Hello, Matt Blocki with EWA. Today we are talking through ten tips for 2023 and how to maximize your financial plan. Tip number four for 2023 is to be aware of allowable income when it comes to your plan.
So in 2022, the max maximum allowable income for matching or profit sharing contributions was 305,000. That has now been raised to $330,000. So what that means is if you are making $200,000 and you get a match of 3%, you’re going to get $6,000 in the plan, no questions asked.
If you’re making 350, only 330 of that 350 will be matched at 3% for a maximum 9900. Anything above that 330 doesn’t get matched. Something important to consider if you’re going back to tip number one and trying to reach that four one five C limit of 66,000 in the 401.
For example, if you’re a million dollar income earner and getting a 3% match thinking you’re getting $30,000, that’s not the case. You’re going to be capped at the 9900 again because they only match you in the first 330.
So this can come into play in trying to reverse engineer how much needs to be put into an after tax account to reach the four one five C limit. This can also come into play as some employers will offer a spillover deferred compensation plan where they’ll match into your 401 up to the 330,000 and then they’ll continue to match if you enroll in a deferred compensation plan above and on the 401K.
So something we would recommend to do if there’s free money, something we may not recommend to do because deferred compensation plans would be subject to bankruptcy if the company goes underneath.