401k limit

[rennigade]

From what I've read you can only contribute $16,500 into a 401k per year, minus the fact if you're older and need to play catch up.

My question is what happens if you hit $16,500 before the year is up? Will your 401k contributions automatically stop or will it keep getting funded with a penalty?

[jIM_Ohio]

From what I've read you can only contribute $16,500 into a 401k per year, minus the fact if you're older and need to play catch up.

My question is what happens if you hit $16,500 before the year is up? Will your 401k contributions automatically stop or will it keep getting funded with a penalty?

Your HR department or payroll department is required to comply with this rule. If you over contributed you might have a penalty if you did not catch it... but at same time if you over contributed in November, you can back the contribution out in December with no penalty.

Most modern payroll systems handle this without an issue.

[sandrark]

I simply sign up for $1375 per month deductions. I don't rely on other people to catch my math.

I do NOT want to have to deal with an over-contribution, so I deal with it myself.

Sandi

[disneysteve]

I simply sign up for $1375 per month deductions. I don't rely on other people to catch my math.

Some jobs do it by percentage which can make it a little trickier, especially if your income isn't consistent or your job involves bonuses or commissions. My wife is paid hourly and doesn't work the same number of hours each week. It doesn't matter for her because she doesn't earn enough to hit the max, but it could for others.

[Slug]

Once you hit $16,500, you're no longer allowed to contribute so your employer automatically stops it.

[banditfist]

Once you hit $16,500, you're no longer allowed to contribute so your employer automatically stops it.

Not entirely true. You can still contribute, but it will be with after tax money.