### Strategies for High Earners Facing 401(k) Contribution Limits

David must proactively explore a Safe Harbor 401(k) plan and diversify savings strategies to maximize his retirement contributions.

### Navigating 401(k) Contribution Caps for High Earners: Strategies for Effective Savings
* 💼 Many companies impose a cap on 401(k) contributions for high earners, typically those making over **$150,000**, to ensure equitable benefits between highly compensated and non-highly compensated employees.
* 🔍 It's essential to check with your HR department to see if your company can amend its plan to a **Safe Harbor plan**, which would allow **higher contributions without the risk of refunds due to testing failures**.
* 📊 If a Safe Harbor plan isn't feasible, request guidance from your employer on the **safe contribution limits for the upcoming year** to avoid issues with **excess contributions**.
* 💡 Consider asking if there will be an opportunity for **year-end adjustments**, allowing you to contribute any **additional bonuses** without complications.
* 💰 Even with a cap on your 401(k), it's crucial to maintain your savings strategy by **maximizing contributions to other accounts** like a Roth IRA or Health Savings Account (HSA).
* 📈 Diversifying your investments into a regular after-tax brokerage account can also help build your wealth, ensuring you still aim to **save 25% of your gross income** for future needs.
* 🔄 Remember, while tax-advantaged accounts provide benefits, **consistent saving remains vital for your financial future**, regardless of the limitations imposed by your 401(k).

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High-earner 401(k) investment cap and initial advice.

Company limits 401(k) investment to 11% due to high earner status.

Explanation of 401(k) plan testing to prevent highly compensated employees from disproportionately benefiting.

Focus on preventing highly compensated employees (over ~$150,000) from receiving substantially greater benefits than lower-income employees.

Many plans use Safe Harbor plans to automatically pass testing, allowing high earners to maximize contributions.

Analysis of the current 401(k) plan and potential solutions.

David's company's plan likely lacks a Safe Harbor provision, leading to contribution caps.

Suggesting to inquire with HR or management about amending the plan to a Safe Harbor plan.

Exploring if a Safe Harbor plan would be more cost-effective for the company.

Prioritize checking for plan updates to allow for uncapped savings.

Alternative strategies if a Safe Harbor plan isn't feasible.

If a Safe Harbor plan isn't possible, determine the safe contribution percentage for the year.

Inquire about year-end adjustments to potentially contribute extra without W-2 restatement.

Proactively manage contributions to avoid yearly issues.

Explore alternative savings options if the 401(k) cap remains.

Maximizing savings despite 401(k) limitations.

Continue saving despite reduced tax advantages; aim for 25% of gross income.

Maximize Roth IRA, backdoor Roths (if applicable), and HSAs.

Invest in a taxable brokerage account to supplement retirement savings.

Maintain the goal of saving 25% of gross income, even with reduced tax benefits.