It is becoming increasing more important to invest in your own financial future, as pension plans and government retirement programs become a thing of the past. The fact is, even if you receive government aid, it will only be a fraction of your former income, requiring your personal savings to make up the rest.
Your yearly contributions to your 401k are crucial for you to grow and maintain your account, and you should review your contributions periodically. The best way to maximize your retirement savings and build a secure financial future is to contribute as much as you can your your 401k plan, within preset IRS limits.
When you are reviewing your contributions to your 401k you may have many questions including how much can I contribute to my 401 per year? Although it is advised to contribute as much as you can to your retirement account, you can not exceed the contribution limits or you will face IRS penalties.
How Much Can I Contribute To My 401k Per Year:IRS Contribution Limits
People under the age of 50 are allowed to contribute up to $16,500 per year in their 401k accounts. When you are between the ages of 50 and 59½ years old, you are allowed to contribute an additional $5,000 a year in “catch up” contributions.
Contributions to your 401k are on an pre-tax basis meaning that the funds are deducted from your salary each month prior to taxes being withdrawn. When you have reached the age of 59½ you will be allowed to withdrawal your funds penalty-free.
If you want to contribute to a retirement account beyond these contribution limits, you must open and invest additional funds in a traditional or Roth IRA. These accounts operate on an after-tax basis, and can provide you with options for diversifying tax benefits and withdrawal options.
Carefully consider how much you can comfortably afford to save for retirement. Some tools that may be of some help to you are the Budget and Retirement Calculators offer at online brokerage ETrade. These tools can help you figure out how much you need to save, as well as how you can go about doing it.
Benefits To Maximizing Your 401k Contributions
It makes sense to invest the maximum amount you are allowed to contribute to your 401k given the retirement plan’s valuable tax breaks and employer match feature found in some plans. If you can not afford to contribute the maximum amount, try and contribute enough to receive this contribution match.
Studies indicate that as many as 1/3 of the participants in 401ks do not contribute enough funds to qualify for their employer’s matching contribution. It is easy to find out your plans guidelines on how much you need to contribute in order to receive the greatest employer match, as you simply need to contact your plan administrator or Human Resources department.
The key to building a comfortable nest egg for retirement is to steadily invest in your retirement accounts, and continue increasing the amount contributed in order to maximize your account’s benefits. Find out the answers to, “how much can I contribute to my 401k per year?” and all of your retirement questions, as well as get up-to-the-minute details on rules and regulations at the ETrade Retirement Center.
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