If you don’t act soon, you could be giving up more money than you think.
It’s hard to believe that 2025 is almost over. But alas, we’re already in November, which means it’s getting darker earlier and the weather has started to cool. Pretty soon, it’ll be Thanksgiving, after which you may find yourself scrambling to finish your holiday shopping and decorate your house so it’s nice and festive in time for December.
It’s easy to get caught up in year-end hoopla at this stage of the game. But there’s a very important financial move to consider making before 2025 comes to an end. It’s a move that relates to your 401(k) plan, and it’s one you might kick yourself for failing to make.
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Have you maxed out your employer 401(k) match?
If you have a retirement plan through your company, it may not just be your money that’s getting contributed. One big advantage 401(k)s have over IRAs is that they’re often eligible for an employer match. And if you haven’t yet contributed enough to your 401(k) to claim your workplace match in full, now’s the time to find a way to put more money into your account.
The money your employer is willing to put into your 401(k) is basically free cash for your retirement. And it may be a lot more valuable than you think.
Let’s say your employer will match up to $5,000 in contributions this year, but you’ve only put $2,500 into your 401(k) to date and are only on track to contribute another $500 by the end of the year, bringing your total to $3,000.
You might think you’re only giving up $2,000 in matching dollars in that situation. But in reality, you’re giving up a lot more when you consider the fact that that $2,000 is money you can invest.
Let’s say you’re 35 years old and your 401(k)’s investments give you an 8% yearly return, which is a bit below the stock market’s average. Let’s also assume that your intention is to retire at age 67, which is your full retirement age for Social Security.
When you factor in lost investment gains, giving up $2,000 this year actually means giving up almost $23,500 for retirement in total. That’s a much bigger deal. And that’s also why you should make a point to try to ramp up your 401(k) contribution now, while you still can.
A move you can’t wait on too much longer
One nice thing about IRAs is that you have until the following year’s tax-filing deadline to make contributions. In other words, you can fund your 2025 IRA all the way into April of 2026.
But 401(k)s don’t work the same way. If you want to contribute to your 401(k) for 2025, that money needs to hit your account by the end of the year. And so if you want your complete workplace match and you’re not there yet, the time to make changes to your savings rate is now.
You may be thinking, “Where will the extra money come from?” But the good thing about this time of the year is that there tends to be a lot of opportunity to boost income with seasonal work. If you’re willing to take on a side hustle for the next six weeks or so, it could spell the difference between being able to claim your workplace match in full or not.
Remember, it’s not every day that you’re offered free money. So it pays to do what you can to take every dollar your employer is willing to give you, even if it means having to make a few sacrifices and hustle a bit more in the near term.