Q: I’d like to contribute more to my 401(k) by the end of the year. Can I make an additional one-time deposit?
Unfortunately, it might be too late to add significantly to your 401(k) in 2018.
Assuming that your 401(k) is through your employer, there are a few things you need to know.
For starters, employers typically don’t allow you to simply add money to your 401(k) outside of payroll deductions. In other words, if you want to contribute another $5,000 to your 401(k) this year, you can’t simply write a check or deposit cash.
Furthermore, unlike with a traditional IRA and some other retirement savings vehicles, 401(k) deposits are generally due by the end of the year. The IRS technically allows contributions until the tax filing deadline, but most employer-sponsored 401(k) plans don’t allow you to specify which tax year your payroll deductions are applied to.
Finally, even if you boost your contribution rate now, it could take your employer a few weeks to process the change — so a contribution increase might not even go into effect by the end of the year.
The bottom line is that now that we’re well into December, if you want to make a lump-sum retirement contribution, your employer’s 401(k) is likely not the best option. However, the IRA contribution deadline isn’t until April 15, 2019, so if you qualify for the traditional IRA deduction, you could potentially boost your tax-deferred retirement savings that way.
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