Are you contributing to your workplace retirement plan and wondering “Should I max out my 401(k)?” And does your employer match your contributions?

If you answered yes to these questions – great! You’re taking advantage of “free money” from your employer’s match and being a savvy saver for retirement. However, be careful about how much money you place into your account each month. Getting it wrong could cause you to inadvertently lose some of your employer’s contributions.

Once you max out your 401(k) (the 2024 IRS limit is $23,000, with an additional $7,500 catch-up for those age 50 and older), you can’t contribute any more. If you hit that limit in, say, September, you can’t contribute to the plan in the final three months of the year.

And here’s the problem: Many employers match only if you contribute. If you don’t put in money in October, neither will your employer. This is where having a plan to max out your 401(k) strategically is important. You can calculate how much you should be contributing from your paycheck each month, plus your employer’s matching contributions, to ensure you’re not hitting the limit too soon (and missing out on the employer’s matching funds).

Some employers true up their matches at the end of the year to protect workers in this situation. But not all employers do this. So check to see whether your employer offers the true up. If it doesn’t, work with HR to spread your paycheck deductions throughout the year, so you don’t miss any of your employer’s matching contributions.

Also, if you were over contributing previously, this strategy can add additional funds back into your paycheck that you can apply toward other investment opportunities, if desired. Discuss with your financial advisor if this works in your long-term financial plan.