Looking to reduce your 2018 taxable income by making the maximum 401(k) contribution?
Great idea, but time and again, owners and other highly compensated employees will max out their 401(k) deferrals, only to get a “corrective distribution”—in other words, a refund that’s taxable—the next year.
That refund may not only cause you to owe more taxes next year, it could bump you up to a higher tax bracket. The corrective distribution can also mean that your employer match contribution was reduced, so your overall retirement savings took a bigger hit.
You can avoid that situation, but you have to act now.
Some contribution limits are higher this year
A safe harbor 401(k) provision enables owners and eligible employees to defer up to their 401(k) maximums:
- Up to $18,500 in pre-tax deductions; up to $24,500 if you are 50 or older
- Contributions totaling $55,000 ($61,000 for those 50 and older), including both employee deferrals and employer contributions
So, if you’re thinking about a safe harbor 401(k), you only have a few weeks left. We’ll work to design a plan that will work for everyone, including the business owner.
Monday, October 1 is the deadline for setting up a safe harbor 401(k) this year.
Click below to set up a free 401(k) consultation. And if you already have a 401(k), then our team can help you implement a safe harbor provision for next year.
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