Finally I Have a 401k

Earlier this there was a lot of press covering the 401k millionaires.  The long bull market combined with steady savings in theirs 401ks resulted in the largest number of 401k millionaires.  A 401k can be a great way to build wealth, but many people – including me until this month – don’t have access to a 401k.  A lot of smaller employers don’t offer them and many larger employers make you wait a few months or a year before you can contribute.

My employer has offered a 401k since I started working there. However, as a seasonal employee I wasn’t eligible to contribute. After switching to a 10-month seasonal position last year I finally amassed the 1000 hours in a year needed to qualify for the 401k. Even though I qualified last September I wasn’t eligible to enroll until the beginning of the year. And then for some reason I had to wait 30 days to actually set up the account. It wasn’t until last Friday that I finally had a contribution come out of my paycheck. It would have been great if I could have contributed last year as soon as I met the hourly requirement. Although, I maxed out my IRA and also contributed to an HSA and Solo 401k I wasn’t able to reduce my AGI as much as I wanted. That resulted in a larger amount of taxes owed than I planned on and having to repay $750 of the advanced premium tax credit I received.

Now that I have a 401k I will be doing my best to max it out. Since I’m 50 I can contribute $24,000. Being over 50 also allows me to contribute up to 100% of my paycheck. Those under 50 are limited to contributing 75%. I had 50% held out for my first contribution. Since I’ve been working so much overtime my paycheck was just a couple hundred dollars less than normal. For the next paycheck I have increased the contribution rate to 76%. After that paycheck I’ll see if I need to adjust the contribution rate up or down. My health insurance and taxes do have to be paid out of my check so I’m not sure what would happen if I increased the contribution rate to 100%. Maybe I have to pay my employer on payday? There are three paychecks in March so I might experiment with having one at 100 and then I’ll know how it works.

After tax season is over and I no longer have overtime I will have to move my contribution rate back down. I think a 50% rate will be sustainable, but we will see.

I wish I would have had access to a 401k when I was younger. I actually did have a 401k at one casino I worked at, but I moved and quit about a month after I started contributing. There may have been other companies that had them and I didn’t know since it wasn’t something I was overly concerned with back then. I switched jobs a lot so I probably wouldn’t have been eligible at most places anyway. There is nothing I can do about that now. I’ll just contribute as much as I currently can.

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