Fidelity 401k offers a feature that automatically stops contributions once a predetermined investment limit is reached. This limit can be established as a specific dollar amount or as a percentage of one’s salary. Once the limit is met, contributions to the 401k are paused until the following year. This automatic stop mechanism helps participants avoid over-contributing to their 401k, which could result in potential tax penalties. However, it’s important to note that participants can adjust or remove the contribution limit at any time, allowing them to resume contributions if they wish.
Automatic Contribution Limits
Fidelity 401(k) plans have automatic contribution limits in place to ensure that employees do not contribute more than the legal maximum each year. These limits are set by the Internal Revenue Service (IRS) and are adjusted annually for inflation.
- 2023 Contribution Limit: $22,500
- Catch-up Contribution Limit (age 50 and older): $7,500
If you contribute more than the automatic limit, your employer will stop deducting contributions from your paycheck until the end of the year. You will not be able to make additional contributions during this time.
How to Avoid Overcontributing
There are a few things you can do to avoid overcontributing to your Fidelity 401(k) plan:
- Monitor your contributions regularly. You can check your account balance online or through the Fidelity mobile app.
- Estimate your total contributions for the year. This includes contributions from your employer, as well as any rollovers or transfers.
- Reduce your automatic contribution rate. If you are on track to exceed the limit, you can reduce your contribution rate to avoid overcontributing.
| Contribution Type | Contribution Limit | Catch-up Contribution Limit |
|---|---|---|
| Employee Contributions | $22,500 | $7,500 |
| Employer Contributions | $66,000 | N/A |
Fidelity 401k: Understanding Contribution Limits
Fidelity Investments, a leading provider of 401(k) plans, offers a range of retirement savings options. However, when it comes to contributions, it’s crucial to be aware of the limitations in place.
Employer Contribution Matching
Many employers offer matching contributions to employees’ 401(k) accounts. This means they will match a certain percentage of the employee’s contribution, up to a specified limit.
For example, if your employer offers a 50% match, and you contribute $1,000 to your 401(k), your employer will contribute an additional $500.
Contribution Limits
There are both employee and employer contribution limits set by the Internal Revenue Service (IRS). For 2023:
- Employee limit: $22,500 (plus a $7,500 catch-up contribution limit for those aged 50 or older)
- Employer limit: $66,000 (plus a $14,000 catch-up contribution limit for those aged 50 or older)
These limits are in place to ensure that employees and employers do not save too much in tax-advantaged retirement accounts.
Automatic Stopping of Contributions
Once you reach the employee contribution limit for the year, Fidelity will automatically stop deducting contributions from your paycheck. This is to prevent you from exceeding the IRS limits and incurring penalties.
However, employer matching contributions will continue even after you reach the employee contribution limit. This is because employer contributions do not count towards the employee limit.
Table: Fidelity 401k Contribution Limits
| Contribution Type | Limit (2023) |
|---|---|
| Employee | $22,500 + catch-up |
| Employer | $66,000 + catch-up |
By understanding the contribution limits and how Fidelity handles automatic stopping, you can ensure that you are maximizing your retirement savings while staying within the IRS limits.
Rollover Options upon Limit Reached
Upon reaching the 401(k) contribution limit set by the IRS, Fidelity offers participants the following rollover options:
- Rollover to a Traditional IRA:
- Tax-deductible contributions if you meet eligible income requirements.
- Tax-free withdrawals of principal contributions.
- Potential tax on earnings upon withdrawal.
- Rollover to a Roth IRA:
- After-tax contributions, so no immediate tax deduction.
- Tax-free withdrawals of contributions and earnings after meeting certain conditions.
- Rollover to a 403(b) or 457(b) plan:
- Tax-deferred contributions, similar to 401(k) plans.
- May offer different investment options and fees.
| Plan Type | Employee Contribution Limit | Employer Contribution Limit |
|---|---|---|
| 401(k) | $22,500 ($30,000 for those aged 50 or older) | $66,000 ($73,500 for those aged 50 or older) |
| 403(b) | $22,500 ($30,000 for those aged 50 or older) | $66,000 |
| 457(b) | $23,000 ($31,000 for those aged 50 or older) | $66,000 |
Investment Allocation Adjustments
When you reach the contribution limit for your Fidelity 401k, automatic contributions will stop. However, you can adjust your investment allocation to redirect contributions to other investment options within the plan.
Here’s how to adjust your investment allocation:
- Log in to your Fidelity 401k account.
- Click on the “Investments” tab.
- Click on the “Change Allocation” button.
- Enter the desired allocation percentages for each investment option.
- Click on the “Submit” button.
Once you have adjusted your investment allocation, any contributions that exceed the limit for one option will be automatically redirected to the other options based on the percentages you specified.
For example, if you have reached the contribution limit for your stock fund and have 10% of your contributions allocated to that fund, the remaining 90% of your contributions will be directed to your bond fund.
| Investment Option | Contribution Limit |
|---|---|
| Traditional 401(k) | $22,500 per year (plus catch-up contributions of $7,500 for those age 50 or older) |
| Roth 401(k) | $22,500 per year (plus catch-up contributions of $7,500 for those age 50 or older) |
Hey there, folks! We hope you found this little exploration into the ins and outs of your Fidelity 401k limit helpful. Remember, it’s always a good idea to keep an eye on your account and make sure you’re on track to reach your retirement goals. If you have any more questions, feel free to give Fidelity a call or drop by their website. Thanks for reading, and we’ll catch ya later for more financial fun!