With only a few pay periods left in the year, it’s time for those who intend to maximize salary-deferral contributions to an employer 401(k), 403(b), or 457(b) retirement plan to double check their pay statement to make sure things are on track before the end of the year. The maximum elective deferral for 2023 – due by the end of the calendar year – is $22,500 with an additional $7,500 catch-up contribution for those age 50 and older. Beyond checking the math to confirm you are maximizing your opportunity to save for retirement, there are a few additional circumstances that merit extra attention to your plan contributions:
You Changed Jobs
If you switched jobs during the year, there is not only a risk you could miss out, but also a risk you could overcontribute. You cannot “double up” on contributions to multiple employers during the year, so it is important to coordinate the full year amount. If a new job had a waiting period before you could contribute, your deferrals might have fallen off pace and require a high deferral percentage to fully contribute the annual maximum before year-end.
Your Company Changed Payroll Provider
An administrative hiccup is always possible when it comes to changing systems and service providers. If your employer switched from one payroll processor to another mid-year, it could be wise to take the last paystub from the earlier company and your most recent paystub from the new company to make sure the combined total of retirement plan contributions are in line with your expectations.
Your Company Changed Pay Cycles
Like changing payroll companies, changing the timing of compensation is known to cause glitches. For example, if you were on an every-other-week payroll schedule and moved to monthly, the transition could have interrupted 401(k) deposits.
Your Company Changed 401(k) Sponsor
One hopes that a move from one 401(k) provider to another would be seamless but in practice that is not always the case. This is another example of a situation where a mistake could be outside of your control, but ultimately you are the one responsible to ensure your contribution was made in a timely manner for the amount you intended.
You Turned 50 During the Year
Most plans allow a catch-up contribution for those age 50 and older (non-governmental 457(b) plans do not). Some plans are better than others at notifying you of this additional savings opportunity. Especially if you turn 50 late in the year, you should take extra care to confirm if you will in fact fulfill the catch-up amount ($7,500 in 2023) before year-end.
Putting it All Together
If you aren’t sure what to look for on your paystub or are getting mixed messages from your benefits department, Heritage can take a look at your records to help keep you on track to reaching your retirement goals.
ICYMI: Our Year-End Planning 2023 webinar shares both new and tried and true planning opportunities that can help you maximize your wealth and prepare for 2024 before the year draws to a close. If you missed it, be sure to watch the replay!
- 2023 Important Financial Numbers summarizes income tax rates, contribution limits, deductions, and social security details you need to know for 2023.
- Checklist: What Issues Should I Consider Before the End of the Year?