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Practical Planning Tips: Year-end considerations on Employer Retirement Plans

December 17, 2023

Today’s year-end planning tip will cover Employer retirement plans.

Assess contributions made this year: You should Review how much money you contributed to your employer retirement plan this year. If you are financially able to, it’s worthwhile to max out your 401(k) or 403(b) if you have not done so already. In 2023, those limits are $22,500 before any company match or $30,000 if you are 50 or older.

Next year’s contribution limits: For 2024, the contribution limit increased to $23,000. Catch-up contributions will remain the same at $7,500, for those 50 and over. Don’t forget to make the required tweaks within your plan to ensure you are making the maximum contribution for the upcoming year.

Then there is always the classic deliberation between a Roth vs Traditional: The rule of thumb is if you think you may have a very high income year, than a traditional IRA makes more sense. If you anticipate a low-income year, then a Roth IRA may make more sense.

Review your investment lineup and portfolio: Determine with your advisor if it makes sense to make any changes. This is especially applicable if your firm switched 401(k) providers recently, if you rolled over an old 401k into your IRA, OR if you are approaching retirement. In any of those scenarios, tweaking your investments may make sense.

Consolidation of old accounts: Do you have old retirement accounts still held at a previous employer? If appropriate, now is a great time to consolidate them into an IRA to keep your assets organized. It rarely makes sense to have old retirement accounts scattered at various institutions, especially old employers. It makes financial planning, managing the assets, and monitoring your progress unnecessarily difficult. I would highly recommend consolidating those assets today.

Planning Tip: It’s common for business owners to neglect retirement planning for themselves given the rigors of running their business. A retirement plan can not only provide a foundation for a secure future, it can also assist in attracting and retaining good employees. Business owners without retirement plans may wish to get started by establishing a SEP-IRA or SIMPLE-IRA which are very easy to set up. Or, maybe it makes sense to upgrade to a 401(k) plan that can offer more flexibility on customizing a solution that meets their needs. Additionally, with the passage of the SECURE 2.0 act, there are enhanced tax credits available for start-up retirement plans.

You can view the FULL video here.