When the calendar turns to January, there are a few things to take care of if you are a participant in an employer plan (401k, 403b, etc). I talked with a client about a few of these reminders this week and thought it would worth highlighting them here.

Revisit Contribution Rate

Each year, the IRS adjusts the allowable contribution amounts for employer-sponsored retirement plans. And in most cases, it’s up to the employee to adjust things on their end to ensure the max contribution (if that is the goal).

For 2025, a few of the most relevant employee contribution limits for 2025 are as follows:

*Under 50: $23,500

*Between 50-59, or over 64: $23,500 plus another $7,500 catch-up contribution ($31,000 total)

*Between 60-63: $23,500 plus another $11,250 catch-up contribution ($34,750 total)

The total contribution limit (for employee and employer contributions combined) is $70,000.

Depending on how you have set-up your contribution rate, you may need to manually adjust it to ensure you reach the maximum contribution (if that is your goal). It’s a good idea to check your current contribution and adjust as needed. Aim high – a little extra savings is always a good idea!

Confirm Employer Match

Most employer-sponsored plans offer some level of employer match and/or contribution – meaning that your company will contribute into your account either as a match of what you contribute or a contribution regardless of your participation in the plan. When deciding how much to contribute yourself, it’s worth confirming your employer’s matching level and approach. When possible, it is very advantageous to contribute at least as much as the matching level

Also, pay attention to how your employer match operates. Many are on a “per paycheck” basis so in that case, it may be in your best interest to contribute evenly throughout the year (versus front-end loading contributions as you will miss out on matches that way)

Revisit Traditional vs. Roth Designation

Many employer plans now offer a Roth option for employee contributions. As we’ve discussed in the past, Roth funds are made on an after-tax basis (ie: you do not receive a tax deduction when contributed). However, Roth funds grow tax free forever and are not taxed upon their ultimate withdrawal. Traditional/non Roth funds will receive a present year tax deduction but future withdrawals (of the original contribution and any growth/earnings) will be taxed as ordinary income in the year they are withdrawn.

Everyone’s situation is different but it is worth assessing your current mix of traditional (ie: pre-tax) retirement savings and Roth savings for your portfolio as a whole and evaluating whether or not you would be well served to add some more Roth funds to the mix. Keep in mind that all employer contributions will be pre-tax/traditional funds no matter what. Also note that starting in 2026, if you earn above a certain level of wages ($145,000), any eligible catch-up contribution you make will be required to be made to a Roth account.

Rebalance & Investment Election Considerations

2024 was a great year for investors – especially investors with meaningful allocations to US equities. When any given asset class does meaningfully better than its counterparts, there is a chance that your current asset allocation may be somewhat out of line with your target allocation as a result. Be sure to take a look at your retirement account and assess whether it remains in line with your goals. If you want to make adjustments, you can either rebalance current balances or adjust how your future contributions will be allocated – or both

It’s also a good idea to review your current investment elections, as well as all investment elections available within the plan. Consider items including (but not limited to) recent performance, expense ratios, relative performance against other funds in their same style of investing, holdings, management ownership in the fund, and sector positioning. While your investment options are limited by your plan, it remains your responsibility to work with what’s available and align your account with your objectives and risk tolerance.

Check Beneficiaries

While you are in your online account, why not take care of one more item? Since employer plans are retirement accounts, they are required to have a beneficiary on file with the custodian. A beneficiary is the person(s) you designate to receive the assets if you were to pass away. Review your beneficiary assignments and adjust as necessary!

Hopefully these suggestions help you feel confident with your employer plan account as you start a new year!