The Last Day for 2021 401(k) Contributions Is Coming

The sign "401k" is lined with gold letters on wooden planks.
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Have you maxed out your 401(k) contributions for 2021? If not, time is running out to take advantage of tax incentives. Payroll contributions to a 401(k) retirement plan come out as pre-tax dollars, so you can lower your tax bracket by contributing more.

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Workers under the age of 50 can contribute a total of $19,500 for 2021. Those who are 50+ can deposit up to $26,000, with $6,500 of that as “catch-up contributions,” according to the IRS.

U.S. News & World Report says that a 50-year-old employee in the 24% tax bracket could reduce their total tax bill by $6,240 if they max out their contribution.

However, changes to your 401(k) may take some time for your company’s payroll department to process. So if you haven’t already requested the change, do so as quickly as possible to potentially meet the December 31 cut-off for this year. It also pays to look at your total contributions for the year and see if you want to change it to ensure you max out your 2022 contributions.

Retire Comfortably

If you are in a lower-income household, there are additional tax advantages to contributing to a 401(k). Taxpayers with an adjusted gross income (AGI) of less than $33,000 ($49,500 for head of household and $66,000 for married couples, filing jointly) can receive a tax credit worth 10%, 20% or even 50% of their retirement account contributions up to $2,000 (double that for married couples).

There are a few other retirement account deadlines and benefits you should also keep in mind as the year draws to a close, as well.

Make IRA Contributions By the End of the Year

Similarly, you’ll want to max out contributions on a traditional IRA account by December 31 if neither your nor your spouse is covered by a retirement plan through their employer. You can deduct your full contribution (up to $6,000, or $7,000 if you are 50+) for an IRA in some cases.

Take Necessary Distributions from Retirement Accounts

If you’re over the age of 72, you’ll need to make sure you take the minimum distributions from your 401(k) or traditional IRA account by Dec. 31. Otherwise, you’ll pay income tax on the distribution plus 50% of the amount that you should have withdrawn for the year and didn’t.

Retire Comfortably

If you just turned 72 in 2021, you can wait until April 1, 2022, to take the initial minimum distribution. But subsequent deadlines are still Dec. 31 in the following years, with no extension available.

If you’re concerned about your tax bill due to IRA distributions in 2021, you may have the option to avoid taxes on those funds by donating up to $100,000 of your required distribution directly to a charity recognized by the IRS.

See: Why This Is the Year You Should Hire an Accountant
Find: 4 Charitable Deduction Options To Reduce Your Tax Bill in 2021

As 2021 draws to a close, it might make sense to speak to your tax accountant or a financial advisor regarding your retirement plan to maximize your retirement savings and minimize your tax burden for the future.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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