There is a new round of stimulus funds ready to send out, will you get any?
Increasing your 401(k) contribution could get you more stimulus money because with a traditional 401(k) plan, you’re reducing your income for the current year. You pay the taxes when you withdraw money in retirement. This wouldn’t work for a Roth 401(k) because you contribute post-tax and get tax-free money later on.
Let’s say you’re married filing jointly with two dependents. Your combined income is $160,000, so you didn’t qualify for any stimulus money. If you can lower your combined income by $10,000 through 401(k) deferrals, you’d get a $5,600 stimulus credit next year, since the payment for each dependent is also $1,400.
By putting more money in your pocket now through 401(k) savings for the future, you can benefit now.