401k experts - question
 

I took a job at the beginning of this year with a smaller (leaner/meaner) firm local to me and gave up my cushy job with a larger company with full benefits, 401k, profit sharing, etc. I got a pretty decent salary bump to do so, but the new place does not (as yet) have a 401k program (I adjusted my salary request accordingly).

My question: I know I can contribute up to $4,000 per year (pretty sure, might be $5,000 now) to a 401k, but I obviously got a lot more than that contributed from my old employer because of the profit sharing and the contribution matching. Is there any way to "pay myself" as an employee of my own company or something in order to get around the $4,000 limit?

Re: 401k experts - question
 

Do you really mean a 401k for your limits? I know the 401K personal contribution limit was 15K in 2006 (for most folks), but I think you're really referring to the limits for IRAs etc. I do not have an answer to your question...

There is a difference between IRS contribution limits and employer limits. The IRS will let you contribute $4k to an IRA this year ($5k if over 50), and $15.5k to a 401k ($20.5k if over 50), not including any employer contributions. The problem is that your employer can set lower limits on your 401k.
So, I would certainly max out your 401k, plus open up an additional Roth IRA and max it out as well. Anything over an above that, you can put into other investment vehicles that will typically outperform a 401k anyway.

Ahh, so the Roth is the $4k limit, but I should still be able to toss money into my old employer's 401k account (which I still have open) right?

That's fine by me. My 401k investments have been doing fairly well.

You are eligible to put $4000 for this year($5000 if older than 50) into either a traditional IRA(deductible, but taxed as ordinary income upon withdrawal) or a Roth IRA(non deductible, but never taxed afterward). There are income restrictions.

You can not continue to contribute to your 401k at your previous employer after separation from service. I would roll this money over into a no-fee Rollover IRA at the institution of your choice, Fidelity, T. Rowe Price, Vanguard are all good.

Also good to know. . . My previous employer's 401k was through Fidelity, which had (has) some pretty good funds. One concern about rolling it into a Rollover IRA is that the funds might not be as good - same with a Roth. Guess it doesn't hurt to look though.

The stuff about this employer's 401k or that employer's 401k seems needlessly complex to me - the good thing is I have enough $$$ in the account where I can keep it in there (I checked, there's a minimum amount you need to have to do this, otherwise they'd force you to either cash it out or roll it over, which for me isn't an option since the new place doesn't have 401k benefits yet).

Can I just do something like just set up a corporation to pay myself through and set up my own 401k account under THAT company? That'd get me around all this kind of silliness and allow me to keep the same 401k account open forever with whomever I choose, even if my employer (or more correctly, the "corporation's employer") changes in the future.

401k is just another "system-made" scam designed to collect fees and expenses.

it's money you wont have access to until you're near dead. I'll pass , thank you very much. I can grow my money faster than in any lame 401k account.

I "retire" under my own rules.

SmileWavy

They will do a rollover into the same funds you are in now. You just eliminate the 401k fees.


Not legally, if you don't understand it talk to a fee only financial planner.

While it's true that you can't continue to contribute to your former employer's 401k plan (Fidelity), you don't have to touch what's already there unless you choose to. My current employer's 401k plan is also with Fidelity, and their fees are almost nil in my case, and I doubt I ever move it. Many years ago, I also rolled over a previous 401k plan into a different IRA brokerage account provider that also incurs minimal fees (but greater than Fidelity's).

While there is no single correct way to approach investing, most folks (on their own), would not outperform a 401k due to the tax advantages and the initial 'free money' from an employer match. I've always been in 401k plans with very minimal fees, and I could easily switch things around and provide a nice income stream (taxable, but penalty free) even though I'm only 47. The 401k is only a piece of my strategy, but to dismiss them out-of-hand is shortsighted imo.