Club409
Economics
we haven't actually checked in on beth's 401k performance in a while because it's been pretty depressing to look at
also govt pension suckas which actually i'm about to pay more into for the same thing wink wam
Thread REVIV'D
Spent some time thinking about maximum 401k contributions today. In 2015 the IRS says the most you can contribute is $18000. At Motorola (and I presume it's similar at other companies) we can choose how much we contribute based on a percent of our salary but it has to be a whole percent. This means that unless your salary happens to be an optimum value (i.e. $18000 is equal to or just above some whole percentage of your salary) you have to actively manage your contribution number throughout the year to actually maximize your contribution.
As a completely arbitrary example if your salary is $87800 then you'd need to set your contribution to 20% for half the year and then 21% for the other half in order to get up to $18000.
This made me wonder what the graph would look like for the "set it and forget it" crowd (of which I am a member.. I don't come anywhere close to hitting the max but I do make sure to take advantage of the 4% company match). So below you will find the graph of "How much money will make it into my 401k assuming my employer makes me choose a whole percentage at the beginning of the year and they will match up to the first 4% as a function of salary:"
The four max points are at $450K (4%) $600K (3%) $900K (2%) and $1.8M (1%). Anything above that and you're down to less than 1% of salary which means your whole percentage value you choose at the beginning of the year is zero :'-( sorry not sorry if you make $1.8M.
For the curious the formula for the graph is:
The "floor(1.8M/x)*.01" part you see twice represents the percentage value that you have to pick given a salary of "x" to get as close to 18000 without going over.
I should have also included a min() limit on the first piece -- Moto limits us to contributing 30%. At the very least I should limit it to no more than 100% :)
x = employee salary
r = employee contribution rate = min(0.30floor(1.8M/x)*.01)
k = total 401k contributions = x * (r + min(r 0.04))
Haha so after all that when I logged in to verify the Motorola-imposed max contribution limit of 30% I now see that there is an option to "maximize my contribution for this year" which not only allows a non-integer contribution percentage but also takes in to consideration YTD contributions and gets it down to the penny. So basically this was an intellectually stimulating complete waste of time.
There are other tax advantaged retirement vehicles outside of 401k as well if you are shitting cash and don't have anywhere to put it: Roth-IRAs 529 plans and even tax advantaged mutual funds. You could also buy another house in Chattanooga and get that mortgage interest deduction. Actually why haven't Club409 pooled some money to buy a small trailer park in Walker County??Perhaps we need to move to Business Ventures thread.