Home Forums Hunting & Shooting Hunter's Campfire Invest, or pound the 401?

It is not wrong that the maximum that Kenneth can defer from his own salary is $24,000 (including catch up) for 2016. The TOTAL for 2016 that would include salary deferral and any matching is $53,000. It makes no difference if they are pre-tax deferral for Kenneth or Roth 401k deferrals. The total salary deferral maximum is $24,000. Here is the IRS link.

IRS deferrals for 2016

Keep digging. You first claimed it was illegal then after I posted up the IRS link you said it may or may not be true. Now you go off on contributions. Maybe you need to be educated on excess contributions and how they are handled, but that deviates from what the OP was trying to find out. Facts on his tax savings.

Longbob, I readily admitted admitted you were right about the ability to fund outside company plan below 98k. Don't break you arm patting yourself on the back.
Now I can tell you without question, you are dead wrong on putting after tax money into 401k.
Your combative nature tells me a lot about you, I work with people like you.
You continue on your path, I'll stay on mine. Doubt we cross paths.

There is nothing combative that I have posted. I have quoted you and posted factual links straight from the IRS to clear up any misinformation for the OP. Feel free to post up any links from the IRS that support your claims.

Looked this up since I was totally confused.

3 Choices for 401(k) Contributions

To review, investors can make three types of 401(k) contributions, provided their plans allow for them, each of which carries its own tax treatment.

The first, and by far the most common, is a pretax 401(k) contribution; the money compounds on a tax-deferred basis and the whole kitty is ultimately taxed upon withdrawal.

In addition, some plans also allow for Roth contributions, meaning that the investor contributes money that has already been taxed but enjoys tax-free compounding; withdrawals of contributions plus investment earnings are tax-free in retirement.

Finally, some 401(k) plans allow contributions of additional aftertax monies for investors who want to set additional assets aside for retirement, above and beyond what they're making in pretax or Roth contributions. The key benefit of such contributions--until recently, that is--is that retirees can enjoy tax-deferred compounding on those aftertax contributions; investment earnings are taxed as ordinary income when withdrawn.

Yes, there are a few that will allow it. Somewhat rare, but can be helpful. Like I mentioned before I do not know of many that allow it.

According to this article, 48% of companies in the US allow their employees this ability. I had always been told that I could put additional Taxed money into a 401K and have in the past. That is why I was so confused by this thread.

I think that 48% figure also includes companies that allow the Roth 401k option. I can tell that the three brokerage firms (two via buyout) that I have worked for only offer the Roth 401k option and not additional contributions beyond that after tax.

There are many good answers here already. But just to emphasize, do the 401K at the amount to get the maximum "match" by the company. "Matches" are not that common anymore (post '08 recession) so take advantage of it. The money for the 401K is pre-tax which as indicated by others is a benefit too. The downside is many companies have limited choices in options and you don't get to see the name of the actual company.
If you have additional money to invest, do so under the umbrella of a Roth IRA. This should be done by an earnings-based advisor - not fee based. Be aware of any advisor that directs money into the companies own proprietary investments. Its your signal to leave that service - so do your interviews with care.
Even though it is post tax dollars, your investment grows without (at present) tax implications for the future. Further, in a dire need, Roth investment dollars can be re-claimed without an early withdrawal implication - but only as a last resort.

The power of compounding interest points to the necessity to invest as young as possible. Its "time" not "timing" that is your friend.

Full disclosure. I just spoke with my contact at Fidelity's 401k administration and it is as I suspected with the 48% figure you said your article mentioned.

Of the 21,000+ plans that Fidelity administers it is less than 2% of their plans that offer additional after tax contributions beyond a Roth 401k option. Fidelity says that it is rarely offered or even discussed after the Roth 401k option became available. 47% of Fidelity's plans currently offer a Roth 401k option.

That confirms your 48% number, but it is skewed due to the number including the Roth 401k option I believe.

Thanks for following up with that. Longbob.

No worries and thanks. The rules are constantly changing and make it an advising mine field. Do it long enough and you get a fairly good feel for it, but that doesn't mean you shouldn't research it to make sure.

Not know what you thought you knew.
Thanks RO, I wasn't going to take the time to prove him wrong.
I have done it for years, I would expect most of the Fortune 500 offer the choice. He was right on his original point of opening a additional plan after filling up the 401k, I did not have a clue.
LongBob, I'll just say you aren't on my short list to share my vacation time with.
With Love from Dixie.

English please.