Does your employer offer a 401(k) plan? And do they match any of your contributions?
If so, they might only match up to that percentage on each of your checks, and not on how that check amount relates to your total annual salary.
That means deferring too much, too soon of your salary could reduce the amount of those matching contributions.
Here’s an example of how that could happen:
In 2019, you can contribute up to $19,000 of your salary to a 401(k) plus another $6,000 if you are 50 or older for a potential total of $25,000.
Suppose you are 60, just got a fat bonus from last year or maybe your spouse started a new job that includes a hefty pay increase.
Now you have cash to spare and decide to max out your tax-deductible contributions to your 401(k) within the first six months of the year. Then you’ll have the remaining six months to sock away money for a nice vacation over the holidays.