Question: I turned 50 this year and asked by employer if they offered catch up contributions through my 401K savings plan. I currently contribute the maximum. They told me I could do catch up contributions but I would need to send them a check for 4,000.00. I though catch up contributions were required to be a payroll deduction and that catch up contributions are made on a pre-tax basis. Is my employer correct in telling me to give them a check for 4,000.00? There is no tax deferral in doing it this way. Please advise.

Zip Code: ryan@okonite.com

It seems to me that you would pay your catch up contributions the same way you pay your regular 401(k)contributions - through withdrawals from your salary and not by writing a check.

If you don't get a satisfactory answer from your employer, try contacting either a retirement specialist at the financial institution that's holding your 401(k) investments or the organization that's maintaining the records for your 401(k) plan (generally known as a third party administrator). They hopefully will confirm what we both think is the proper course of action.

That's great that you're taking advantage of this rule now that you're 50.

Zip Code: cpa@mdtaxes.com