Ask The Hammer: Is It Better to Save Early in the Year or Not?
Jeffrey Levine of Buckingham Wealth Partners explains why it's better to start saving early in the year.
Key Takeaways
- Contribute to IRAs and 401(k)s in January rather than December to capture an extra year of tax-free or tax-deferred growth; over a 10+ year career, this compounds into significantly more retirement savings
- If your 401(k) plan offers employer matching, confirm whether it includes a 'true-up' provision—without it, maxing out early in the year could cause you to forfeit matching contributions on your remaining salary
- If you contribute to multiple 401(k) plans across different employers in the same year, you must respect the combined IRS limit ($20,500 for 2023) or face a 6% annual penalty until excess contributions are properly removed
- Request your plan administrator use the correct 1099 coding for excess contribution distributions to ensure the IRS recognizes the correction and stops assessing annual penalties
Ask The Hammer: Is It Better to Save Early in the Year or Not? Jeffrey Levine of Buckingham Wealth Partners explains why it's better to start saving early in the year. Watch more episodes of Ask The Hammer at this link: https://www.finstream.tv/videos/ask-the-hammer/
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