Should I lower my post-tax or pre-tax contributions to my 401k?

I am currently contributing 15% post-tax and 15% pre-tax of my pay to my 401k. My company contributes a 4% base amount and matches up to 6% (for a total of 10% if you contribute 6%). So I am already above the amount they match. I am in the situation where I would like a little more spending money, so I am considering lowering one of my contribution amounts to 10%.

I have had no problem maxing out my 401k contributions the past several years and expect to do the same this year even with the lowered amount (if that information is relevant).

Many people who are trying to hit the max by the end of the year try to reach the limit on the last check of the year.

They do this because:

• Spreads the pain across the entire year.
• Makes sure they get the who match. Though some companies will true up the match, not all do.

Sometimes this is hard to do when the pay in each check isn't consistent, or they receive a large bonus near the end of the year. One way to address this is to specify a $/check value instead of a percentage of the gross.

So dropping the contribution amount to still hit the max in December would be a viable plan. You will have to run the numbers yourself because we don't know your salary, and we don't want to know your salary.

Would it be better to lower my pre-tax contributions or my post-tax contributions?

You need decide separately if you want to be contributing to a Roth or traditional 401(k); or splitting your contribution between the two. It depends on your current marginal tax rate, and where you fit within that bracket. It also depends on where you expect future rates to go.

In reality most people will over their lifetime want a mix of both, but this years contribution depends on where you are in your working life.

Notes:

• A new law requires that if you are 50 and your FICA taxable earnings for the previous year are over 150K your catchup contribution must be in Roth, even if you want it to go to your traditional 401(k).

• Some companies allow the company match for Roth contributions to go to the Roth account, so you should investigate that option if your company allows that. Though you will have to pay taxes in the current year for their match.