John E. Chapman
Chief Executive Officer
At the end of every year, advisors receive many questions on how to complete/maximize retirement contributions. The below will serve as a basic guide for year-end contributions and some of the rules associated with them.
Maximizing Contributions: The primary goal of year-end contributions is to maximize the amount contributed to retirement plans, such as 401(k)s, IRAs, or similar vehicles. For 2023, here are the max contributions:
As a note, for those looking to max out their employer sponsored retirement plans (401(k)/403(b)), you CANNOT contribute outside funds to the retirement plan. You are limited to the funds paid to you through payroll. Depending on your Year to Date (YTD) contributions you may need to slightly adjust your last month’s contributions to ensure you are putting in the max contribution. If you are unsure where your contributions stand YTD, your HR department should be able to assist.
Prioritizing Contributions: If you are under the income limits for IRA contributions and have the ability to max out your employer sponsored retirement plan as well as an IRA, do both. If not, your employer plan should take priority, given that most employer plans have a match associated with employee contributions. There are also no income limits associated with employer plans. If your company has an eligible retirement plan, you are able to contribute no matter your income.
Contribution Deadlines: While most retirement accounts share tax treatment, they do not all share contribution deadlines. Employer plans have a deadline of Dec. 31st for current year contributions while IRAs/Roth IRAs/SEP IRAs can back date contributions up until next year’s tax filing. As a note, since there are calculations associated with SEP IRA contributions, the contribution deadline can be extended if the official filing is extended.
If you have any questions regarding your personal or retirement accounts, contact your CCP advisor.
