BobZ

@ 9% it takes a w2 over $400k to reach the current employer contribution limit.

@12% it takes a w2 just over $300k.

Employee contributions and make up after age 50 are up to the individual.

Was talking with fedx bud. Hes a 25+yr guy. We were comparing notes on pwas and retirement. He was shocked i have brokerage account in a 401k.
I was shocked (not really) his A plan is a non cola fixed amount. He was shocked my LTD has no cap on FAE. And my company 401k contribution is doubled if im on LTD. I was shocked his was capped at the A plan max.

There are a lot of factors in weighing career earnings. I know that even with the economic wreckage and terminated pensions of the last decade or so the single component of a pwa brokerage access in our 401k has allowed pilots to realize balances into 7 figures. And i know of at least 1 with an 8 figure number. Thats $10,000,000+.

What makes such numbers even more impactful is realize when the failed DB was in effect.....ERISA limited our self directed savings to 6%.....as the DB caused us to be classified as 'highly compensated employees'. So for YEARS self directed savings growth was greatly supressed.

Imagine that....a b scale new hire making $1800/month.....was 'highly compensated'.

Id rather have the money in my 401k. And the disposable in my hand to invest after tax any day, over trusting some future management to pay me once im gone.

That way there are no questions on my financial how-goes-it for retirement.

Thrust Hold

You don't have to make $400k to get to the $57k limit:

Personal Limit (PreTax/Roth): $19,500
Company DC (9% x $285K): $25,650
Company Match (FedEx): $500
After Tax Contribution: $11,350

Final Total Contributions: $57,000

https://www.irs.gov/retirement-plans...e-annual-limit

ackeight

The most an employer can contribute is based off of $285k of your w2. So that 9% ($25,650) and the $19.5 you are allowed won’t get you to reach the 401k max.

I like having my 401k. I’m young and being limited to “just” $130k and 9% 401k seems low. 30 years down the road when I retire I am confident and hopeful I can use my 4% withdrawal rate and pull $300+k/ year in a mix of Roth and traditional. This is maxing out my 401k with 19.5 Roth and the rest company contributions. The overage I either self invest or use an overage and excess cash account.

This could all get wiped out if we have a catastrophic economic event, so there’s that.....

BobZ

I didnt say that. Go back and read my math

If your employer contributes @9%.....you have to have w2 @ $400k+ to extract the 415 max employer contribution of $37k.

I dont think self funding after tax out of your paycheck is anything to crow about.

BobZ

You have an inaccurate understanding of allowable employer limits i think?

There are several limits involved. My math referenced the 415 max limit of annual employer contruibution. Its just over $37k this year.

So to extract max employer funding to your 401k....the % of income has to realize that $37k.

Thats all my math was trying to explain.

Thrust Hold

Not crowing about anything. Just showing that it's possible to hit the $57k max, while making significantly less that $400k. We don't have Profit Sharing at FedEx. Maybe next go around, but then again Profit Sharing isn't a guarantee. I'm working with FedEx numbers and you're working with Delta numbers (right?).

USMCFDX

His math is correct. I don’t think you have an understanding how our contract works.

BobZ

My math isnt pwa specific. It is 415 specific.

And my math didnt suggest the annual limit couldnt be achieved. It was to answer the point about at what income level would realize the max allowable employer contribution....given the employer percentsge contribution level.

Thrust Hold

Compensation and contribution limits are subject to annual cost-of-living adjustments. The annual limits are:

• salary deferrals - $19,500 in 2020 ($19,000 in 2019), plus $6,500 in 2020 ($6,000 in 2015 - 2019) if the employee is age 50 or older (IRC Sections 402(g) and 414(v))
• annual compensation - $285,000 in 2020, $280,000 in 2019 (IRC Section 401(a)(17))
• total employee and employer contributions (including forfeitures) - the lesser of 100% of an employee’s compensation or $57,000 for 2020 ($56,000 for 2019 not including "catch-up" elective deferrals of $6,500 in 2020 ($6,000 in 2015 - 2019) for employees age 50 or older) (IRC section 415(c))

Example: Mary, age 49, whose annual compensation is $360,000 ($30,000 per month), elects to defer $1,500 per calendar month, up to $19,000 for the 2019 year. Mary may contribute to the plan until she reaches her annual deferral limit of $19,000 even though her compensation will exceed the annual limit of $280,000 in October.

Employer matching contributions

If your plan provides for matching contributions, you must follow the plan’s match formula.

Example: Your plan requires a match of 50% on salary deferrals that do not exceed 5% of compensation. Although Mary earned $360,000, your plan can only use up to $280,000 of her compensation when applying the matching formula for 2019. Mary’s matching contribution would be $7,000 (50% x (5% x $280,000)). Although Mary makes salary deferrals of $19,000, only $14,000 (5% of $280,000) will be matched. She must receive a matching contribution of $7,000 (50% x $14,000) under the terms of the plan.

What does your plan say?

Although not common, a plan can specifically require that salary deferrals cease once a participant’s compensation reaches the annual limit.

If your plan specifies that salary deferrals be based on a participant’s first $280,000 of compensation, then you must stop allowing Mary to make salary deferrals when her year-to-date compensation reaches $280,000, even though she hasn’t reached the annual $19,000 limit on salary deferrals, and must base the employer match on her actual deferrals.

https://www.irs.gov/retirement-plans...e-annual-limit

What Is the 415 Limit?

Named for section 415 of the Internal Revenue Code (IRC), the 415 limit reflects the maximum allowable contributions to a qualified retirement savings plan in a given year. The maximum employee contributions are dictated by section 402(g), but the overall contributions from all sources are limited by section 415. This includes employee deferrals, employer matching, and profit-sharing contributions.

These types of contributions are considered to be annual additions. This means that your employer can potentially contribute much more than an individual to a 401(k), although this is not at all usual. In fact, most employer's match only up to 2-5% of employee contributions.

For example, the 415 limit for 401(k) plans for 2019 is $56,000. Of this, employees may contribute up to $19,000, according to the limits outlined in IRC section 402(g). The remaining $37,000 can be composed of employer contributions and matching or profit-sharing contributions. Anything above the 415 limit is considered overfunding of the retirement account and those monies do not enjoy the same tax-deferred benefits of qualified retirement money. If those excess funds are used incorrectly, the IRS may further impose fines and back-taxes.

https://www.investopedia.com/ask/ans...-415-limit.asp

tnkrdrvr

The reality is that I get 4% less DC from my company than you do until I exceed the current IRS limit. We have essentially traded that for a “guaranteed” $4,200xyears of service. According to DALPAs math, You won’t beat our retirement benefit unless you work for at least 29 years and invest all of your cash over cap for retirement. They could be wrong.