First of all, you need to understand what maxing out means. In case you are new to retirement plans, there are a few things you need to know. When you max out retirement savings account like a 401(k), it means you have made as many contributions as you are allowed to. So you have deposited or contributed the maximum amount that is permitted. It could be an Individual Retirement Account –IRA– or something like a defined contribution plan. Take for example a 401(k).
Remember that not only may these limits vary from one year to another, but also depends on your age. Being younger than 50 means you can contribute to your 401(k) up to $20,500 in 2022. In 2023 it will be higher though. You could put in as much as $22,500 in 2023. However, as retirement is closer to those who are 50 years old or older, they have a different limit. In this case, it is quite a lot of money extra. This lump sum is called a catch-up contribution and it goes up to $6,500 extra in 2022.
Whereas it will be one thousand dollars more in 2023 reaching $7,500 for those aged 50 or older. So this age group can contribute up to $27,000 in 2022 or &30,000 in the coming year. Whenever possible, you should max out your retirement savings plan. It does not really matter if it is IRA or 401(k). Do not miss a chance to boost your nest egg for your future retirement.
Can you max out your 401(k) retirement savings plan before the year comes to an end then?
As long as you have not exceeded the deferral limit for the year you can max out your 401(k) plan. However, you should take into consideration that some plans do not allow you to make large contributions in a short period of time. Some plans only let you contribute up to a maximum per pay cycle. The thing is you need to have saved with your earnings as much as $20,500 this year and you are younger than 50 years old.
It would have been best to pay regularly rather than wait to have a big lump sum that may not be possible to pay. If you are older than 50, you should have saved even more. The amount goes up to $27,000 for your 401(k) plan. Once more, check the amount of money you are allowed to pay during each pay cycle in order to know it for sure.
Once you have maxed out there are several things you can do. Do not forget about your employer’s match whenever there is a possibility. This percentage, no matter if it is high or low is essential to make the most of your 401(k) savings plan. In addition to this, have a look at the different programs that there might be for new investors. Do as much as you can to boost your 401(k) retirement savings plan.