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Maximizing Your 401k Contributions: A Step-by-Step Guide for 2024

401k contribution retirement planning Dec 28, 2023

             As we enter the new year, it's essential to plan ahead and make informed decisions about our finances. One area that deserves careful attention is our 401k contributions. In this video, we will guide you through the process of calculating your 401k contribution on your W2 form, ensuring that you maximize your contributions for 2024. By planning ahead, you can set yourself up for success and take full advantage of the new 401k allowed amount.

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Step 1: Understand the 401k Contribution Limits for 2024
Before diving into the calculations, it's crucial to familiarize yourself with the 401k contribution limits set for the year. As of 2024, the maximum contribution limit for individuals under the age of 50 is $20,500. For those aged 50 and above, an additional catch-up contribution of $6,500 is allowed, bringing the total to $27,000.

Step 2: Review Your W2 Form
To calculate your 401k contribution, you'll need to refer to your W2 form. This form provides valuable information about your income, taxes, and deductions. Locate the section that outlines your pre-tax deductions, which typically includes your 401k contributions.

Step 3: Determine Your Desired Contribution Amount
Now that you have an understanding of the 401k contribution limits and have reviewed your W2 form, it's time to determine your desired contribution amount. Consider your financial goals, budget, and any other retirement savings vehicles you may be utilizing. Aim to contribute as much as possible, up to the maximum allowed amount, to take full advantage of the tax benefits and employer matching, if applicable.

Step 4: Calculate the Difference
To calculate the difference between your current 401k contributions and your desired contribution amount, subtract the amount listed on your W2 form from your desired contribution. This will give you an idea of how much you need to adjust your contributions to reach your goal.

Step 5: Adjust Your Contributions
With the calculated difference in mind, it's time to adjust your 401k contributions. Contact your employer's HR department or log into your employee portal to make the necessary changes. Ensure that you are set up to contribute the correct amount each paycheck, taking into account any pay frequency changes or adjustments throughout the year.

Step 6: Monitor and Review Regularly
Once you've made the adjustments, it's essential to monitor and review your contributions regularly. Keep an eye on your pay stubs and W2 forms to ensure that the correct amount is being deducted. If any discrepancies arise, reach out to your HR department promptly to rectify the issue.

By planning ahead and calculating your 401k contribution on your W2 form, you can maximize your contributions for 2024. Taking advantage of the new 401k allowed amount ensures that you are making the most of this valuable retirement savings vehicle. Remember to review your W2 form, determine your desired contribution amount, calculate the difference, adjust your contributions, and monitor them regularly. With careful planning and attention to detail, you can set yourself up for a financially secure future.

Don't forget to watch the accompanying video for a visual walkthrough of the process. Here's to a prosperous and financially sound 2024!

Paula with Paycheck Powerhouse

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