Finance & Enjoyment Blog

Still Time For 401(k) Contribution

As Denver's Accounting Professionals at KKB CPA we often get asked: “Is there still time to contribute to a 401(k) plan?”

The answer is:

Absolutely!

There are very rare circumstances where you cannot contribute. We feel you are never too old to contribute to a 401(k) or other investment and savings plan from your employers. In fact, the older you get, the more you can contribute to your 401(k) if you feel the need to “catch-up” on the savings. When you are over 50, you are allowed to contribute up to $22,000 to your 401(k) per year. This is an additional $5,500 that you are allowed; whereas if you are under 50 you can only contribute $16,500 per year.

Obviously, starting early on 401(k) contributions is ideal. But, as you get older, it is great that you are allowed to contribute more. We do suggest that if you feel that you need to catch-up, that you leverage that ability to contribute more. After all, as you get older, hopefully you find that your debt goes down as kids move out of the home, perhaps your home gets paid off or you downsize to a more affordable mortgage. These changes in lifestyle can offer you that ability to contribute more to your 401(k).

If you have a 401(k) in place, we also encourage you to gradually increase the percentage of your contributions. Increase one percentage point every few months until you feel that you cannot contribute more. Do this throughout your career or as you start with a new employer. And, as you find ways to save more at home use that to add to your 401(k). This added little bump in your savings can begin to add up as you near retirement age.

Also, with social security, it is possible to delay retirement. If you decide to work up to age 70, you will be eligible for full social security payout and benefit. So, you don’t have to feel that your 401(k) has to shoulder your full retirement burden. As long as you are working, you do not need to take the IRS-mandated “required minimum distributions” from your 401(k) plan, which normally kick in the year after the year you turn 70-and-a-half. Of course, this is only true if you have an ownership interest of more than 5 percent in your company, in which case distribution is required.

How to Use This Information

Keeping a 401(k) or other similar savings is important. And, it is never too late to contribute to a savings plan. At KKB, we are here to help and can provide you with advice on ways to save for retirement and offer different strategies. Contact us online or call us at 303-815-1100.

What are some of your 401(k) savings tips?


Posted in Your Financial House »



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