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My current and future employer both match 50% of contributions up to 7% of earned income. In effect, I can get 50% of my $18,000 contributions.

I have front-loaded my contributions at present employer, and have contributed ~ $16,500 already. The employer has matched $2,800 approximately as per my earnings to date. I didn't realize that I would be matched at the most on earnings to date, not just my own contributions.

My future employer has also a similar 401(k) plan. I would want to get the maximum possible match from them, but I'll probably overshoot my yearly contributions, when combined with the amount I've put in while at my current employer.

What options do I have at this point of time? One thing I could think of, is to contribute as much as possible to receive the maximum match from the new employer, and after the December 31st, withdraw the extra amount I have contributed to my 401(k) plans combined.

Does anyone see any issues in this?

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Just don't exceed the match percentage. Stop when you contribute to 1500. It sucks, but most employers do it this way.

  • And then resume with the other company to get their match too. – Harper May 15 '17 at 22:46
  • I am already ahead in contributions, so I am not doing any more in my current employer. Plan to resume with the new employer soon. – reddragon May 16 '17 at 22:44
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First, I would check on is the vesting schedule of the match. If your match is fully vested then you shouldn't have any problems there when switching jobs.

The second issue is the $18,000 annual limit on 401(k) contributions. You will need to withdraw the excess contributions before April 15 of next year.

  • Thanks. So is would be possible to withdraw from either of the two 401(k) accounts? I plan to contribute as much as I can to maximize contribution from the new employer, and remove the excess contribution from the old employer's 401(k) once done. Does this sound fine? – reddragon May 16 '17 at 22:43
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The primary issue I see is that your base assumption, that you can get a full 50% match of the IRS maximum allowed contribution, is incorrect.

Based on the numbers in your question it calculates out that you earn around $96k a year.

Based on that estimated salary it would be impossible for you to get a full 50% match of the $18k ($9000)

With a cap of 7% of your salary on the match, the absolute maximum you could receive in match would be around $6720.

In order to receive the full $9000 match you would need a base salary of at least around $129k.

  • I'm not sure your math is accurate. The issue is that the employer doesn't match based on contribution timing it matches your annual election evenly through the year. So when the big lump contribution came in, the employer "matched" the same level annual amount, ignoring the literal contribution amount. – quid Mar 21 '18 at 18:31
  • @quid based on an original question date of May, the OP reported matching contribution of $2800 as being based on earnings to date, and a stated limit of 7%. The OP earns between $96k and $120k. Even in the most generous case he cannot contribute enough to receive a match of $9000 even if he stayed the entire year. Given the most generous interpretation that the to-date earnings are for only 4 months, he earns $120k/year and 7% of that is only $8400. – Justin Ohms Mar 21 '18 at 22:36

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