We are already in the middle of October and the end of the year will be here before we know it. Now is the time to check your paystub and make sure that you are on course to max out your employee contributions to your employer-sponsored retirement plan.
I just want to point out that this information pertains to W-2 employees that participate in a retirement plan at work, such as a 401k, 403b, or SIMPLE IRA. If you are self-employed or a 1099 contractor, you most likely have some type of self-employed retirement plan, like a Simplified Employee Pension (SEP) plan or IRA. For these plans, you have until the date that you file your tax returns to make the contributions.
Before doing anything, check your latest paystub to determine how much you have contributed to your retirement plan year-to-date. Also, check out how much you contribute per pay period. Pay periods are typically every two weeks. If you are salary based, this amount should be the same each pay period. Then you can calculate how much you will contribute for the rest of the year.
Using the 2 week pay period as an example, if you look at your pay stub for the pay period ending this week, 10/15/2021, you can take that contribution and multiply it by 5 (number of remaining pay periods in 2021) and then add it your contributions year-to-date to figure out your total employee contribution for 2021. If this amount is less than the max contributions allowed in the table below, you can update your contribution rate on your retirement plan’s website or contact your payroll department to make the change.
Here are the maximum employee contributions in 2021 for the most common retirement plans:
| 401k | 403b | SIMPLE IRA | |
| 2021 max contribution | $19,500 | $19,500 | $13,500 |
| Catch up amount if over age 50 in 2021 | $6,500 | $6,500 | $3,000 |
For example, if you are age 52, you can contribute a total of $26,000 of your pay to your 401k. There can be some variations to the general rules, depending on your plan documents, so be sure to check with your employer.
Please let me know if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
