We got a bonus at work, and I had to decide how much of it to put into my 401K. I did so, and the numbers seemed roughly correct when it was disbursed at the end of last month. (Spoiler: it was not.)
But then I see my next regular paycheck, and my take home is much lower than it usually was. Then I see my mistake: I brilliantly entered the larger percentage I meant to enter with my 401K bonus as my regular Roth percentage instead and didn’t notice. That means a lot less of my bonus into the Roth and was “replaced” by a much larger share than usual of my regular pay going in instead.
I’m assuming there’s no way to fix this, but here’s my question: how much money am I potentially losing out on from company matching because of this? Should I keep the Roth share bumped up to “make up” for it, and use the extra cash I got from the bonus instead? How do I calculate what the best thing to do is?
I’m not following this. Could you post with actual numbers (even if they’re made up?)
Like maybe a normal paycheck looks like
gross: $100
taxes: $20
401k: $5
take-home: $75
And now it looks like?
Is it a Roth 401k that you accidentally put it into? Are you sure your company doesn’t match the Roth? How, precisely, does the matching work? Is it matched on a per-paycheck basis, or just matched up to a percentage of the total over the year?
It doesn’t really matter whether it was your bonus or your regular pay that went into the account. It’s all income that’s going to get treated the same at tax time.
Okay, let’s see if I can answer. It’s a per paycheck basis, though my company has a policy that matches full amounts even if you hit the limit early. But what happened is this: suppose these were my elections before:
401K: 10%
401K bonus: 5%
Roth: 10%
Roth bonus: 5%
What I wanted to do was change the bonus lines to 25%. What I did instead was:
I’m also not following exactly what happened, but if you want to try to change it, I think a conversation with your payroll department is in order. They should be able to change the contribution amounts to what you originally wanted.
IANA financial adviser, but I don’t think there is a problem.
If at the end of the year you want to have a certain total amount in your 401K and your Roth, just make adjustments later to get where you want to be. As iamthewalrus said, it is all fungible - bonus dollars are indistinguishable from paycheck dollars for all intents and purposes.
Had your employer not made sure you get the full match even if you hit the limit early, there would be a potential for problems, but that is not the case.
Even if they can’t adjust it after the fact, just figure out how much you want in each account and adjust the percentages until it’s there, then go back to your default.
Like, if your bonus was $20k and you wanted to have $5k of that go into the Roth but you only had $1k put in from your bonus, and your normal paycheck is $5k and you wanted to have $500 go in, but actually $1250 went in, then what you have is:
desired Roth amt: $5500
current Roth amt: $2250
So increase your normal paycheck % so that the normal amount you want ($500) plus the catchup for your error ($3250) goes in, leave it for one paycheck (for my example, that’d be 75%), then switch it back. Or if you can’t put that much in from one paycheck, then choose a smaller percentage and leave it for more paychecks until it gets to where you want it.
It doesn’t matter if the money came from your bonus or your normal paycheck. It’s all just money.
You actually touch on the main concern I was about to follow up with: how to calculate exactly how much more to withhold and for how long. The reason I didn’t notice the bonus contributions being wrong was that I’m bad at math. Considering in terms of just the one bonus payment and just the one paycheck really helps. Thanks!