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diverging accounts, which way to maximize long term gains

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outoftheblue
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diverging accounts, which way to maximize long term gains  Reply with quote  

Just got told last week that i make too much money and there is a new rule somewhere in the govt which says i can no longer contribute maximum amts to my 401k, and can only add 4%. that stinks. my company does allow me to start contributing to a 403b, so i will just add in the difference to make the same contribution. my question is this: now that i have the same money goinig into two different accounts, how much will this affect the compounding effect of the interest (or not at all)? the reason i am not just putting all of it into the 403b is bc my employer matches up to that 4% in the 401k, so i want to take advantage of that.

thanks for the help
Post Mon Jan 13, 2014 5:43 pm
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clydewolf
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Re: diverging accounts, which way to maximize long term gain  Reply with quote  

quote:
Originally posted by outoftheblue
Just got told last week that i make too much money and there is a new rule somewhere in the govt which says i can no longer contribute maximum amts to my 401k, and can only add 4%. that stinks. my company does allow me to start contributing to a 403b, so i will just add in the difference to make the same contribution. my question is this: now that i have the same money going into two different accounts, how much will this affect the compounding effect of the interest (or not at all)? the reason i am not just putting all of it into the 403b is bc my employer matches up to that 4% in the 401k, so i want to take advantage of that.

thanks for the help

I have never heard of an employer sponsoring both a 401k and a 403b plan.
But I don't mind learning.

One question, Are you sure the second plan is a 403b and not a 457?

Any way, the reason you are limited on your 401k contributions is not a new rule, it has been around since 401k plans started. This rule is there to make sure that every employee can participate in the plan, not just the highly paid employees. The way to do this is to limit the contributions of the highly compensated employees.
OR have more of the lowly compensated employees participate in the plan.

To answer your question, if the investments in both plans are the same, the only difference would be in the expenses charged by the administrators.
Post Tue Jan 14, 2014 12:44 am
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outoftheblue
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i work for a hospital. not sure if that is why we have 403b and 401k. so, it sounds like splitting up into two accounts should not affect the long term compound interest as long as i keep contributing the same amount total?

seems like a ridiculous and capricious rule. im not sure how limiting how much i can put into a 401k helps the next guy to save. getting a big whiff of stanky old politics at play.
Post Tue Jan 14, 2014 7:32 pm
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coaster
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blue, you're using the term "compound interest" ... do you mind sharing what your accounts are invested in?

~Tim~
Post Wed Jan 15, 2014 5:46 am
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