Here are four important retirement planning options to review before age 65.

1. Super Catch-Up 401(k) Contributions: A Limited-Time Opportunity

Along with traditional contributions, the current rules allow individuals age 50 and older to make additional catch-up contributions of up to $8,000 to retirement plans each year. However, for individuals ages 60–63, recent rule changes allow for a “super catch-up” contribution of up to $11,250 each year.

These additional allowed amounts create valuable opportunities to boost retirement savings.

Planning question: Will you maximize your retirement contributions during these years?

2. Medicare Enrollment: Missing It Can Be Expensive

Turning 65 triggers one of the most important retirement deadlines: Medicare enrollment.

Medicare is a federal health insurance program designed primarily for individuals aged 65 and older. So, whether you need the coverage immediately or not, failure to enroll within the proscribed window may increase your healthcare costs in the future.

While decisions around Medicare can be complicated, especially if you plan to work past 65 or you already have insurance coverage, it’s important to be aware of, investigate, and understand the process because delaying enrollment may result in a permanent premium increase of 10% for each full year of non-enrollment. And, unlike many penalties that disappear over time, this one may follow you indefinitely. So, ask for help if you have questions about Medicare or Medicare enrollment.

Planning question: Will you review Medicare and evaluate enrollment timing implications before age 65?

3. HSA Contributions: Stop When Medicare Starts

Health Savings Accounts (HSAs) are tax-efficient savings tools. Contributions can be tax-deductible, growth can be tax-deferred, and qualified withdrawals can be tax-free.

However, once you begin Medicare, IRS rules require you to stop all HSA contributions.

To avoid unintended excess contributions to your HSA and triggering tax penalties of up to 6%, consider stopping HSA contributions six months prior to enrolling in Medicare.

Planning question: Will you coordinate your HSA strategy with your Medicare timeline?

4. Medicare Premiums: What is IRMAA?

To determine premiums, Medicare looks back at your income from the previous two years on an annual basis. In other words, financial decisions you make at ages 63 and 64 are used to determine your Medicare premium costs at 65 and 66.

Higher-income retirees may pay additional surcharges called Income-Related Monthly Adjustment Amounts (IRMAA). Be aware that large Roth conversions or retirement account distributions, significant capital gains, or unusual income events that add to your income could result in increased Medicare premiums. Reference Basics of Roth IRA Conversion resource.

This does not mean you should avoid these strategies. It simply means that you should understand how using them may impact your healthcare costs at a later date.

Planning question: Will you look ahead at how today’s income decisions may affect future Medicare costs?

Here is a helpful resource to get a handle on Spending in Retirement.

The Bottom Line

As you move closer to age 65, you have a number of important options that can save money, reduce taxes, and improve long-term outcomes – some options come with expiration dates, while others help you plan to avoid possible negative consequences. Retirement planning isn’t just about building assets. It’s also about understanding the timing of key deadlines, so you can make informed decisions for your financial future.

The post Retirement Planning? What to Do Before Age 65 appeared first on MainStreet Financial Planning.

1. Use Your Tax Return as a Guide

Before you file it away, take a quick look at what actually happened last year:

• Where did your income really come from?
• How much did you pay in taxes?
• Did anything surprise you (a big refund or an unexpected bill)?

Ask yourself: Was this what I expected?

If not, that’s helpful. It usually means there’s something worth adjusting now—not next year.

2. Adjust Withholding or Estimated Payments

If you owed more than you expected or got a much bigger refund than you planned, it’s probably time to fine-tune things:

• Update your paycheck withholding
• Revisit estimated tax payments (especially if you’re retired or self-employed)

The goal here isn’t perfection. The goal is just to avoid big surprises and smooth out your cash flow.

3. Revisit Your Tax Strategy for This Year

Now that you’ve seen how last year played out, you can be more intentional this year.

A few things to think about:

• Does a Roth conversion make sense this year?
• Should you shift income between years if you have flexibility?
• Are there opportunities to realize gains or losses more strategically?

4. Update your Contributions

This is one of the easiest things to review and update during your “spring cleaning.” Be sure to increase your contributions to your 401k and/or IRA’s to max out for the year.

For 2026, contribution limits have increased to:

• 401(k): $24,500 (+ $8,000 catch-up if 50+, or up to $11,250 if ages 60–63)
• IRA (Traditional or Roth): $7,500 (or $8,600 if 50+)
• HSA: $4,400 individual / $8,750 family (+ $1,000 catch-up if 55+)

If you can:

• Increase your automatic contributions
• Revisit your IRA or HSA funding plan
• Make sure your savings still match your current income

Even small changes now can make a noticeable difference by the end of the year.

5. Clean Things Up and Simplify

This is the “spring cleaning” part. Take a little time to:

• Consolidate old retirement accounts
• Double-check your beneficiaries
• Organize important documents
• Cancel or unsubscribe from things you don’t use anymore

6. Revisit Your Investment Mix

The market has moved around a lot over the last year and your portfolio can drift more than you realize. After tax season is a great time to:

• Review your allocation
• Rebalance if needed
• Make sure your investments still line up with your timeline (especially if retirement is getting closer)

Filing your taxes isn’t really the finish line—it’s more like the starting point for making smarter decisions this year. A few small, intentional adjustments now can go a long way toward reducing taxes over time, improving cash flow and feeling more confident about what’s ahead. If you have questions about any of this, feel free to reach out! We’re always happy to help you get things organized and on track for the year ahead.

The post Spring Cleaning for Your Finances: What to Do After You’ve Filed Your Taxes appeared first on MainStreet Financial Planning.

1. Maximize Your Retirement Contributions:

Enhancing your retirement savings not only secures your future but also offers immediate tax benefits. For 2024, the IRS has increased contribution limits:

– 401(k), 403(b), and most 457 plans: You can contribute up to $23,000. If you’re 50 or older, you can make an additional catch-up contribution of $7,500, bringing the total to $30,500.

– Traditional and Roth IRAs: The contribution limit is $7,000, with an extra $1,000 catch-up contribution for those 50 and above, totaling $8,000.

While IRA contributions for 2024 can be made until April 15, 2025, contributing before year-end allows you to benefit from tax-deferred growth sooner.

2. Harvest Tax Losses

If you have investments that have declined in value, consider selling them to offset capital gains from other investments—a strategy known as tax-loss harvesting. You can use up to $3,000 of net capital losses to offset ordinary income, with any excess carried forward to future years. Consult with a tax professional to navigate the complexities and avoid wash-sale rules.

3. Prepay Deductible Expenses

If your itemized deductions are close to the standard deduction thresholds—$14,600 for single filers, $29,200 for married filing jointly, and $21,900 for heads of household in 2024—prepaying certain expenses can help you exceed the standard deduction and maximize your tax benefits. Consider:

   – Mortgage Interest: Making an extra mortgage payment to increase deductible interest.

   – Medical Expenses: Scheduling and paying for medical procedures or expenses before year-end, especially if they exceed 7.5% of your adjusted gross income.

 – Property Taxes: Paying property taxes due in early 2025 before December 31, 2024, keeping in mind the $10,000 cap on state and local tax deductions.

– Tuition Payments: Prepaying college tuition for the upcoming semester may qualify you for education credits, such as the American Opportunity Tax Credit, worth up to $2,500 per eligible student. Be aware of income phase-out ranges for these credits.

4. Bundle Charitable Contributions

If your charitable donations don’t typically exceed the standard deduction, consider “bunching” multiple years’ worth of contributions into one year to maximize your itemized deductions. Establishing a donor-advised fund allows you to make a large charitable contribution in one year, receive the tax deduction, and distribute funds to charities over time. This strategy is particularly effective if you have appreciated securities, as donating them can help you avoid capital gains taxes.

5. Contribute to a 529 College Savings Plan

Contributions to a 529 plan grow tax-free, and withdrawals for qualified education expenses are also tax-free. While there’s no federal tax deduction for contributions, many states offer tax benefits. For example, California does not provide a state tax deduction for 529 contributions, but the tax-free growth and withdrawals still offer significant benefits. Check your state’s specific rules to understand the potential tax advantages.

By implementing these strategies before December 31, you can optimize your tax situation and set a strong financial foundation for the upcoming year. Always consult with a tax professional, (we happy to help you as well) to tailor these strategies to your personal circumstances and ensure compliance with current tax laws.

The post Save on Taxes with These 5 Year-End Financial Tips appeared first on MainStreet Financial Planning.

What is an HSA?

A Health Savings Account (HSA) is a special type of savings account that allows individuals with a high-deductible health plan (HDHP) to save money pre-tax for future medical expenses. The funds can be used for qualifying medical costs like doctor visits, prescription medications, dental care, and vision services.

The real beauty of HSAs lies in their triple tax advantage:

1. Tax-deductible contributions: The money you contribute to your HSA is pre-tax, which lowers your taxable income.
2. Tax-free growth: Any interest or investment earnings grow tax-free.
3. Tax-free withdrawals: When used for qualified medical expenses, withdrawals are also tax-free.

How Does an HSA Work?

To open an HSA, you must be enrolled in a high-deductible health plan (HDHP). Contributions to the HSA can be made by both individuals and employers. In 2024, the annual contribution limits are:

– $4,150 for individuals.

– $8,300 for families.

– Those over 55 can make an additional $1,000 catch-up contribution.

One great feature of HSAs is that the funds roll over year after year, unlike Flexible Spending Accounts (FSAs) where unused funds can expire at the end of the year. This makes HSAs a great tool for both short-term healthcare costs and long-term financial planning.

How to Invest Your HSA

Beyond just saving for medical expenses, HSAs offer investment opportunities. Once you’ve built up enough savings, many providers allow you to invest your balance in mutual funds, ETFs, and stocks—much like you would with a retirement account. This allows the funds to grow over time, providing an additional cushion for future medical costs, especially during retirement.

For example, if you can cover your medical expenses out of pocket now, you can let your HSA balance grow tax-free for decades. After age 65, you can even withdraw the funds for non-medical expenses without penalty, although the funds will be subject to regular income tax.

Top HSA Providers

Choosing the right HSA provider is key to maximizing your account’s benefits. Here are three top providers to consider:

1. Fidelity – Best for Investment Options

Fidelity offers a wide range of investment opportunities with no account fees and no minimum balance required to start investing. It’s ideal for those who want to actively grow their HSA funds.

2. Lively – Best for Low Fees

Lively is known for its fee-free structure and flexibility. It partners with Schwab platform for investment options, offering a simple yet robust platform for HSA management.

3. HealthEquity – Best for Automated Investment Help

HealthEquity provides robo-advisor options for those who prefer a hands-off approach to investing their HAS, Vanguard funds as an option. It’s also a great option for employer-sponsored HSAs, offering seamless integration with payroll systems.

What Can You Use an HSA For?

HSAs can be used for a wide range of qualified medical expenses, such as:

– Doctor visits and co-pays.

– Prescription medications.

– Dental and vision care.

– Acupuncture and physical therapy.

After age 65, HSAs become even more flexible, allowing you to use the funds for non-medical expenses without facing a penalty. However, non-medical withdrawals will be subject to regular income tax, similar to traditional IRA withdrawals.

HSAs as a Long-Term Planning Tool

While HSAs are great for covering immediate medical expenses, they also serve as a powerful tool for retirement planning. Medical expenses often rise in retirement, and having a dedicated account that grows tax-free can help ease the burden. Many people use their HSA as a supplemental retirement fund, tapping into it during their golden years for healthcare costs, which are tax-free.

Even if you don’t use all the funds for medical purposes, HSAs remain one of the most tax-advantaged savings accounts available, making them an excellent part of any long-term financial strategy.

Health Savings Accounts offer a unique opportunity to save for medical expenses while also benefiting from long-term tax advantages. Whether you’re looking to reduce your current healthcare costs or build a nest egg for future needs, an HSA can be a key component of your financial strategy.

Take action today:

Look into opening an HSA if you haven’t already, and consider maximizing your contributions to benefit from this powerful financial tool. For those with existing HSAs, it may be time to start thinking about how you can invest those funds for even greater growth.

The post Unlocking the Power of Health Savings Accounts (HSAs) appeared first on MainStreet Financial Planning.

1. Healthcare
Open enrollment is an excellent time to reassess your healthcare needs for the upcoming year. Here are a few items to review for your healthcare benefits:

Consider if you need to change the type of healthcare plan you will have for the upcoming year. If you have an upcoming surgery or a baby on the way, a lower-deductible health plan might be beneficial. Conversely, if you are generally healthy and don’t anticipate significant medical needs, a high-deductible health plan could be more cost-effective.

If you do choose the HDHP, you may also have the option to open a Health Savings Account (HSA) where you can contribute pretax dollars to an investment account that can grow and be withdrawn tax-free to be used for eligible healthcare expenses over the rest of your life.

Does your employer offer a Flexible Spending Account?  If so, you have the benefit of setting aside a specific amount from each paycheck, pretax, to go into an account to be used for various healthcare expenses for that year. The trick with an FSA is that these dollars don’t roll over every year so you may need to adjust how much you contribute each year based on what you expect to spend on healthcare-related expenses for the upcoming year.

2. Disability Insurance
Check whether you have disability insurance through your employer. Some employers automatically provide this benefit, covering the premium and offering about 60-65% of your income if you need it. If your employer offers you the option to purchase additional coverage, remember that paying the premium yourself means your disability income will be tax-free. If your employer pays the premium, the income will be taxed, which can affect your take-home amount. Understanding your coverage and tax implications is crucial to ensuring you have adequate protection. Use open enrollment as a time to confirm you have disability insurance, review how much coverage you have, and consider whether you might need additional coverage through a private policy if what you have through work would not be sufficient for your family.

3. Life Insurance
Review your life insurance options during open enrollment. Employers often provide a base amount of life insurance, typically one to two times your salary. You may also have the option to purchase additional coverage for yourself or your spouse. Group policies offered through employers are usually more cost-effective, making this an opportune time to secure adequate life insurance, especially after significant life changes like marriage, home purchase, or childbirth.

4. Legal Benefits
I’ve seen a lot more employers starting to offer legal services to their employees. This could be useful to you if you need estate planning done, which could be at a free or reduced cost through your benefits. There are also legal plans you can sign up for that allow you a set number of hours of legal counsel as well. Be sure to check your full benefits package to see if this is available to you!

I hope this helps you in reviewing your employer benefits during this open enrollment season and if you have questions about whether you have the right coverages for you, reach out to us at MainStreetplanning.com and we would be happy to review your employee benefits with you as you decide what benefits are right for you this year.

The post 4 Things to Review During Open Enrollment appeared first on MainStreet Financial Planning.

Review Tax Withholding: Check your paystubs to assess if adjustments to your W-4 are needed to avoid overpaying or underpaying taxes in 2024. If you had a big tax bill, consider increasing your withholdings and if you received a large refund that may mean you are withholding too much from each paycheck and essentially giving the government a free loan until next April.  The IRS website has this helpful Tax Withholding Estimator you can use as a reference if you are unsure how much to withhold.

Quarterly Payments: If you had a large tax bill last, consider making quarterly payments.to avoid penalties for underpayment

Maximize Deductions and Credits: There are numerous tax deductions and credits that you may be eligible for, from deductions for charitable gifts, to an electric vehicle tax credit. There are some income limits/phaseouts to be aware of but it is always helpful to review what may be available to you this year that you may not have been eligible for last year.

Explore Tax-Advantaged Accounts: One way to lower your tax burden is to take advantage of your employer’s retirement plan if they have one by contributing pre-tax dollars into your 401(k) or 403(b). If you weren’t able to max out those accounts last year, can you increase your contributions this year? You may also be eligible to make deductible Traditional IRA contributions depending on whether you have access to an employer retirement plan and your income level.

Healthcare Expenses: If your employer offers HSAs or FSAs, these can be a great way to help manage expenses related to healthcare but also be a good way to reduce your taxable income. FSA’s are usually a “use it or lose it” type of account where you have to use the full amount in that calendar year (with some grace period exception) whereas an HSA can be invested and continue to grow until you reach retirement age.

If you still haven’t filed your taxes for 2024, now is the time to get organized, and here are a few other resources to help you plan for taxes for 2024.

Other Resources

Should I do my own taxes?

What can you learn from your latest tax return?

What is Tax Loss Harvesting and when should I do it?

*This article was originally posted on March 14, 2024*

The post Make your 2025 Taxes Less Taxing by giving yourself a Tax Checkup! appeared first on MainStreet Financial Planning.

At MainStreet Financial Planning, every member of our dedicated team is proudly affiliated with the Garrett Planning Network (GPN). This affiliation goes beyond a mere association; it signifies a commitment to providing exceptional service and embracing a unique model of financial planning. Our approach aligns with the five defining characteristics upheld by the Garrett Planning Network that set us apart in the realm of financial planning.

Here is what makes us different:

1. Hourly, Fee-Only Service:

We operate on an hourly or, flat, fee-only basis, ensuring transparency and alignment of interests with our clients. Importantly, we do not accept sales commissions or any compensation beyond what is directly agreed upon with our clients. Clients pay only for the time your advisor actively works with you.

2. No Minimums, Maximum Accessibility:

Unlike traditional financial advisors, being a Garrett Advisor means that we have no income or investment account minimums for hourly engagements. This eliminates barriers, making our services accessible to individuals across different income brackets.

3. No Product Sales, Pure Expertise:

This is probably the most distinctive part of being a Garrett Planning Network advisor. We, as Garrett Advisors, distinguish ourselves by not selling financial products. Instead, we offer our time and expertise to guide clients through their financial journey. This commitment to objectivity ensures that the advice provided is solely focused on the client’s best interests.

4. Tailored Recommendations:

While not selling products, we do offer specific recommendations and opinions on various products and services that may be suitable for a client’s situation. Additionally, we can guide clients on where to obtain these products or services. If requested, we can also assist with plan implementation so whether it is rebalancing your employer’s 401(k) or giving a recommendation for how to invest your ongoing IRA or brokerage account contributions so that they align with your risk tolerance and time horizon, we can help regardless of whether they are held at Schwab, Vanguard, Fidelity, Betterment, etc.

5. Accessible Financial Guidance for All:

This is my favorite quality of being a Garrett Planning Network advisor – with fees structured as flat or on an hourly basis, MainStreet provides accessible options for individuals at every stage of their financial journey. Whether you’re a beginner with a quick question, a middle-income earner seeking ongoing financial assessment, or a do-it-yourself enthusiast in need of direction, Garrett Advisors cater to diverse financial needs. Our team has a wealth (pun intended) of knowledge ranging from:

• Debt payoff plans
• Experience with government employees, including both military and civilian
• Evaluating equity compensation
• Helping small business owners
• Working with individuals who are widowed or divorced.
• Planning for college
• Taking a gap year
• Relocating to another state or country
• Retirement income planning
• And so much more

In embracing the Garrett Planning Network model, clients gain not just financial advice, but a partnership built on trust, transparency, and a commitment to their financial well-being. If you’re intrigued by this innovative approach to financial planning, feel free to reach out with any questions. I say this with the most humility one can communicate in a brief article that our entire team at MainStreet loves what we do, and we are here to guide you every step of the way.

The post Unlocking Accessible Financial Advice The Garrett Planning Network Advantage appeared first on MainStreet Financial Planning.

I suggest you make time early in the open enrollment period so you can dedicate ample time to making the best choices.  You may need/want to gather more information before making a benefit selection, so getting started early will give you time to do that.  Use this guide as you navigate your open enrollment…I hope it helps you take a fresh look at your benefits!

Health Insurance:  Re-evaluate your needs for the upcoming year and pick the plan that is best.

• If you are generally healthy and expect healthcare expenses to be minimal, then choose a High Deductible Plan they have the lowest premiums but the highest deductibles. If, you end up having unexpected medical costs then you will have out-of-pocket costs…but that is why you have an emergency fund!
• If you have health issues, take regular medications, are planning to have a baby or a planned surgery in the coming year, then choosing a plan with lower out-of-pocket costs would be the best strategy.

Spending Accounts:  Contributions are with pre-tax wages and if you use the money on eligible expenses…you never pay taxes on that money!

Healthcare FSA – Maximum contribution limit for 2024 is $3,200.

• Use it or lose it (recently you may be able to rollover a small amount into the next calendar year- check with your employer).
• Only contribute what you plan to spend on eligible healthcare expenses in the coming year.

Dependent Care FSA- Maximum contribution limit for 2024 is $5,000 (single and married filing jointly taxpayers); $2,500 (married filing separately taxpayers).

• Use it or lose it!
• Can be used to pay for childcare expenses: daycare, preschool, summer camps, and before/after-school programs.
• Can also be used for adult care expenses for any adult you can claim as a dependent on your tax return that is physically or mentally unable to care for him/herself.

Health Savings Account (HSA) – Maximum contribution limit for 2024 is $4,150 for an individual and $8,300 for a family.

• You have to have a high deductible health care plan to be eligible to contribute.
• Unused funds will rollover, so you can choose to invest the money you have in your HSA and use the funds later for medical expenses.
• If you are 55 and older you can contribute an extra $1,000.

Disability Insurance– Don’t miss this chance to protect your ability to continue to earn income in the event you are unable to work due to injury, illness, or maternity leave.

• Short Term Disability coverage is usually paid for by your employer and would provide a percentage of income to you in the event of an injury or illness that prevents you from going to work for a short period of time.
• Long Term Disability is often paid for by your employer and kicks in after short term disability coverage ends. It will provide income replacement of usually 60-70%.
• If you have the option to increase your coverage through your employer, we highly recommend it. Premiums can be lower than getting a private disability policy.
• There may be an elimination period before disability payment begins, so have an emergency fund you can access.
• Click here to watch a short video all about Disability Insurance.

Life Insurance:  Re-evaluate your life insurance needs and decide if your employer group life insurance options are best for you.

• Pros of group life insurance: easy to get (no medical exam)
• Cons of group life insurance: usually not portable and premiums will increase frequently.
• Explore a private life insurance policy and compare rates with your work provided group coverage.
• Figure out how much life insurance you need. You generally need life insurance if you have dependents (spouse, kids) relying on your income for housing and education costs.
• AD&D insurance is cheap, but it rarely pays out due to all the exclusions. It is usually best to have life insurance instead of AD&D.
• Click here to access a bunch of articles to learn more about life insurance!

If you need help understanding your employee benefits or making a benefit selection, we are here for you!

The post OPEN ENROLLMENT: A WINDOW OF OPPORTUNITY! appeared first on MainStreet Financial Planning.

State Unclaimed Property Search:

Check out the official website of your state’s unclaimed property program. To find it, search on the internet by simply entering your state and “unclaimed property” or look at the National Association of Unclaimed Property Administrators to direct you to your state’s site. Here you can search for unclaimed funds using your name or the names of deceased family members.

Missing Money Databases:

There are other online databases that consolidate information from multiple states and organizations. Check out the following sites to continue your search for missing funds.

• • MissingMoney.com
  • Unclaimed.org
  • Treasury Hunt on TreasuryDirect.com for missing savings bonds or interest
  • The IRS’s Where’s My Refund for missing tax refunds

Pension and Retirement Plans:

If you’ve worked for multiple employers throughout your career, you may have retirement funds or pensions from previous jobs that either you didn’t know about or have forgotten about. Search the following sites:

• Department of Labor’s Abandoned Plan database
• US Pension Benefit Guaranty Corporation
• National Registry of Unclaimed Retirement Benefits

There are some organizations who claim they can help you find unclaimed money for a fee, but don’t do it. These sites listed, mostly governmental sites, are free to use and just takes a little effort to submit the documents to prove the money is yours. It is such a joy to hear back from a client who found a pension from an old job or received a check from a forgotten store credit. It usually isn’t a significant amount, but whether it adds up to a cup of coffee or a dinner out, it’s time to check if there’s something out there for you.

The post Do You Have Missing Money? It’s Time To Check! appeared first on MainStreet Financial Planning.

Let me give you an example using a 401(k) plan, but it applies to most of the employer plans I mentioned above.

Let’s say that you are 45 years old, make $150,000 per year, contribute 20% of your income to your 401(k), and your employer matches 4% of your income every paycheck.  The 4% match you are entitled to is $6,000 ($150,000 x 4%).

Well, 20% of $150,000 is $30,000.  If the maximum annual contribution that year is only $22,500 (2023 limit for those under age 50), and you are contributing 20% of your income, you will have reached your $22,500 maximum in 9 months (assuming your income and contributions are spread out evenly over the year), and then you will have to stop making contributions.  After you stop making contributions, there’s a chance your employer might also stop making matching contributions…because they don’t have anything to match.  If your employer stops making matching contributions, you will have missed out on the final 3 months’ worth of matching contribution, or in this case, $1,500 in free money.

This problem doesn’t affect all 401(k) plans, so here’s what to look for.

If your 401(k) plan has what’s known as a “true-up” contribution/feature, you should be fine.  This provision should make sure you don’t miss any matching contributions you would normally be entitled to, even if you max out your 401(k) plan before the end of the year.  Any “true-up” contributions are normally made at the end of the year, or at the beginning of the next year.  You can find out if this feature is in your plan by contacting your Human Resources department.

Another thing to pay attention to is when does your employer make the matching contributions?  If your employer matches your contributions every pay period, that could be a problem.  Because then the matching contributions stop when your contributions stop.  If your employer makes a one-time lump sum matching contribution, usually at the end of the year or at the beginning of the next year, then you are most likely okay.

What you should do: Spread out your 401( k) contributions.  If your employer does not have a “true-up” provision or does not do one-time lump sum matching contributions, then you need to spread out your contributions over the full year.  Don’t max out your 401(k) plan early in the year.  To figure this out, divide the maximum annual contribution by your annual income.  So, in the example I used above, you would divide $22,500 (annual maximum for anyone under age 50) by $150,000 (annual income).  In this case, this person would want to contribute no more than 15% of their income ($22,500/$150,000 = 15%).  At 15%, this person would max out their 401(k) plan at $22,500 and spread out their contributions over the full year so they don’t miss any employer matching contributions.  Problem solved!

If you have already contributed to your 401(k) plan this year before reading this, here is the formula for how to figure out what to change your contributions to for the rest of the year

• First, calculate your remaining contributions for the year = Annual Limit – YTD contributions
• Second, calculate your remaining income for the year = Annual income – YTD Income
• Divide the remaining contributions for the year by the remaining income for the year to find the percentage you will want to save at per pay period for the rest of the year. Be sure to reset your contributions again on January 1^st.

Let’s not leave free money on the table. Good luck and happy saving!

The post How Maximizing Your 401(k) Early Leaves Free Money Behind appeared first on MainStreet Financial Planning.