27 Jan No re-do for 401(k) savings

Q. I didn’t realize it, but my employer was taking less out of my paychecks than I thought for my 401(k). I only contributed $13,000 for 2015, but I wanted to do the max. Is there anything I can do?
— Trying for a fix

A. We’re afraid you’re out of luck with making additional 401(k) contributions for last year, but not all is lost.

By definition, an employee’s contributions into a 401(k) plan are amounts deferred from the employee’s pay, said Clare Wherley, a certified financial planner and certified public accountant with Lassus Wherley in New Providence.

She said deferral limits for those under 50 are $18,000, and there’s an allowable $6,000 catch up for those 50 and older.

“Once the year has ended, any underpayments are lost opportunities,” Wherley said.

Before we discuss your other option, we want to make sure you don’t make the same error this year.

“Having had this experience, it will be important to monitor your year-to-date contributions on a periodic basis to ensure the maximum is being deferred,” Wherley said. “Establish specific dates and put them on your calendar to make sure you stay on top of this in future years.”

Or, talk to your employee benefits department about making the correct calculation for your contributions going forward.

Also note that if you discover — before the year is over — that you’re behind, you can still play catch-up.

You do have another savings opportunity.

Based on your adjusted gross income (AGI), you may be able to make a deductible IRA contribution to make up the difference, said Steven Gallo, a certified public accountant with U.S. Financial Services in Fairfield.

For the 2015 tax year, you can save $5,500, or if you’ve over age 50, you can save $6,500.

Gallo said if you are single or a Head of Household, your AGI must be less than $61,000, and then there’s a phase-out provision that allows for a prorated contribution if your income is between $61,000 and $71,000.

If you are married and filing jointly, you must have AGI of less than $98,000 to make the contribution, and there is a phase-out provision for income between $98,000 and $118,000.

“Of course if your employer’s plan had a matching provision you will not get the benefit of the match on the IRA contribution, nor will you get the tax deferral benefit on your state tax return if you are a New Jersey resident,” Gallo said.

You may want to make the contribution even if it’s not deductible, so check with your tax preparer.

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This story was first posted in January 2016.