{ "media_type": "text", "post_content": "Hello I just started my first job (I’m 22) and I need to set up a 401k for matching with my company. I’m really confused how this works because I want to try to hit the IRS maximum of $19,500 for Roth contributions this year. Maybe it’s too late in the year now, but it’s asking me to pick my desired contribution % per pay period, but I’m not sure how much to do because it says it’ll kick in 1-2 pay cycles and I don’t even know when the next pay check comes yet. Any tips would be great", "post_id": "6100b9ff6531d60024a8bf17", "reply_count": 20, "vote_count": 1, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

Hello I just started my first job (I’m 22) and I need to set up a 401k for matching with my company. I’m really confused how this works because I want to try to hit the IRS maximum of $19,500 for Roth contributions this year. Maybe it’s too late in the year now, but it’s asking me to pick my desired contribution % per pay period, but I’m not sure how much to do because it says it’ll kick in 1-2 pay cycles and I don’t even know when the next pay check comes yet. Any tips would be great

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Put in some nominal percentage. Get your first pay check and then figure out what you need to change it to hit the max once you see your deductions etc..

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My salary is $90,000 excluding other types of comp like bonuses and stock. I get paid bi-weekly. I am in California, but I don’t know the tax rates and such yet because I haven’t gotten a pay check.

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Unless your employer has no limit, many limit it to 30 percent per check, you can’t. Back of the envelope would say you need to contribute about 60% to get to 19.5

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Might be hard with tax and insurance withholding

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I would say just just get the match and max out the Roth IRA for this year then next year try to max both if you can

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I ended up doing 35% contributions I think for the next 5 months but need to run a quick double check on how this will all break down. This is what I pulled for MONTHLY pay from a calculator , and I didn’t mention this but I live in SF and my rent is $2,100 a month. I’m trying to use 401k calculators online but it’s really confusing me lol. The amount of taxes keeps changing!

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You can usually change it at any point if you need to go up or down.. I’ve changed mine a few times. See what your first paycheck is like and adjust from there! I would also think for federal tax, assuming you Didn’t have income before starting, you will fall in the 12% bracket

A few things to keep in mind: 1. All contributions are expressed as a % of gross paycheck, so to max out in a full year, you need to contribute 19.5/90, or 22%, assuming 0% from bonus. This is regardless of whether you elect pre-tax or Roth contributions. 2. Some plans automatically stop when you hit the 19.5 limit. You can call your provider to find out if your plan offers this, which may make life much easier for you. 3. For #2, you also need to check if your plan offers “true-up employer contributions.” If you max before year-end, you may lose out on match for your last few paychecks. The true-up makes up for that. 4. Paycheck changes typically take 1-2 weeks. If your next paycheck is in about 2 weeks, it’s probably one cycle—they just don’t want to guarantee that, since people will make changes 1-2 days before pay day and get mad when they’re not reflected.

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You’re gonna need to put in like 70%+ of your net paycheck if I had to guess (if your plan even allows for this). If you can afford it, I’d put a really high number to start and adjust down from there

So you need to at least set it to ~22% to get the full 19.5k in each year based on your 90k. 22% would evenly spread it out across all 12 months. So while you’ll have to set it to more like ~50% for the rest of 2021, remember to move it back down to 22% for 2022 and beyond and slightly adjust each year, based on your annual raises.

Thank you!!!!!

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If you just started working today (congratulations by the way!), it’s possible that you won’t get your first paycheck until the second pay period in August. This doesn’t have any relation to how often you get paid (for example, everyone who isn’t a Consultant at BAH gets paid monthly), but because payroll needs time. To answer your question, I’m sure you can find some 401(k) calculator online. I’ve also heard that you can front load your contributions so once you hit the $19,500 limit, nothing else is taken out until next year.

- Simple, set it at 65.

This is the formula I figured out to determine the percentage for equal distribution for the rest of the year. Correct me if I am wrong. % distribution = (19,500 ÷ gross salary) * (26 ÷ remaining pay periods in the year) Example: (19,500 ÷ 90,000) * (26 ÷ 9) = 62.59% from each paycheck. Your sign on bonus usually comes in first paycheck. Since your 401k will start accruing after your first paycheck I assume you'll have only 9 paychecks remaining this year to contribute into 401k. If correct, please share with me if this %age has any effect on sign on bonus. Thanks.

Correct if paid bi-weekly; otherwise, adjust 26 to however many pay periods in a year. This formula also assumes $0 has been contributed so far this year and that deductions start with the next paycheck.

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