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Table of Contents

The Tax Deadline to Contribute to Your 401(k) Is the End of the Year

Contributions to individual retirement accounts can be made for the previous year up to the tax-filing deadline of the current year. But the tax deductions for 401(k) plan contributions and most other salary-deferral retirement plans usually apply only to the calendar year in which they are actually withheld from the taxpayer's paycheck.

The following significant differences can affect your retirement savings.

Key Takeaways

  • Contributions to 401(k)s usually apply to the calendar year in which they are withheld from the participant’s paycheck.
  • Contributions to some types of individual retirement accounts are acceptable up to the October filing date of extended tax returns.
  • A self-employed person's ability to file past Dec. 31 may depend on the type of business they engage in, as well as the type of contributions they make.

Non-401(k) Plans

The combined individual contribution limit for Roth and Traditional IRAs in the 2022 tax year is $6,000 (rising to $6,500 in 2023). Those aged 50 and older can make a "catch-up" contribution of an additional $1,000 in both 2022 and 2023.

Although contributions to traditional IRAs are tax-deductible, the deduction may be reduced or eliminated if the account holder or their spouse is covered by a retirement plan at work. The money grows tax-free while it remains in the account and is taxed at withdrawal.

Money in a Roth IRA grows tax-free and can be withdrawn tax-free in retirement. Contributions are not tax-deductible. Income limits restrict the ability to make contributions or deduct them from taxable income.

Deadline rules vary for 401(k) plans.

401(k) Plans

The limit on employee tax-deductible elective deferrals for most 401(k) plans is $20,500 in 2022, rising to $22,500 in 2023.

If permitted by the plan, participants who are 50 or older at the end of the calendar year can make additional catch-up contributions of up to $6,500 for the 2022 tax year, rising to $7,500 in 2023.

Contributions to a 401(k) are generally due by the end of the calendar year. For instance, assume that an employee makes an election to defer part of a bonus to be received for 2021. The bonus is based on 2021 compensation but is paid on Jan. 31, 2022. The amount deferred from the bonus will apply to the employee's 2022 salary deferral contributions.

Plans may also vary. Contributions for a prior year may not be allowed because an employee is limited to making contributions through payroll deductions.

Employers may have a longer time period with which to make matching contributions for a given year of a plan. This means an employee technically can make 401(k) contributions as late as the deadline for their company to file its taxes, including any extensions.

This additional time becomes especially apparent in the case of self-employed savers, who might not contribute to their solo 401(k) plan for a given year until tax time the following year. The ability to do so can depend on the business type and whether the contribution is by employee deferral or through a profit-sharing component.

What Are the 2022 and 2023 401(k) Plan Contribution Limits?

The 401(k) contribution limit for 2022 is $20,500, rising to $22,500 in 2023. In 2022, if you are age 50 or over, you can contribute an additional $6,500. That number rises to $7,500 in 2023.

Can I Lose Money in a 401(k) Plan?

401(k) plans are designed to be long-term investment plans. Therefore, over long time horizons, the likelihood of you losing money, especially a significant amount of money, in a 401(k) plan is considered to be low. That said, due to typical market fluctuations, it is common to see the value of your account drop from time to time. Furthermore, the performance of a 401(k) will be dictated by the risk level and type of securities one invests in. A well-diversified portfolio following a passive indexing strategy is generally recommended.

When Can I Take Money Out of My 401(k) Plan?

Without incurring any penalties, you can take money out of your 401(k) plan at the age of 59-1/2. There are some circumstances that would allow you to take out money before that age without incurring penalties, such as hardship withdrawals.

The Bottom Line

Generally, the 401(k) has a hard contribution deadline at the end of the year. But plan participants may check with their human resources department or consult experts to see if they are permitted to make contributions in the new year—before tax time.

Article Sources
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  1. Internal Revenue Service. "401(k) Plan Overview."

  2. Internal Revenue Service. "Oct. 15 Deadline Approaches for Taxpayers Who Requested Extensions to File 2020 Tax Returns."

  3. Internal Revenue Service. "2022 Tax Filing Season Begins Jan. 24; IRS Outlines Refund Timing and What to Expect in Advance of April 18 Tax Deadline."

  4. Internal Revenue Service. "401(k) Limit Increases to $22,500 for 2023, IRA Limit Rises to $6,500."

  5. Internal Revenue Service. "Traditional and Roth IRAs."

  6. Internal Revenue Service. "Retirement Topics—IRA Contribution Limits."

  7. Internal Revenue Service. "Retirement Topics—401(k) and Profit-Sharing Plan Contribution Limits."

  8. Internal Revenue Service. "Retirement Plans for Self-Employed People."

  9. Internal Revenue Service. "One-Participant 401(k) Plans."

  10. Internal Revenue Service. "401(k) Resource Guide - Plan Participants - General Distribution Rules."

  11. Internal Revenue Service. "401(k) Plan Fix-It Guide - You Haven't Timely Deposited Employee Elective Deferrals."

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