Tag Archives: Overfunding 401k

April 2017 Podcast Video, Financial Planning Tax Review and Earnings Update- By John Kvale

Whew, that was easy…. tax season is finally mostly over ….

We wanted to look back one last time on our personal taxes before we sunset those tax strategies for the high point of the season….

As a reminder,  we started with an Audio Podcast format for those that are unable to SEE the video or just prefer to listen to the audio… this makes the review slightly longer, but more descriptive.


April 2017 Video


Financial Planning Tip(s)-

AMT Tax Reminder

We ran across a lot of AMT or Alternative Minimum Taxes this season

Here are the key thoughts from our detailed post on AMT earlier this month-

  • Incomes between $170k and $313k joint and singles over $100k – you are in the cross hairs of AMT
  • Deferring income may be useful
  • Accelerate income

There is not a lot of planning changes with AMT, but in this case knowledge may be power!

Possible MAJOR tax reform

Late in the month an overview of major tax reform was released.

Here is a link from the White House

Here is a link from Barron’s that does a pretty good analysis

Here is our article on the possibilities earlier this month

What to do if you overfund your 401k/retirement plan

In our overfunding 401k post here, we discuss how your 401k/retirement plan can get overfunded….. here are the main points

  • Refund the extra amount ASAP
  • Apply the extra to the new year
  • If its a super small amount, its not the end of the world

Capital Market Comments

First Double Digit Earnings growth since 2011 expected

From our friends at Factset, who do a terrific job of outlining historic and future earnings.

Earnings are the ultimate driver of capital markets!

4-27-17 SP earnings estimates - Factset

What is nice about these estimates are that historically companies have been beating the street estimates … if this continues, the actual earnings may be even better double digit growth…. time will tell and we will be watching!

Hello May!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

What to do if you overfund your 401k/Retirement Plan and how to prevent it from happening!

Maximizing your 401k or other similar retirement plan is one of our favorite tax saving ideas. We recommend all do this mostly throughout the year evenly.

In most situations the plan administrator watches the funding levels and stops our contributions when they hit the maximum Federal allowed tax deferred level. There are a few situations that can allow for an overfunding of your plan.4911abd2-4b9c-408a-a953-d805a2ea9c1a-9907-0000085a4bc97ada_tmp

Change of Jobs

It makes sense, we change jobs and the new sponsor has no idea wha the old sponsored plan allowed us to defer. In this case, be sure to keep your last paycheck from your old employer, which we HIGHLY recommend anyway, and track your contributions.

Merging or splitting of your Company

If your company splits or merges with another company, it is highly likely the new plan will not have visual of your old contributions. Once again, keep your last paycheck from the old company and track your new company contributions.

Changing of Administrators

This is a less likely overfunding option, but occasionally, it does happen. Once again, keeping your last paycheck from the old sponsor and tracking your total contributions is a good idea.

Overfunded, Now What?

Accidents do happen  and this is not the end of the world. We would recommend you work with your current employer/administrator to apply the possible following fixes.

  1. Refund the extra funds- Watch your w-2 carefully as this can cause inconsistencies- Keep a year end copy of your last paycheck is a must on this!
  2. Apply the extra funds to the following year- Not always available – Can be the easiest if administrator has sophisticated systems.

Double Tax

If for some reason you are not able to reverse the over contribution, you will be double taxed. Your overcontribution will be taxed as income and then you will be taxed when the funds are distributed, leading to a double tax. Not the end of the world for a small amount, but larger amounts wil be cumbersome.

In closing, keeping a final paycheck in any type of change is recommended, especially in the examples we mention, along with a comparison of your W-2 will help prevent many of these and other problems.

Have a “Less Taxing” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.