Although there’s plenty of time left before we ring in the New Year, now is the time to do an end-of-the-year check to make sure your retirement plan is helping you reach your goals.
Firstly, checking your plan a few months before the end of the year gives you enough time to make any changes to your contribution amount. If you need to make a change, that adjustment can take one to two pay periods to process, meaning you may have to wait two to four weeks for it to go into effect. Don’t wait until the last minute!
Secondly, if you’re planning to max out your 401(k)/403(b) contributions for 2023 ($22,500, or $30,000 if you’re over 50 years old and making catch-up contributions1) checking now means you can see whether you’re on track or need to adjust. You can only contribute to employer-sponsored retirement plans via your paychecks for the same calendar year you earned the wages – that is, you can’t make lump sum or backdated contributions. So if you need to make adjustments, now’s the time to do it!
Confirming Your Contributions
Did you start your current job this year or become eligible for retirement benefits in 2023?
Double-check that you are enrolled in your 401(k) plan (or were enrolled automatically if your employer’s plan has that feature). Now is also a great time to confirm that you’re contributing the right amount to your 401(k) based on your goals and retirement timeline.
Here’s what to do:
- Sign in to your recordkeeper’s website—this is the institution that holds your account and lets you process transactions
- Confirm that you are enrolled in your plan and contributing more than 0% or $0
- Confirm that your contribution amount meets your goals for the year
- If you need to make changes, most recordkeepers allow you to edit your contribution amount online. If you can’t, connect with our SMARTMap team here and we can help!
Maxing Out Your Contributions
If you plan to max out your 401(k) in 2023, watch out for excess contributions, which are a headache at tax time. Some employers have an automatic “stop” built into their payroll system to prevent you from overcontributing, but not everyone does. Check with your HR department to find out whether your company has this feature installed.
If your workplace has an automatic stop in place for contributions, here’s how to make sure you’re maxing out your 2023 401(k) deferrals:
- Sign in to your recordkeeper’s website
- Ensure your contributions will reach the maximum amount for 2023 by your last paycheck of the year
If you don’t have an automatic stop in place, here’s what to do:
- Sign in to your recordkeeper’s website
- Check your current contribution level and projected annual contribution against the yearly limit
- Adjust your contribution so you’ll get close to—but not exceed—the limit for 2023
- If you need to change your contribution amount, schedule a call with our team for assistance
Preparing for the Future
Take the time now to make the most of your workplace retirement plan. Checking your contributions helps ensure you get the maximum benefit from your retirement account – every dollar counts, especially with the power of compound interest!
If you have any questions about your company’s retirement plan, feel free to set up a call with the team here at SMARTMap.
1) Internal Revenue Service Notice 2022-55. https://www.irs.gov/pub/irs-drop/n-22-55.pdf
Prepared by a third-party.