As far as I know, you are not permitted to defer severance pay to a 401(k).
I assume that you are asking about making a 2024 IRA contribution since presumably you would have received enough regular compensation in 2023 to support a 2023 IRA contribution. If you are age 50 or over in 2024 and your 2024 Form W-2 shows at least $7,500 in box 1, you can contribute $7,500 to a traditional IRA for 2024. Depending on your modified AGI for the purpose, you might be eligible to contribute to a Roth IRA instead. Whether a traditional IRA contribution will be deductible will depend on your modified AGI for the purpose and whether you are covered by a workplace retirement plan for the year of the contribution. Even if you left the employer before 2024, you might still be covered for 2024 depending on whether the plan uses a fiscal tax year or a calendar tax year.
The IRS deems the wage shown in box 1 of your W-2, minus any amount in box 11, as being compensation that will support an IRA contribution.
Thanks. Does this mean I can contribute up to $7K in 2024 tax deductible or can I contribute to the maximum allowed for 401K of $23K tax deductible?
@dmertz Sorry, I am repeating here as I am not sure if I replied to myself or you!
Thanks again:
What can I contribute exactly: $7K or $23K to my IRA with my severance pay over a 26 pay period?
As far as I know, you are not permitted to defer severance pay to a 401(k).
I assume that you are asking about making a 2024 IRA contribution since presumably you would have received enough regular compensation in 2023 to support a 2023 IRA contribution. If you are age 50 or over in 2024 and your 2024 Form W-2 shows at least $7,500 in box 1, you can contribute $7,500 to a traditional IRA for 2024. Depending on your modified AGI for the purpose, you might be eligible to contribute to a Roth IRA instead. Whether a traditional IRA contribution will be deductible will depend on your modified AGI for the purpose and whether you are covered by a workplace retirement plan for the year of the contribution. Even if you left the employer before 2024, you might still be covered for 2024 depending on whether the plan uses a fiscal tax year or a calendar tax year.