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Multiple 403b/457b accounts, Max Contributions >50 y/o

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  • Avatar huruta 
    Participant
    Status: Spouse
    Posts: 33
    Joined: 01/23/2016

    I am a biomedical researcher at a public institution, receive a W2 and have a mandatory retirement plan which is a 403b into which I put in 7.5% with a 7.5% match (~19.5k/year) – (I’m married to an MD and am the other type of Dr., aka PhD). I also have another 403b (Voluntary Investment Plan, VIP) that I max out, also at 19k this year. I have a 3rd plan that is a Deferred Compensation Plan that is a state run 457b that I also contribute the max of 19k to. I turn 50 this year and would like to leverage the $6k optional “catch-up” contribution but have a few questions.

    1. I presume I have a total of 62k that I can put into retirement plans pre-tax given my age. True?

    2. I was told by a Fidelity person that my mandatory retirement plan (403b) does not count toward the 62k because the 62k is for optional retirement contributions and my retirement plan is mandatory. True?

    3. Can I put in 6k catch-up contributions to BOTH the 403b VIP AND the 457b Deferred Compensation Plans?

    Thanks in advance for any information.

     

    #179675 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1750
    Joined: 02/01/2016

    1. Seems about right.

    2. It is not entirely clear what the Fidelity rep is saying.

    There is one employee elective contribution limit (2019 = $19K + $6K > age 50) for all 401k, 403b, SARSEP and SIMPLE IRA plans combined.

    However, employee mandatory contributions are not included in the employee elective contribution limit.

    There is an employee + employer annual addition limit (2019 = $56K) for each unaffiliated employer.

    3. The 457 contribution and catch-up limits are separate, but equal to the employee elective contribution and annual addition limits.

    Take that all together:
    457b $19K + $6K = $25K
    403b $19K + $6K = $25K
    403b $19.5K
    No annual addition limits are reached.
    Total = $62.5K

    #179699 Reply
    Avatar huruta 
    Participant
    Status: Spouse
    Posts: 33
    Joined: 01/23/2016

    Ah, to clarify, he’s saying that only the 25k in the VIP account and the 25k in the 457b account count toward the 62k and that I could contribute another 12k tax free if I had a way because the mandatory account doesn’t count toward the 62k limit. Make sense?

    #179708 Reply
    Avatar JBME 
    Participant
    Status: Spouse
    Posts: 439
    Joined: 03/26/2018

    Are you sure that mandatory 403b isn’t a 401a plan? Either way no it shouldn’t count towards the max

    #179717 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1750
    Joined: 02/01/2016

    While it does not matter in your case, the Fidelity rep is not correct.

    The 457b has a separate total contribution limit of $19K for both employee and employer contributions + the $6K catch-up. You will have maxed that out

    Each 403b has a separate $56K annual addition limit. Technically, you could have additional contributions up to ($56 – $19K = $37K) + ($56K – $19.5K = $36.5K) = $73.5K.

    The only thing the mandatory contributions don’t count against are the employee elective contribution limit.

    @jbme: While it is not common, mandatory contributions can be made to 403b plans, although most are made to 401a plans.

    #179758 Reply
    Liked by JBME
    Avatar treesrock 
    Participant
    Status: Physician
    Posts: 293
    Joined: 08/14/2017

    I always thought that there was one employee contribution limit to be shared across multiple 401k/403b accounts? Why in this case is the employee able to max out employee contributions to two 403b’s?

    #179820 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1998
    Joined: 03/01/2018

    One is a mandatory contribution, doesn’t count toward elective deferral limit

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179824 Reply
    Liked by treesrock
    Avatar huruta 
    Participant
    Status: Spouse
    Posts: 33
    Joined: 01/23/2016

    To provide clarity:

    1. Mandatory retirement plan is a 403b, % match
    2. Voluntary investment plan is a 403b (as jacoavlu said, can contribute to both 403bs because first one is mandatory)
    3. Deferred compensation plan is 457b

    So, what I’ve come up with is that I can contribute the following

    1. Mandatory 403b – dictated by the % match, 7.5% until I turn 50, then an additional 2.5% for 10%
    2. Voluntary 403b – Can contribute to 25k, no way to contribute, all payroll deductions
    3. Deferred Comp 457b – Can contribute to 25k, no way to contribute more, all payroll deductions

    62k limits aren’t really a factor here because of the types of the plan and the plan contribution requirements. My university requires I take home some proportion of my pay (I think it’s 40%) so I have to determine how that’s counted and if my already pathetic paychecks can be smaller. Anyway, thanks to you all for helping me work through this.

    #180158 Reply

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