401K SA Question

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NYC1983
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Joined: Mon Jun 18, 2012 4:17 pm

401K SA Question

Postby NYC1983 » Thu Nov 01, 2012 2:29 pm

Hi guys,
Has anyone tried to max out their 401k annual limit during their SA summer? This would require about a 50% contribution- do firms allow this?
Thanks!

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Old Gregg
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Re: 401K SA Question

Postby Old Gregg » Thu Nov 01, 2012 2:33 pm

NYC1983 wrote:Hi guys,
Has anyone tried to max out their 401k annual limit during their SA summer? This would require about a 50% contribution- do firms allow this?
Thanks!


As far as I know, firms don't enroll summer associates in their 401K plan...

anon168
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Joined: Mon Jul 02, 2012 10:36 pm

Re: 401K SA Question

Postby anon168 » Thu Nov 01, 2012 2:35 pm

NYC1983 wrote:Hi guys,
Has anyone tried to max out their 401k annual limit during their SA summer? This would require about a 50% contribution- do firms allow this?
Thanks!


Uh, no.

SAs do not qualify for 401ks.

Even as a new associate, you don't get enrolled until something like 3-6 months after you start (depending on firm), and matching will sometimes take even longer than that.

NYC1983
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Joined: Mon Jun 18, 2012 4:17 pm

Re: 401K SA Question

Postby NYC1983 » Thu Nov 01, 2012 4:37 pm

Great.. there goes my master plan. Thanks

bdubs
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Re: 401K SA Question

Postby bdubs » Sat Nov 03, 2012 2:53 pm

Contribute the max to an IRA/Roth IRA. If you're borrowing anything for school next year you should really put the money toward that.

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20130312
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Re: 401K SA Question

Postby 20130312 » Sat Nov 03, 2012 3:01 pm

bdubs wrote:Contribute the max to an IRA/Roth IRA. If you're borrowing anything for school next year you should really put the money toward that.

This. Just do it yourself. It's more flexible than a traditional 401k anyway.

NYC1983
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Joined: Mon Jun 18, 2012 4:17 pm

Re: 401K SA Question

Postby NYC1983 » Sat Nov 03, 2012 3:08 pm

Yeah, I was planning on that but it is capped at $5,500 for 2013 so I was hoping to do a 401k too. Oh well.

PS any other tax saving tips out there?

badaboom61
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Re: 401K SA Question

Postby badaboom61 » Sat Nov 03, 2012 3:38 pm

NYC1983 wrote:Yeah, I was planning on that but it is capped at $5,500 for 2013 so I was hoping to do a 401k too. Oh well.

PS any other tax saving tips out there?


Pay some tuition and take the tax credit. Not sure if its American Opportunity or whatever new name they've come up with. You can also pay down some interest on existing loans and take a non-itemized deduction.

shock259
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Re: 401K SA Question

Postby shock259 » Sat Nov 03, 2012 3:41 pm

I was planning on using SA money to build an emergency fund, but retirement contributions actually make a lot of sense. Especially if you don't have debt to pay down. One extra year to max out contributions.

I guess I need to talk to a financial adviser. I have no idea how to get any of this crap set up.

bdubs
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Re: 401K SA Question

Postby bdubs » Sat Nov 03, 2012 3:48 pm

shock259 wrote:I was planning on using SA money to build an emergency fund, but retirement contributions actually make a lot of sense. Especially if you don't have debt to pay down. One extra year to max out contributions.

I guess I need to talk to a financial adviser. I have no idea how to get any of this crap set up.


You can withdraw principal from a Roth IRA without a penalty, so it is essentially an emergency fund.

http://www.mymoneyblog.com/can-i-really ... nalty.html

NYC1983
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Joined: Mon Jun 18, 2012 4:17 pm

Re: 401K SA Question

Postby NYC1983 » Sat Nov 03, 2012 3:59 pm

But remember you won't get any (instant) tax relief for a Roth IRA

bdubs
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Re: 401K SA Question

Postby bdubs » Sat Nov 03, 2012 5:19 pm

NYC1983 wrote:But remember you won't get any (instant) tax relief for a Roth IRA


You will make less money in your SA tax year than you will at any point until you leave big law, it is the best time to contribute to a roth. The tax break you get from deductions on total income of 30,770 is really minimal anyway.

Anonymous User
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Re: 401K SA Question

Postby Anonymous User » Sat Nov 03, 2012 5:21 pm

anon168 wrote:
NYC1983 wrote:Hi guys,
Has anyone tried to max out their 401k annual limit during their SA summer? This would require about a 50% contribution- do firms allow this?
Thanks!


Uh, no.

SAs do not qualify for 401ks.

Even as a new associate, you don't get enrolled until something like 3-6 months after you start (depending on firm), and matching will sometimes take even longer than that.


My firm allowed SAs to contribute to 401k.

And to my knowledge matching is nonexistent for associates in biglaw.

NYC1983
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Joined: Mon Jun 18, 2012 4:17 pm

Re: 401K SA Question

Postby NYC1983 » Sat Nov 03, 2012 5:32 pm

bdubs wrote:
NYC1983 wrote:But remember you won't get any (instant) tax relief for a Roth IRA


You will make less money in your SA tax year than you will at any point until you leave big law, it is the best time to contribute to a roth. The tax break you get from deductions on total income of 30,770 is really minimal anyway.



This is true. I wonder if Roth is still a better bet with a spouse earning 60k?

badaboom61
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Re: 401K SA Question

Postby badaboom61 » Sat Nov 03, 2012 5:50 pm

NYC1983 wrote:
bdubs wrote:
NYC1983 wrote:But remember you won't get any (instant) tax relief for a Roth IRA


You will make less money in your SA tax year than you will at any point until you leave big law, it is the best time to contribute to a roth. The tax break you get from deductions on total income of 30,770 is really minimal anyway.



This is true. I wonder if Roth is still a better bet with a spouse earning 60k?


A roth is about the best investment vehicle ever created, and you won't be able to do it forever if you get above the income cap. Maxing out your roth contribution should be your first priority over every non-essential payment.

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Tiago Splitter
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Re: 401K SA Question

Postby Tiago Splitter » Sat Nov 03, 2012 6:22 pm

Just remember that in your first full year you'll have to backdoor the money from the trad. IRA into the Roth because you'll make too much to contribute to the Roth directly. If your firm allows for Roth salary deferrals you could max out the 401K with Roth contributions regardless of income.

gionnovi
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Re: 401K SA Question

Postby gionnovi » Sat Nov 03, 2012 8:26 pm

badaboom61 wrote:
NYC1983 wrote:Yeah, I was planning on that but it is capped at $5,500 for 2013 so I was hoping to do a 401k too. Oh well.

PS any other tax saving tips out there?


Pay some tuition and take the tax credit. Not sure if its American Opportunity or whatever new name they've come up with. You can also pay down some interest on existing loans and take a non-itemized deduction.


The tuition deductions don't differentiate whether you pay cash or use loan money, either way you are considered to have paid and are eligible for the credit.

Max of 401k is around $17k plus you are still eligible for the $5500 on an IRA so it's definitely worth looking into. I worked at one employer where they allowed a max of 80% so assuming the plan is offered the applicable max should not be an issue. After your summer you should be able to roll your 401k into a Roth IRA after separating employment like the poster above said move the 401k to traditional and then roll that to a roth. Walk into a brokerage such as Scottrade or Charles Schwab and they should be able set that up pretty quickly. You'll get a 1099-r for the rollover amount, and you pay taxes then (essentially reversing the tax benefit), but it'll be at a lower rate than in the future and you get the long-term benefits of a roth.

As poster above indicated Roth 401k is the best way to go if it's available.

NYC1983
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Joined: Mon Jun 18, 2012 4:17 pm

Re: 401K SA Question

Postby NYC1983 » Sat Nov 03, 2012 9:59 pm

Thanks for the info!

So is the consensus that most SAs can or cannot contribute to a 401k?

Anonymous User
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Re: 401K SA Question

Postby Anonymous User » Sat Nov 03, 2012 11:07 pm

Anonymous User wrote:And to my knowledge matching is nonexistent for associates in biglaw.

This. My V10 does not offer any 401k matching at all.




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