I recently sold a rental property and have a surplus of cash sitting around. If possible, I'd like to make a lump sum contribution to my employer's 401(k) plan.

Is that possible? Or would I need to increase my contribution percentage a whole bunch and live off the cash surplus for a while?

  • 2
    You may have already done so, but also consider other retirement options, such as the various types of IRAs. Depending on the size of your lump sum, these may allow you to contribute the entirety of it with similar tax benefits to, but more investment flexibility than, the 401k
    – Nicholas
    Aug 29, 2014 at 12:49

2 Answers 2


Contributions to 401k plans have to come from the wages that the employer is paying you, and cannot be made from external funds. Many plans will allow for a large percentage to be withheld from a single paycheck or from the remaining paychecks for the current year, and for that time, you can live off the surplus of cash from the sale.

  • 1
    If you are funding a 529 plan it is possible to make a lump sum contribution of 5x the annual limit that would normally trigger the inheritance rules (5x 14,000) Aug 29, 2014 at 10:02

The response that your employer will only allow your wages from that employer to be put into a 401k is probably half true. You have to earn at least the amount you put into a 410k, but the source of the money may not have to be your wages from THAT employer.

When it comes to 401k plans, if you want to put the maximum into your retirement account, you'd have to earn at least that amount with the employer who sponsored the plan. You mostly likely cannot put the maximum amount into the account ahead of your earnings. For instance, if you earn $60k/year with an employer and want to contribute the maximum into your 401k in January, your employer may not allow that because there hasn't been enough time in the year for you to EARN the maximum amount from that employer.

If you skip contributing to your employer plan for half the year and decide in July you want to make the max contribution, as long as you've earned at least that amount with your employer, you can use money you earned from a bake sale to come up with the money to make a max contribution. It's called a catch up payment. You would simply subtract your 401k contributions from your total income, including the bake sale income. This way you're not deducting from wages you earned from your employer AND your bake sale income.

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    Nothing in what you wrote contradicts the accepted answer, nor provides evidence that non-wages can be deposited in a 401(k).
    – RonJohn
    Dec 24, 2017 at 3:30
  • Mostly incorrect or full of half-truths. Dec 24, 2017 at 23:00

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