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I was contributing the maximum amount to my former employer that closed down in June 15, 2012. I started a new job on Sep 10, 2012 but I will not be eligible to participate in my new employer's 401-K until Jan. 1, 2013. What are my options? I would like to make the maximum contribution of $16,500 in 2012 towards my 401-K (or equivalent) and gain the tax advantage that flows from this contribution too? Any advice, please? Thank you.

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When I read your title, my first thought was that if you are not covered by a 401(k), then you should contribute to a Traditional IRA, since the eligibility of deducting a Traditional IRA is helped by not being covered by a 401(k) during the year. However, it seems that you were covered by a 401(k) for part of 2012 with another employer, so that doesn't apply. – user102008 Oct 10 '12 at 20:13

Check if you might be able to make a contribution on or by December 31, 2012 if you agree to forego any employer match on that amount. Some employers restrict participation in the initial year of employment so as to avoid putting in a matching amount during the new employee's probationary period. After all, the new employee may be let go during this time, or may decide to quit if the job is not what was expected, and so the employer would be out the matching amount put in. Some 401k plans have rules about when the match vests to avoid this eventuality, but perhaps your new employer's plan does not have such a rule, and the match is yours to take with you even if you quit (or, God forbid, are fired) by the end of the year. But if you agree to forego the match, they may be willing to let you contribute in 2012.

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Yes, that is definitely the case at some, but not all companies with 401k plans. Just as Dilip said, you can roll your money over to the new employer's 401k, but you won't get any matching money contributed, not until you are eligible to contribute through payroll deductions, based on the terms stated in the plan agreement at the new job. – Ellie Kesselman Oct 10 '12 at 20:10
@FeralOink Actually, I didn't say anything about rolling over the old 401k into the new one since that was not a matter raised by the OP. I feel that rolling over 401k money in an ex-employer's plan into a new employer's 401k plan is rarely a good idea -- it is usually better to roll over old 401k money into an IRA where one has many more investment options, and can choose a low-cost fund rather than the high-expense funds generally favored by 401k plans. – Dilip Sarwate Oct 10 '12 at 20:52
Dilip Ah, okay, you said "contribute", which I took to mean "roll over". I doubt a company would allow a contribution of funds earned at that company into the new employer's plan, as usually, an employee must be eligible for enrollment for which OP will not until 1 Jan 2013. But it never hurts to ask, I agree. – Ellie Kesselman Oct 10 '12 at 21:59
Regarding roll-over to a new company's plan, of 401k monies from prior employer: Pro's and con's. True, there are fewer investment choices with a company 401k, and more restrictions in other ways. Yet there are sometimes opportunities to invest in funds available only to institutional investors, that become accessible through the employer 401k, that are not to an individual. That, and perhaps the loan from 401k if needed, are the only pro's that come to mind. – Ellie Kesselman Oct 10 '12 at 22:04
+1, definitely worth exploring. Also, worth checking IRA limits (even though under a sponsored plan, some may still remain deductible if the AGI is low enough...), and Roth IRA option as well. @Feral, there's another question I've just answered that is related to your point, you might want to comment there as well. – littleadv Oct 10 '12 at 22:56

Keep saving just like you are.

You can pay taxes now, or pay taxes later. The 401(k) and the like let you pay taxes later -- maybe much later, and who knows how high the tax rates will be. A savings account, CDs, mutual fund, whatever, may incur taxes every year, but then you've paid them.

Tax-advantaged accounts are but one type of investment vehicle. If you get a match from your employer, that can be a good thing to take advantage of. If you don't get a match, I'd broaden your options beyond 401(k) and take a look at the numbers.

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