If you lagged funding your 401(k) over the past year, you’re certainly not alone. The COVID pandemic really set some people back.
Want to catch up? There are several ways to do it, starting with boosting your payroll contributions. The government also allows for additional “catch-up” contributions if you’re over 50.
Although the catch-up provision has been around for years, few take advantage of it: “Nearly all 401(k) plans (98%) permit catch-up contributions, but, according to an analysis by Vanguard, only 15 percent of eligible participants take full advantage,” writes Dylan Telerski for myubiquity.com.
“The 401(k) catch-up contribution limit for Traditional and Safe Harbor plans will remain unchanged at $6,500 for 2021,” Telerski notes. “The regular contribution limit also remains unchanged at $19,500 – which means, if you are turning 50 in 2021, you will be able to save up to $26,000 in a tax-advantaged retirement saving account.”
Even if you weren’t able to make a catch-up contribution in 2020, you still have time this year. “Fortunately, the 401(k) contribution deadline extends further than you may realize; you have until your 2021 taxes are due on April 15, 2022, to make all your contributions and catch-up contributions for the year.”