Retirement Forum

geormes · Newbie Joined: 21 Feb 2010 Posts: 2

I was just laid off this month(Feb. 2010). I can leave my inactive 401 where it is as long as I want.
My question is: Can I still contribute the max this year even though I am no longer an employee and the account is inactive? I will receive a buy out and would like to avoid a big tax hit if possible.

AnthonyK · Newbie Joined: 06 Sep 2006 Posts: 77

My answer would be no going forward because employee 401k contributions are salary deferrals. However since you did work in 2010 for two months then you may be able to contribute. The best way is to ask your 401k plan administrator because there may be some plan specific rules at your company as not all 401k plans are identical.

Another venue would be to max a tax deductible contribution to an IRA, if your income is less than $89,000 if you are married.

geormes · Newbie Joined: 21 Feb 2010 Posts: 2

Thanks for the speedy reply. The plan administrator's reply was "I'll have to get back to you on that".
The max contribution to an IRA would be 6k if I was under 89,000. The buyout alone will put us over the max.
I could retire this year if that would help our tax burden in some way.
Next year will not be a problem, in fact just the opposite. Too bad income averaging was repealed.