Leaving job in Aug, should I max out 401k for year?

So I’m getting laid off at the end of August. I normally max out my 401k each year ($18,500 as under 50) but trying to decide what to do this year. I get 1 month severance (after 23 years) and already have vacations planned for September so will not start any new job until October at the earliest. I’m wondering if it’s best to just max out my 401k with current employer to be sure I get full 401k for 2018 as I have no idea when I will get a new job or if they have waiting period for new employees contributing to 401k.

The caveat is that my current employer only puts their match in for the entire year if you are working on December 15 which means that I will get no match for the entire year with my current employer. But suppose I don’t find a new job until January 2019 or I find a new job and they make you wait 6 months before joining 401k, I’d hate to lose putting in the full amount into 401k for 2018. I’m just over 1/2 in for the year now.

I’m thinking of updating 401k amount in next 4 days so last 4 paychecks can pull out enough to hit my $18.5k for the year. Any reasons why this is a bad idea? I could also put in $17k or so to leave some room in case I get a new job that matches from day one.

Not sure if it matters but wife and I are in high tax bracket and used to pay AMT but not sure under new tax laws what taxes we’ll pay. We live in NJ so have high SALT but not enough to skip the $24k standard deduction due to $10k limit. I’m thinking it’s just good to lower taxable income even though I don’t get a match but want to make sure I’m not missing anything.


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Depends on how much you have in emergency funds to tide you over to your next job. Also your assessment of how quickly you think you’ll be able to find a new job. You don’t want to lock up the money and then have a cash flow problem.


You’re thinking about all the issues correctly. Not too much time to get paid and matched at the new job, assuming you find one quickly, given your schedule. Since your taxes are high, I’d say put in the max if you can swing it. Worst case, you don’t find a job and take it out the next year at a lower tax bracket.


Assume you’ve verified your plan allows you to change percentage mid-year. Some only allow setting the percentage once.


Yes, cash reserves is not a problem (actually too much in cash) so that’s not an issue at all. My plan does allow me to change at any time during year and I have 5 days to get the change in for July paychecks. My wife is “highly compensated” so her plan only allows change 1 time a year which sucks so I know how that goes.

I’ll go make the updates today before I forget. Thanks for the gut check to make sure I wasn’t missing something.

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Not sure about the answer to your actual questions, but my advice would be to try and figure this out as soon as you can (the IRS is supposed to be done issuing regs by October in case you have a weird situation where you still don’t know the tax consequences, but if not, I’d start looking at it now).

Man, after working there for 23 years they’re only giving 1 months severance? That is pretty rough. So is not getting any of the match due to that ridiculous policy of giving it all on December 15h.


I agree. It’s like a slap in the face after 23 years. Before they changed that in 2016 I would have gotten about 40 weeks. They changed the 401k match a few years ago to save more money and screw the employees yet again.

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I’d probably max out the 401k unless you have another job immediately lined up and know that they will let you contribute, and they give you a match, by the end of the year.

On the bright side since you have another 5 or 6 weeks, you can start looking for work right now, and then possibly put 100% of your last 1 or 2 paychecks to hit the max contribution. So I would figure out how long you can make the decision for and wait until then.

Also, I’d strongly advise against feeling like they owe you something because you’ve been there 23 years. The entitlement mentality is a prescription for misery and unhappiness. I will avoid getting too political, but look at the unhappiest people in the US today. They all feel like they are entitled to something they aren’t getting.

Oh you worked there 23 years? Consider yourself fortunate for having gotten to work there so long AND for getting a one month severance. Because if it wasn’t a good job for 23 years, you wouldn’t have stayed there. Be grateful for what you got instead of miserable for what you think you were owed and didn’t get.


One angle not mentioned here:

Max the 401k.

Max the new employer’s 401k.

Whichever plan has worse investment performance, notify the plan administrator that you overcontributed due to a job change and ask for a refund of the overcontributions.

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This is just asking for a tax and paperwork nightmare.


This sounds a lot like IBM… OP, is that your employer?


Assuming that you’ll be in a high tax bracket regardless of whether you’ll find work by the end of the year, max out the 401k, then roll it over when employment ends. That by itself is worth a lot especially if your future employer has less optimal investment options.

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it is

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Then let me be the first to congratulate you on getting out of there. I know that the layoff process is difficult, and it seems like it sucks right now, but IBM has no future. They survive on cutting costs and milking legacy businesses dry. The whole C suite over there is clueless and are more concerned about watching their own back as opposed to growing the business and creating an environment where their employees can do their best work.

I’ve had family members and friends who are “IBM lifers” and the best thing that ever happened to them was getting out of there, either via retirement or moving to another company.


Yeah, I agree, I should have left a few years ago but they let me work from home so it was just easy to stay (and nice having 5 weeks vacation). My Dad is IBM retired so I’ve literally been around them my entire life so it is sort of weird cutting the cord but I know in the long run it will be good.