice is from an individual perspective. BTW if you are 50+, you can add another $6k on top of the mentioned $19k, by law.
I think you commented without watching? This isn't what you think it is.
Nice editing skills there...Enjoy the vids!
=D
If you’re considered highly compensated you will be limited to 10%. Highly compensated is around $120,000 so you’re screwed.
10% matching of salary? Or you can only contribute 10% of your salary max. They have various rules depending on which company.
BeatTheBush I can only contribute 10% of my salary pretax because I’m considered highly compensated.
I get what you are saying but remember why 401k is created the first place. It is to target lower than middle class people who rather not save or invest. The example you give does not line up with a person who would want to enter into the 401k plan. If he make 120k and can save alot. It would be best to invest in stock or real estate where he can have more gain. I know it free money but in long haul stock and real estate will win. Plus you can allocate your asset when time are hard,. Whereas 401k you are stuck or get penalize for early withdrawal.
Match does not count toward yearly individual contribution limit
=D
Why don't we start a lottery pool? Get so big that we buy every number combo. We can't lose. Then every losing ticket would be counter our winnings (less tax).
This is a great idea! Thanks!
You're welcome!
Assuming this doesn’t apply to companies where you have to be there a certain period to be 100% vested.
The money you put in is always 100% vested no matter what company no matter how long you worked.
True up contributions ❤️❤️❤️
btw thanks for this! I got converted to FTE recently and immediately matched the max amount offered by my company.
You're welcome! Isn't it great to sit on money ahead of schedule?
BeatTheBush I was surprised! I would have never thought of doing that in the first place and luckily my company matches the actual amount you put in 1:1 up to the limit. The limits not a whopping 6% of salary like some lucky ppl get, but not bad either 😁
What had happened to the original video? Was that some ACTA stuff or something else?
Original video got demonetized so I removed it.
Your comment at 9:58 isn't true. Taking an excess contribution out by April 15th is definitely permitted. You just have to withdraw the contribution and any associated gains and pay ordinary income taxes on any portion that was un-taxed, such as the gains or pre-tax contributions.
If you fail to withdraw the excess contribution by April 15th of the following year, you don't have the option to fix it later. Instead you must pay taxes on the excess contribution and live with it. At least that's how it works for pre-tax contributions - I'm not sure about after-tax or Roth.
But in general the intended penalty for an excess employer-plan contribution is double taxation if you don't fix the issue in a timely manner. Once the tax has been paid, the excess contribution is no longer an excess contribution and can and probably must remain until you can make a qualified distribution. When you make that distribution, the excess contributions are not treated differently from the rest of your plan balance.
Also if you receive a sizable match from both employers, seriously consider paying the double-taxation. At Microsoft we receive 50 cents on the dollar for the entire $19,000. If you worked elsewhere and then take a job here mid-year, you should seriously consider maxing out the 401(k) plan here regardless - even if it means paying taxes on the excess contribution.
That's because if you withdraw an excess contribution, the employer will withdraw any excess match. At Microsoft that's 50% of the contribution. If the (penalty) tax is 24%, you still get to keep a 26% match on the excess!
Of course if not all of your previous employer's contributions were matched, you might want to try to withdraw those instead. But you would never want to withdraw matched contributions from a plan like Microsoft's - better to just pay the penalty tax.
Thank you for the information 👍🏽