How to take advantage of higher 401(k) contribution limits for 2023

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If you’re looking to increase your retirement savings, there’s good news for 2023: a higher 401(k) contribution limit. And now is the time to adjust your procrastination, financial experts say.

You can channel $22,500 to your 401(k) account403(b) and other similar plans for 2023, up from $20,500 limit in 2022. Employees 50 and older can contribute an additional $7,500, up from $6,500 in 2022.

By 2021, about 14% of investors have maximized employee deferral time, according to estimated in 2022 from Vanguard, based on 1,700 plans and nearly 5 million participants.

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Catherine Valega, founder of Green Bee Advisory in Boston, said: “You’re so smart to do this. “Most people put [401(k) contributions] once and never look back.”

If you’re aiming to contribute up to a 401(k) for 2023, starting early can pay off, as it can be easier to allocate this amount than to contribute more at the end of the year.

Marguerita Cheng, Gaithersburg, Maryland-based CFP and CEO of Blue Ocean Global Wealth, adds time in the market could offer more growth potential.

“The sooner you can increase your contributions, the sooner you can make the money work for you,” said Cheng, who is also a member of the foundation. CNBC’s Advisory Board.

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Find out your 401(k) match before preloading

Higher earners may also consider preloading 401(k) contributions to reach the deferred limit before the end of the year.

For example, if you get your October bonus, you can preload 401(k) contributions to maximize the plan, freeing up more take-home pay for November and December.

Before maxing out early planning, though, you need to know how your 401(k) match works, says Valega. Many companies only make matching payments when you defer part of your paycheck.

The sooner you can increase your contributions, the sooner you can make the money work for you.

Marguerita Cheng

CEO and Co-Founder of Blue Ocean Global Wealth

In that case, you won’t receive the full employer matching amount unless you contribute your 401(k) each pay period.

However, other plans have what’s called “adjusted,” meaning the company calculates 401(k) matches on an annual basis rather than per pay period.

“That means they don’t really care when you put the money in,” Valega explains. “They’ll make sure you get the full game at the end of the year.”

You can learn more about your match by checking your 401(k) summary plan description, describing how the account works, or reviewing the documentation with a financial advisor.

When is the 401(k) contribution limit?

While the maximum 401(k) contribution is a lofty goal, there are reasons why you might decide to limit procrastination after receiving a company match.

“Of course, this can vary depending on the goal,” says Marianela Collado, CFP and CPA at Tobias Financial Advisors in Plantation, Florida.

For example, if you’re saving for a down payment on a home, you can temporarily reroute the funds to meet your short-term goals, she says.

Likewise, if you have high-interest credit card debt or don’t have an emergency fund, you can allocate the money elsewhere before increasing your 401(k) late payment.


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