A fun question: I maxed out my 401(k) already. But I made a mistake. Can I pull it back out and start over?

#1

Clickbait title for attention!

I maxed out my 401k contribution with my previous employer (yay!). Then I got a new job (double yay!). But I made a rookie mistake on the employer match because now, I think my 2021 match might only be 4% of however much salary I was paid during my time with the previous employer.

Can anyone confirm that this is correct? Or will my past employer - which does “true-up” matches at the end of the year - still match my contribution since I managed to max out the full amount? (Is this a question for Fidelity or for my ex-company?)

I’m also wondering if there’s any way to “fix” this. Can I possibly pull out my 401k contribution for the year into a post-tax account, pay taxes on that, and then try maxing out again to get a better 401k match from my new employer instead?

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#2

I’m a bit confused by your description of the scenario…

When you said you “maxed out” your 401k at your ex-company, do you mean you have already contributed $19,500 into that 401k? Or what do you mean?

If you have out $19,500 into the 401k already with your ex-company,

  1. You are maxed out for the year with pre-tax and Roth 401k contributions. You can contribute after-tax to your new employer’s 401k if they allow it. There is no other way around it.
  2. I would expect your ex-employer to only match during the month that you were employed with them. So if their match was 4% of your salary, whether you contributed 4% or 20% of you salary during a month, your ex-company will only match 4% for that month. There is no true-up at year-end (unless you ex-company is special and chose to complicate their plan for legally-questionable reasons). But you can certainly call you ex-company to verify - they would know the answer best for their plan.
#3

Yes, I contributed $19,500 in the first few months through my first employer. I’m wondering if I can switch that amount to an after-tax contribution now, and instead contribute pre-tax through my new employer. What you said is what I’m thinking: That that isn’t possible.

#4

Right…if you convert your pretax 401k to after-tax now, you will have to pay taxes on it and you will not be able to contribute pretax or Roth to your new employer’s 401k. Or better said, you can contribute but there will be some penalties when you do you year end tax return.

If you want to get a match by your new employer, you can do after-tax contributions (do not do Roth or pretax) if your employer allows it and just contribute enough to get all of the match. But you should make sure the sum of the following, at year-end, would not exceed $58,000 for 2021 – that is the limit for all types of contributions under qualified defined contribution plans:

  1. your contributions to the ex-company’s 401k,
  2. your ex-employer match,
  3. your contributions to the new employer’s 401k, and
  4. your new employer match.
#5

You’re right! I just found out my employer does allow after-tax contributions (YAY). But no match there, sadly. It’s okay. Life lesson, and I’ll be sure to max it next year!

#6

You mean your new employer only allows a match on pretax and Roth contributions, and they don’t offer a match on after-tax contributions? That’s really odd…From my experience, if the defined contribution plan allows a match on an employee’s elective contribution, then they would match on any type of contributions - as long as the company allows such type of contributions.

#7

Huh… that’s a good question. I actually have no idea! I’d probably call the service provider of your old company’s 401ks and ask those questions (what’s the match gonna be, can I undo the contribution?). Since contributions are made via payroll deduction, I suspect at best you’re gonna have a mess of paperwork if you try to undo it.

Personally, I’d probably just move on with my life and be glad I’m crushing it at work enough to max out a 401k in just a few months! :slight_smile:

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#8

Just to clarify, a person can not undo a contribution into the 401k plan - not legally possible. Once contributed, the only way to take out money is one of the below

  1. Taking out a loan or hardship withdrawal from the 401k plan.
  2. Taking a distribution (with penalties if you don’t meet the qualified requirements).
  3. Rollover
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#9

Thanks, Jeremy! I think you’re right and that’s the route I’m going to have to take. :slight_smile: That’s the right reframing/perspective to keep!

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#10

Thank you! Yep, that makes sense. 2022, here I come :slight_smile:

#11

Hello All, I had to make a COVID 19 hardship withdrawal of 30,000 k from my 401 K. I would like to work on putting that money back into my account but found out because it was a withdraw I am not able to do so. I feel like I am missing out on big gains. Any creative ideas on how I can put that money back into my account, or should I just open up a normal brokerage.

#12

If your plan administrator already told you no, then there is no way around that…unless your employer allows After-tax contributions (not Roth), then you can contribute more than $19,500/year into your 401k.

But I would say, your best bet, if you still have that money, is might as well invest it in an IRA or brokerage. After-tax contributions isn’t very advantageous unless you’re making tons of money (you’re taxed at the time you contribute and taxed on gains upon withdrawal).