1 Retirement Plan You Should Try to Max Out Before 2022 Ends — and 2 You Can Wait On

How much savings will you need to get through retirement? The short answer is “a lot.”

Social Security will only replace about 40% of your preretirement income if you're an average earner. And most seniors inevitably wind up needing about twice that much income to live comfortably once their careers wrap up and they're no longer earning a paycheck.

Now, when it comes to building retirement savings, you have choices. And you may be saving for retirement in a few different accounts, including a 401(k) plan, IRA, and HSA.

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If you haven't yet maxed out these accounts for 2022, you may be eager to boost your savings this month. But there's one specific account that should take priority now as far as your spare money is concerned.

Focus on your 401(k) first

If you aren't done funding your 401(k) plan for 2022, it's a good idea to prioritize that account over an IRA or HSA.

Why? Well, with an IRA or HSA, you have until next year's tax-filing deadline to finish funding your account for 2022. But if you want your 401(k) contributions to count for 2022, the money you put needs to land in your account no later than Dec. 31 of this year. You don't get extra leeway to fund your 2022 401(k) during the first few months of 2023.

Furthermore, if you're eager to ramp up your 401(k) plan contributions, you must make that decision now — and loop in your payroll department. That's because 401(k) contributions are done as payroll deductions. But it can take some time to make an adjustment to a pay run.

So, let's say you decide you want to put another $1,000 into your 401(k) this year, only you don't tell your payroll department until Dec. 29. At that point, it may be too late to get that money into your account in 2022. But if you put in for that change within the next few business days, that's more likely to give your payroll department enough time to honor your request.

Some retirement plans are more flexible than others

The fact that IRAs and HSAs give you the option to make contributions after the year is over is a good thing. But 401(k)s don't work that way. And so if you're looking to boost your retirement plan contributions for 2022, at this point, your best bet is to prioritize your 401(k) and then move on to the other accounts you might be saving in.

It's an especially good idea to try to squeeze more money into your 401(k) plan if you haven't yet contributed enough to claim your full employer match. Giving up matching dollars means leaving free money for retirement on the table. And that's a silly thing to do if you can avoid it.

Plus, when you give up matching dollars, you also lose out on the ability to invest them and grow them into a larger sum. So if you haven't snagged your employer match in full for 2022, it pays to ramp up your 401(k) savings rate immediately.

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