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401k Maximum Contribution

Have you reached your 401k maximum contribution for the year? If not, it’s time to find out this year’s maximum contribution and do everything you can to reach it. There’s a reason the United States government puts a cap on this powerful investment vehicle: because it is one of the only ways to become wealthy and plan for the retirement of your dreams using tax deferred principle and compounding interest. Putting the maximum amount of money in your 401k means paying fewer taxes yet earning more money—a win-win situation that no one can afford to pass up.

Every year, the IRS sets 401k retirement account limits based on the inflation and economic fluctuation of that year. These can be found from a variety of sources. There are a few things you should know about your 401k maximum contribution. First, it applies not just to one of your 401k accounts, but to all of them. This means that having two accounts does not allow you to invest twice as much money. Your spouse, however, and other family members can open their own 401k and put the maximum allotment toward it as well. There is also a set ‘catch up contribution’, an extra amount that people fifty years of age or older can contribute to their 401k retirement funds. This allows people who are nearing retirement quickly to pad their funds a little.

There are other circumstances that may affect your 401k maximum contribution. First, your employer may cap the amount of money you are allowed to take from your pretax earnings. Second, some funds have their own set of rules and limits. In situations where you are governed by two or more sets of rules, you are allowed to put in the lowest amount. Also, your employer may match the funds you put toward retirement in your 401k. This does not count toward your 401k maximum contribution.

If your employer offers matching, it is imperative that you put the maximum amount allowed into your 401k retirement account. For every dollar you don’t invest, you are losing two dollars of principal, plus the compounding interest that can build up to ten or more times your original investment. This is a smart, painless way to save money without ever feeling the pinch.

In a volatile investment atmosphere, 401k plans remain stable ways to build wealth throughout your lifetime. Because the investments are diversified over a variety of sources, the ups and downs of the stock market have little net effect on your savings. The long term nature of 401k investment pads them from the day to day fluctuations of the economy.

If you want a bright future, a 401k is one investment tool you shouldn’t be without. Making your maximum contribution to your retirement account every year is a small lifestyle change that can yield a huge difference in your future. Don’t let your retirement be underfunded because you failed to take advantage of this powerful money making opportunity. Maximize your 401k contributions before the year is over and watch them grow throughout your lifetime.

401k Maximum Contribution
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