retirement

Give Your 401(k) a Midyear Checkup

Now is a good time to review your 401(k) contributions to make sure you're getting your employer's full match.

Question: I've been contributing to my 401(k), and my employer matches a portion of my contributions. Does the $18,000 maximum for contributions include the employer match, or does it apply only to my individual contributions? Is it too late to increase my contributions to get the full employer match by the end of the year?

Answer: The $18,000 maximum (or $24,000, if you're age 50 or older) applies only to your contributions. The overall maximum for 2017, which includes the employer match, is $54,000 ($60,000 if you're 50 or older), even though it would be very unusual for your employer to add that much money to your account.

Match calculations vary by 401(k) plan. But the average match in plans administered by Fidelity Investments is 4.5% of a worker's pay. This is a great time of year to review your 401(k) contributions and make sure you're getting as much money as possible from your employer. About 20% of people don't contribute enough to get the full match, says Fidelity's Meghan Murphy.

The procedures for changing your contributions vary by plan, but you can usually make revisions online or by calling the plan administrator at any time. Your new contribution level will generally take effect within two pay periods, says Murphy. Find out how your employer calculates the match before deciding how to boost your contributions. Some limit how much they'll match per pay period, so if you add a lot of money all at once, you may not get the full match. In that case, you should spread your extra contributions out over the rest of the year.

Be careful not to contribute more than the annual limit. Your plan administrator usually tracks the amount you contribute for the year, so that you don't accidentally cross the limit when you boost the money you put in. But it's a good idea to keep track of the amount yourself, too. And it's particularly important to monitor contributions if you've changed jobs in 2017 and your new plan administrator doesn't know how much you've put away in your old employer's plan for the year.

This is also a good time to make sure you're taking advantage of catch-up contributions if you're 50 or older. You can contribute up to an extra $6,000 anytime in the year you turn 50. No need to wait until your birthday.

Most Popular

Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
October 15, 2020
Election 2020: States With Tax Questions on the Ballot
Politics

Election 2020: States With Tax Questions on the Ballot

On November 3, voters in 17 states will weigh in on a variety of proposed changes impacting taxes on everything from property to pot.
October 15, 2020
Will Joe Biden Raise YOUR Taxes?
taxes

Will Joe Biden Raise YOUR Taxes?

There's little doubt that, if elected, Joe Biden will try to raise taxes for some people. Will you be one of them?
October 16, 2020

Recommended

The Best Vanguard Funds for 401(k) Retirement Savers
mutual funds

The Best Vanguard Funds for 401(k) Retirement Savers

Vanguard funds account for a third of the 100 most popular 401(k) retirement products. We rank Vanguard's best actively managed funds, including its t…
October 21, 2020
The 100 Most Popular Mutual Funds for 401(k) Retirement Savings
401(k)s

The 100 Most Popular Mutual Funds for 401(k) Retirement Savings

These funds have the most assets under management in 401(k) workplace retirement plans
October 9, 2020
4 Reasons 401(k) Plans Still Make Sense
401(k)s

4 Reasons 401(k) Plans Still Make Sense

These tax-advantaged accounts remain the backbone of a retirement saving strategy, despite what naysayers might argue.
August 25, 2020
Deadline for Returning RMDs to Retirement Accounts is Approaching Fast
Coronavirus and Your Money

Deadline for Returning RMDs to Retirement Accounts is Approaching Fast

Retirees who took a required minimum distribution earlier this year need to act quickly if they want to avoid taxes on the money they withdrew.
August 24, 2020