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Typically, you can change your 401(k) contribution at any time, but the specific rules and processes may vary depending on your employer's plan.
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Ever wondered if you can adjust your 401(k) contributions whenever you want? You're not alone.
Perhaps the raise you just negotiated is making you consider increasing your retirement savings. Or, if you’re one of the 8% of workers contributing only the automatic default amount, you just realized you could be benefiting more from your employer’s matching contributions.
The good news? You can likely change your 401(k) contributions at any time. Let's explore some helpful tips that will help you strategically manage the amount you put toward your 401(k) throughout the year.
Generally, you can modify your contribution amount at any time, but it ultimately depends on your company’s retirement plan rules. The Department of Labor requires employers to allow quarterly modifications to employer-sponsored retirement plans, but some choose to offer even more opportunities for adjustments.
While there's no universal rule, some plans may restrict how frequently you can change your contribution amount, while others may require a waiting period between adjustments.
To adjust the percentage of your paycheck that goes into your 401(k), you’ll need to look into your company’s retirement plan, talk to the right people, and fill out the necessary paperwork.
Let’s look at these simple steps to changing your 401(k) contribution.
Familiarize yourself with your company's 401(k) plan rules, focusing specifically on the eligibility criteria and any limitations on the frequency of contribution changes. Look for the summary plan description, or SPD, in your 401(k) provider’s online portal or get a copy from your plan administrator.
Reach out to your Human Resources department or the plan administrator to ask for details about the process for changing contributions. Confirm if you have to make changes during specific enrollment periods and whether they can be made online or through paperwork.
The online process will likely only take a few minutes – you’ll update your new contribution amount and provide any other required information. If you prefer a more traditional method, ask your plan administrator for physical copies of the paperwork.
The average American with a 401(k) defers 7.4% of their salary to their account. There are a wide variety of practical reasons why a person may opt to increase or decrease their 401(k) contributions.
Common reasons include:
Modifying your 401(k) contribution could have “hidden” benefits and risks you hadn’t realized. Let’s make sure the energy you’ve put into managing your 401(k) is worth it by considering these potential consequences in advance.
The benefits of being able to tweak your 401(k) contribution include:
There are also potential risks to meddling with your contribution to your retirement savings, including:
The power to control your 401(k) contributions anytime is at your fingertips. Your company’s retirement plan will explain how often you can change them, and now you know the many reasons to do it.
Monitoring your 401(k) contributions will help you adjust them strategically to improve your long-term growth. The higher your contributions, the less taxable income you have, so more money goes to your retirement instead of Uncle Sam. And adding a financial planning tool to your toolbox can help you maximize your tax advantages and help that money grow.
Yes, the IRS sets annual limits to prevent disproportionately high contributions. For 2024, the 401(k) contribution limit for people under the age of 50 is $23,000, while those 50 and older are permitted to save up to $30,500 annually.
If you contribute more to a 401(k) than allowed by the IRS, you could be subject to financial penalties, including being taxed twice on the amount that goes beyond the 2024 contribution limit of $23,000 ($30,500 for those age 50 or older) plus a 10% tax penalty for early withdrawal if you're under the age of 59.5.
The IRS allows people over the age of 50 to make catch-up contributions of $7,500 in 2024. Maximizing your retirement savings through this type of contribution is a strategy that some high earners use to reduce taxable income.
No, you can’t contribute more funds directly to an old 401(k) account from a previous employer. You also won’t be able to borrow against that account for a quick loan. But you can roll your old 401(k) into an IRA, which you can then contribute to moving forward. You can also roll it over into a new 401(k) account sponsored by your current employer.