Can I Contribute Into More Than One 401k From Two Different Jobs?
- No matter how many 401k plans you contribute to, you must not exceed the annual contribution limit put in place by the Federal government. For the 2011 tax year, that contribution limit is $16,500, plus an extra $5,500 if you are 50 years of age or older. Those limits represent the total combined for the two plans, not the figure for each plan you have available.
- Companies are free to impose their own limits on 401k contributions, beyond the limits the federal government sets. Some companies limit the percentage workers can contribute, and that could reduce the amount you can put away. If one plan offers unlimited contributions and the other imposes a cap, you might want to contribute as much as you can to that second plan, then use the unlimited 401k to put away the rest of what you can based on the federal limit.
- If you do have two 401k plans available, you need to decide how best to split your contributions. One possibility is to use your highest-paying job to fund your regular 401k contribution, and use your moonlighting gig to fund your $5,500 catch-up contribution. You could also use one 401k contribution to buy stock mutual funds, while using the other to buy bonds and guaranteed investments.
- Having more than one 401k plan in place can be a bit trickier in terms of tracking your contributions and making sure you do not exceed the federal limits. The administrator of each 401k tracks your contributions and automatically stops them when you reach the annual $16,500 or $22,000 limit. But that administrator has no way of knowing how much you have contributed elsewhere, so it is up to you to watch your pay stubs and stop your contribution at one or both jobs when you reach the annual limit. If you do exceed the contribution limit, you must contact the administrator of the plan and make arrangements to have the funds, and any money it has earned, returned to you.
