How Much Can I Contribute to My 401k

The majority of employees has been asking this question, how much can l contribute to 401k.  As far as l know, as of 2009, you can contribute up to $16,500, and a catch-up contribution of $5,500 can be made, if you are 50 years old or over.

In 401k plan, you have the freedom to capably save for your post-retirement life by take full advantage of your contributions. Every month a set amount is deducted from your salary or wages, and your employer will also make a matching contribution which doubles your contributions. The real benefits of this wonderful retirement savings plan is that you have tax reduction allowance while at the same time, also taking advantage of compound interests.

Every year the savings increases and there are no tax penalties. It is prudent to commence savings as early as possible to be able to exploit the advantage of this plan.

There are limitations on how much you can contribute under 401K retirement savings plan and this is due to some factors that changes every year. Every year a contribution limit is set and the amount fluctuate which also depends on the level of rates of inflation and the value of dollar over time. The limits of $15,500 for individuals below the age of 50 years were set in 2008. While a higher limits were set for older Americans that are nearing their retirement. For folks that are over 50 years old, they are eligible to contribute $20,500 ($5,000 more). In 2009, the contribution limit were set at $16,500 for people below the age of 50 years and additional amount of $5,500 is allowed for people over 50 years of age.

The 401K plan savings is quite useful during economic crisis and emergency financial needs. You have to bear in mind that there are tax penalty for withdrawing the 401K plan early. As a result, you should choose your contribution limit wisely base on the funds in hand.