How to Max Out Retirement Contributions Before Year-End

Every year, the IRS sets a limit on how much money you can contribute to your retirement plans. When you contribute less than the maximum amount allowed, you miss an opportunity that you can’t exactly get back.

Unfortunately, most people can’t afford to max out their retirement contributions each year. In fact, 63% report that they’re not saving enough for a secure retirement.

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But there’s still a chance you might be able to set aside more than you’re saving now. Even if it’s a small increase, the benefits can be significant, from short-term tax breaks to long-term peace of mind.

8 ways to increase your retirement contributions

1. Max out your employer match

How often does your employer offer you free money? If they have a retirement contribution match, it happens every paycheck. Most employers will match what you put into your account, up to 3% of your gross pay.

There are often set dates, usually quarterly and semi-annual, when you can enter your employer’s matching plan. If you’re not yet participating, check with your employer to see how soon you can join.

2. Harness your pay increases

If you receive a pay increase or a bonus, put the money to work. Instead of giving in to lifestyle inflation, which is the natural tendency to spend more when your pay goes up, adjust your recurring retirement contribution.

If you get a bonus, put the money into retirement instead of spending it on a big vacation or holiday gifts.

When you start harnessing your pay increases and bonuses, you’ll have a better shot at maxing out your retirement contribution and increasing your wealth.

3. Move cash around

In recent years, interest rates have been exceptionally high on bank accounts like CDs and high-yield savings accounts (HYSAs). But as interest rates drop, you’ll have to move your money elsewhere to earn high returns.

If you have money saved up that you don’t need for emergencies or for upcoming expenses, now’s the time to consider putting it toward your retirement. If one of your CDs matures, consider moving that money to your retirement plan, too.

4. Cut the low-hanging fruit

When did you last look at each line-item expense on your bank or credit card statement? If it’s been a while, then you probably have expenses you don’t know about and can easily cut.

For example, over 85% of people say they’re being charged for at least one subscription they don’t use, with an average cost of $32.84.

Looking through your financial statements takes just a few minutes. Still, it’s an easy way to find expenses you can forego. Once you cut an expense, increase your recurring retirement contribution by the amount you just saved.

5. Consolidate or refinance

With interest rates falling, many borrowers can free up money by consolidating into a new loan or refinancing their debt.

If you refinance $16,000 of credit card debt from 23% APR to 15% over 4 years, your monthly payments could drop from $595 to $445. That’s an additional $150 a month freed up for retirement savings.

Before you refinance, just make sure you shop around for the lowest lender fees available. These up-front costs can be significant but worth it if the refinance loan saves you money overall.

6. Use multiple plan types

Are you already on the verge of maxing out your retirement contributions for 2024? If so, you might look for another type of plan.

For example, if you’re going to max out a 401(k) or a 403(b), consider opening a Roth IRA. For individual tax filers who earn up to $146,000, you can contribute up to $7,000 to a Roth IRA for 2024.

When you combine that with your employer-sponsored plan, your maximum allowable retirement savings goes up to $30,000 for the year.

For self-employed individuals can potentially save more for retirement by using a solo 401(k) or SEP IRA instead of a traditional or Roth IRA.

With a solo 401(k) or SEP IRA, your earned income could qualify you to contribute as much as $69,000 for 2024, or even more if you’re over 50 and you make catch-up contributions.

7. Contribute in 2025

If you can’t hit your retirement savings goal in 2024, there’s still time in 2025. You can make contributions to an IRA for the 2024 tax year until April 15, 2025.

To improve your chances of hitting the maximum allowable amount, check to see what your total contribution is at the end of 2024. Then, determine how much more you need to add before you max out.

Instead of waiting until April 15th to make a large IRA contribution, see if you can divide the contribution equally over each paycheck before that deadline.

What does it mean to max out your retirement contribution?

Maxing out your retirement contribution means you contribute the maximum amount the IRS allows for a given tax year. If you exceed that amount, also known as making “excess contributions” you could face a 6% tax on the excess, or the money may be taxed twice.

A more common concern, however, is contributing less than the maximum amount allowed. When that happens, you reduce the total amount you’re able to save over your lifetime. But you also lose out in a few other ways:

• Tax advantages: Contributions to 401(k)s, 403(b)s, and traditional IRAs can help reduce your taxable income and tax bill.
• Compound interest: The longer your money is invested, the more it can grow. That’s due to compound interest, which is the interest earned on both the initial contribution and the already accumulated interest.

IRS Retirement Contribution Limits

Remember, every dollar you set aside today has the potential to grow over time, thanks to compound interest.

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Whether you’re just beginning or nearing your retirement goals, these strategies can help you build a stronger, more secure future—one step at a time.

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