Key Takeaways
- One positive that came out of this year is that many Americans found themselves saving more money than usual.
- If you have extra savings, you may want to take advantage of maximizing your 401(k) contributions for the year.
- Consider having the entire amount of your last paycheck of 2020 put into your 401(k).
Many would agree that 2020 has been filled with a lot of bad news, but there has been some good news to come out of this year as well. One of those pieces of good news is that those Americans fortunate enough to keep their jobs are finding themselves with extra cash this year.
Why is this? Well, the CARES Act that was passed at the end of March included a stimulus check, providing many people with $1,200. Add to that, many people found themselves cancelling vacations, not eating at restaurants, not able to attend movies or concerts, and just generally not spending as much money as they normally would because they were now staying home. The result was that the amount Americans were saving increased dramatically, up to 25%, in April and May.
Why is this important? Well, as we’re nearing the end of the year, if you’re enrolled in a 401(k) program and haven’t maximized your contribution, this may be your opportunity to do so. If you find yourself with extra money that you weren’t expecting nor needing, this is a great opportunity to contribute to your 401(k).
If you’re under age 50, the limit for 401(k) contributions is $19,500 this year. If you’re over age 50, there’s a make-up amount of $6,500, meaning that your total contribution can amount to $26,000 for the year. If you aren’t set to already reach those limits, consider asking your plan administrator to put your entire December paycheck into your 401(k).
If you’re concerned that you don’t have enough money to do this, then use the extra cash you had from earlier in the year for your cashflow for December, freeing up your December paycheck to go towards your 401(k).
So consider taking advantage of this one piece of good news that came out of 2020, and look into maximizing your 401(k) for the year. Until next time, enjoy.
