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Question re: bad handling of 401k

I've done some bad planning on my 401k. I am changing jobs and contributing $6000 was enough to get maximum employer match ($3000) from my current employer, but I contributed $15,000, close to the cap. I am now starting a new job that will contribute 50% for $8000 of my 401k contributions, but I have no room to contribute. Is there any way to make this happen?

1- Can I take a hardship withdrawal, or do I need to show genuine hardship? I know there is a 10% penalty, but 50% matching would make up for it, and I'd get back to the cap 401k contribution by the end of the year, so the income tax on the withdrawal would be compensated. 2- If I contribute $8000 ignoring my previous 401k, I would be over contributing by $7,500. As I understand, the excess would have to be withdrawn and taxed, and that's fine by me, as long as it's taken from the old 401k plan or otherwise stops the matching funds from being touched. Is that an option? Thanks!

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Reply to
jdinla
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That wouldn't change the fact that you've already maxed your contribution for the year.

Yes, but be aware that neither plan is required to refund the excess. Your worst-case scenario here would be that you have an excess deferral that will get taxed twice--once for

2007 and again when you withdraw in retirement.

-- Phil Marti Clarksburg, MD

Reply to
Phil Marti

I think the 401k contribution limit is per-employer. I don't think you would be over the limit if you contributed another $15k at your second job, assuming you can afford to.

Reply to
NoSuchPerson

This is incorrect. See IRS Publication 525.

-- Phil Marti Clarksburg, MD

Reply to
Phil Marti

Nope. I am certain the OP's issue is real, and the individual limit is calendar, not per employer. It would be a neat trick for those who hold two jobs, however it's simply not true. JOE

Reply to
joetaxpayer

No, it's not. The employee deferral contribution is aggregated across all employers. So the total

401(k) contribution you can make in a year, across all employers is $15,000 in 2006, $15,500 in 2007 (leaving aside the catch-up contribution).

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

Reply to
Rich Carreiro

Thanks Phil, I did not realize that was the case for point

1, hardship withdrawal. I've read that the plans may not refund the excess contribution, though I find it odd that it would be left to their discretion. But if you don't mind elaborating on the worst-case scenario, I think it may still be worthwhile to me. I get 50% matching on what I contribute, which is more than the tax I'd pay (even if I don't get the refund). What happens next though, is my excess contribution along with its matching dollars considered tax-deferred, all along with any interest it earns? Beyond the double taxation scenario, am I not liable in any way for exceeding the limit?
Reply to
jdinla

That's it. This is also covered in Pub 525.

Reply to
Phil Marti

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