It’s September 5th, 2021 and I am just about to open a 401k, offered by my employer (unfortunately, a John Hancock with .84% fees).
Onboarding for this new job, I marked in the NY withholding form (IT-2104) that I would withhold 6 credits in NYC, i.e. $6,000 will be contributed to a deductible account (traditional IRA or 401k etc).
Since tax season is April 2022, how much do I need to contribute?
I'm thinking $6,000/the number of my paystubs up until April 2020; I get paid twice a month, so I assume 6,000/14 (14 = 7 months till April, * 2).
Can I supplement my 401k with e.g. a Vanguard traditional IRA to reach $6,000, independent from my employer?
Contributions to a 401K can only be made thru the payroll system during the tax year for the same tax year and have a different contribution limitations. Having a 401K at the job can limit the deducibility of the IRA contribution that can be made up to the filing deadline of the return.
....AND , if you confirm that the employer plan is a 401k, then that contribution limit is 19,500 for anyone under age 50 . The 6,000 deduction limit is only for contributing a separate IRA you open yourself. IRAs and 401k plans are not the same thing.... But, as already noted, being able to contribute anything to a 2021 deductible IRA , may be limited, or prohibited by the fact that you are contributing to a 401k thru your employer.
Definitely, talk to the administrators of the employer plan to confirm exactly what that plan is....and it's contribution limits.
Contributions to 401(k) can only be made by employer payroll and cannot be backdated. The only contributions that will count for 2021 are contributions from paychecks that you receive in 2021 where the funds are actually deposited with the trustee in 2021. If you can afford to have $500 per paycheck deducted, that would be $4000 for 2021. If you could afford to have $2000 per paycheck deducted, that would be $16,000 for 2021, and would still be within the contribution limit. You could reset your deductions beginning January 1 to a figure that would be appropriate for an entire year.
It is very important to understand that although a 401(k) and an IRA have similar goals, they are controlled by different sections of the tax law and have some rules that are very different. You will want to familiarize yourself with both sets of rules. For one thing, the $19,500 limit on 401(k) contributions and the $6000 limit on IRA contributions are completely separate. In some circumstances, depending on your income level and financial resources, it may be possible to contribute $19,500 to the 401(k) and $6000 to the IRA, for a total contribution to tax deferred retirement plans of $25,500.
Your ability to make tax deductible contributions to an IRA may be limited depending on your income level if also participate in an employer plan, as mentioned above.