rally round the 401k, pocket full of shells

[CrazyErnie]

Anybody know if you can continue to contribute to a 401k (or other employee retirement plan) while on military leave for Guard duty?

Thanks.

 

[Alex Chilton]

You can continue to contribute to a civilian 401K as long as you are still getting paid by your civilian employer while you are on military leave. For example, if your civilian employer pays you a pay differential between your military base pay and your civilian pay, you can contribute to a 401K.

You can contribute 100% of your pay into a 401K, but only 50% will be tax deferred.

 

[fredflyer]

If you are on an extended activation, and not getting paid by your civilian employer, you will still have the opportunity to make up contrbutions that you would have made if you had not been activated, once you return. If your company has 401K matching, they would have to contribute as well. You have (I think) up to three times the length of time you were activated to make up payments, i.e. if you were activated for a year, you would have 3 years to fully make up for that lost year. That way, you're not killing your take home pay in order to make up for the lost year.

 

[RVSM]

DISCLAIMER! I am not a tax or financial proffesional

Contribute your money on a before tax basis to the Thrift Savings Plan (TSP)
after you come off active duty roll the TSP into your existing 401K. Check with an accountant or someone in DFAS/payroll to get more info.

Fredflyer is correct in that you have 3x the amount of time on active duty to pay in your part of the 401k catchup after you return. This is an allowed exception to the normal max contribution rules.

If TSP will not work for you then put what you would put in the 401 into an account. When you return pump up your 401k contribution (a before tax contribution) to the max you can stand to get caught up. Use the saved money to offset the income now going to 401k. Key words to remember are "before tax contribution" and "compounded interest".

The faster you get caught up the more money you will have at retirement.
Always take into account that money contributed before taxes is roughly a 33% more money compared with taking your post tax money from the savings account to make up the 401k Catch up amount.

 

[UHBlackhawk]

The info about putting money in your 401K up to 3 years after the return is true. This is what I did (after maxing out the TSP as others have said).
Also, don't forget the Deposit Savings Plan. This is available to all personnel deployed to combat zones. You can put the equivalent of one months salary at a time, up to a total of $10,000 dollars in this. It earns 10% interest (not tax free). Must be withdrawn 90 days after returning. I put in $10,000 (two instalments to meet the max pay check requirement), when I was boots on the ground; I got over $11,000 back one year and 90 days later. Not bad for a plan where you principle is safe.
Finally, if you have been putting your money in a regular IRA, consider rolling it over to a ROTH while you are deployed. You will pay tax on the roll over, but your rate will probably be much lower since most of your pay is not taxed.
And after the TSP, 401K, don't forget to contribute to the ROTH.