Question about choosing 401k contribution (Predetermining % of bonus)
So the way Fidelity has us do it at our firm is to predetermine a percentage of each paycheck that you want to contribute as well as a percentage of your bonus you want to contribute. My question is, if I want to finish maxing it out using my eventual bonus, how do I account for the bonus without accidentally overshooting the contribution limit and getting penalized? Has anyone dealt with this issue before?
You won’t over contribute, they’ll cap you at max. No penalty.
Thanks! Really appreciate it!
Yeah. I don't know for sure with fidelity, but most places cap you at the limit...things can get odd with dets on non deductible contributions etc, but most of the time custodians don't want to deal with that and cap you at the deductible limit. Just make sure that you're not missing out on 401k match by capping out early. Free money is free money.
What do you mean by missing out on matching by capping out early?
They dont let you contribute after you hit your max, so if you hit that max before the end of the year you lose out on the match your company gives for the remaining months in said year. try to calculate if you want to max by doing x% = maxing out so x= % I contribute + % they match so you don't cap out early
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