5

I want to max out my contributions to a retirement account for the current year. The employer pays twice monthly (mid-month and end of month). Looking at my retirement account website, there's a Transaction Date and a Payroll End Date for each deposit. The Payroll End Date is consistently on or before the 15th or the last day of the month. The transaction date, however, is consistently after the 15th or last day of the month.

So if my last paycheck for the year is on Dec 30th but the "Transaction Date" on the retirement account is after Jan 1st, does that count for this year or next year?

Improve this question
2
  • 3
    Probably depends on the arrangement between your employer/payroll and the retirement account provider, but mine have always been counted in the previous year. I've had 3 different employers with different payroll companies and different retirement account managers.
    – DSway
    Commented Oct 18, 2017 at 23:12
  • 1
    If your company specifies that they pay at the end of the month, then the contribution at the end of December will count for this year. But some companies pay on the 1st of the month, in which case the contribution will be on January 1st which will count under next year, even though the paycheck would be for "work" that was done this year.
    – user102008
    Commented Oct 19, 2017 at 0:30

1 Answer 1

Reset to default
4

It will count toward the previous year because your employer should be able/required to specify the tax year of the contribution when processing 401k contributions. Check with your HR department to make sure.

Your question also relates to the fact that you can contribute to an IRA (as a previous year contribution) up until April 15th of the following year. Sometimes you won't know your contribution limits until after your last paycheck of the year, so you get a few months to maximize your contributions if you so wish.

Improve this answer
3
  • 3
    Thx! Ugh, I wish "check with HR" wasn't part of the answer... in every small company I've worked for, the "HR dept" is an office manager who's usually very clueless about "all that retirement stuff" he/she has to take care of along with payroll.
    – pbristow
    Commented Oct 19, 2017 at 0:18
  • 1
    @pbarranis, you may also ask to speak with your 401(k) plan company - they may have more knowledgeable experts that can answer your question.
    – JW8
    Commented Oct 19, 2017 at 4:48
  • On every 401k contribution form I've sent in (as someone who processes payroll), there's a big "Contribution Year" field that must be filled in. You should just verify with the person doing payroll that the final paycheck still applies the 401k to the previous year. They'll know what you're talking about.
    – Rocky
    Commented Oct 19, 2017 at 16:45

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .