Prepared to Boost Your 2024 401(k) Contributions? Discover the Importance of Taking Action Promptly.
Prepared to Boost Your 2024 401(k) Contributions? Discover the Importance of Taking Action Promptly.
Maxing out a 401(k) plan is quite a challenging objective. At present, the 401(k) limit for individuals below 50 years of age stands at $23,000, while those aged 50 and above have a $7,500 catch-up option, making their total contribution allowance for 2024 amount to $30,500.
In 2025, these limitations are set to enhance by $500. To be more precise, the contribution limit for workers beneath 50 will ascend by $500, while the $7,500 catch-up contribution remains unaltered.
Consequently, starting from the new year, workers below 50 can deposit a maximum of $23,500, and those aged 50 and above can contribute up to $31,000.
It may not be within your financial capabilities to fully maximize your 401(k) in 2024. However, you might be able to save more in your employer's retirement plan than you've contributed to date and are on track to contribute until the end of the year.
If you aim to boost your 401(k) contribution for 2024, prompt action is vital. Delaying could result in missing out on the opportunity.
Avoid missing the cutoff
The advantage of IRAs is that you have until the subsequent year's tax-filing deadline to make contributions. However, you do not have the liberty to complete funding your 401(k) for 2024 until the end of December of this year.
To have your contributions be counted under 2024 tax obligations, your money needs to reach your account by December 31 of the present year. Therefore, if you foresee an increase in your savings rate, making this decision promptly is crucial.
Unlike IRAs, which can be funded by moving funds from a bank account, 401(k) plans are funded via payroll deductions. This implies that someone within your company must process a modification to your wage structure.
If you delay until late November or December to execute this decision, the appropriate individual to handle this task may be on vacation due to the holidays or overwhelmed with other urgent tasks. Furthermore, depending on your company's payroll software, it may take a pay cycle or two to modify your 401(k) savings rate. As a result, completing the necessary paperwork during the first half of November is essential to ensure you can increase your 401(k) contribution as planned. Delaying beyond this point may prevent you from adding more money to your 401(k) as desired.
Steer clear of forfeiting a workplace match
Raising your 401(k) contributions as soon as feasible is particularly important if you're not on track to acquire your full employer match for the year. If you relinquish even a portion of that match, you're leaving potential money on the table, which could result in a greater financial deficit than anticipated.
Please remember that any money your employer contributes to your 401(k) is money that can be invested. If your 401(k) typically delivers an average annual return of 8%, slightly below the stock market's average return, then forgoing $1,000 in employer matching dollars today could result in a savings deficiency of approximately $15,000 in 35 years.
Even though it may not be feasible to maximize your 401(k) for 2024, striving to get as near as possible is advantageous. The more money you save today, the larger a nest egg you stand to retire with.
However, do not delay in making adjustments to your 401(k) contribution rate. Mark that task off your list during the first half of November to ensure it's taken care of, providing you with peace of mind.
To maximize your retirement savings, consider increasing your 401(k) contribution in light of the upcoming increase in contribution limits. With the new limits, individuals below 50 can contribute up to $23,500, and those aged 50 and above can contribute up to $31,000, starting from the new year.
Delaying your decision to increase your 401(k) contribution could result in missing the deadline for the current tax year. To ensure your contributions are counted under 2024 tax obligations, ensure your money reaches your account by December 31 of the present year. Furthermore, early action is crucial due to payroll processing times and holidays, especially if you need to modify your wage structure.