You can have up to 50 percent of your paycheck go to your 401k so would it be possible to make that change right before leaving? Might save more on taxes that way and then I believe you can draw from your 401k 30 days after your last day. Anyone with better knowledge of this please share as it could help some people out.
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I'm pretty sure someone at our club tried to do that and couldn't.
I don't believe so. Unless things have changed. I left the WM HO in 2017 after 10 years. What I saw when someone was laid off was that the 401k contributions were stopped while the associates were given 60 days to find a new job within the company. They only restarted if the associate found another job. The stores may be different but WM more than likely doesn't want to pay that match out knowing you're gone.
Post ID: @VOA0l2i-ood
Thanks for the great info. I get so frustrated when people complain about paying a higher percentage on certain income ie bonuses, PTO payouts etc when they will get any “overtaxed” money back when they file their federal income tax.
This is doable this way. However it depends on your severance. If your severance exceeds 18K you will be taxed twice, or three times. Here is how it would work:
Any contribution to 401K over 18K will be taxed, the money will then be locked into 401k, let's call that amount "A" - money that exceeds 18K, is in 401K and has already been taxed (that's your first tax on A)
Upon departure, you can draw amount A from 401k
Amount A is a subject to 10% penalty, that's your second tax on A
Amount A is reported as income when you do taxes, you are taxed on it based on your regular tax rate
If you do not go over 18k, you are taxed 10% penalty and your regular tax rate when you do your taxes.
A better alternative would be to let them tax you at 50% now, do taxes in January and get about 30% back as you will be overpaying (I am assuming most of us have about 20% effective tax rate, therefore at 50% we are overpaying and will be paid our 30% back)... So, you need to wait Nov, Dec, Jan but you do not pay the penalty and you are not taxed twice.
I hope this makes sense...