About 401k Plan and Maximum Contribution You Can Make
In this modern time, numerous people are searching for alternatives to save enough for their future, which allows their retirement to be less problematic. In the US, employees have got the option of allocating portion of their salary to their retirement savings plan via 401k that’s initiated by employer. It is vital to know what this is actually about, the 401k contribution limit, the benefits that the employees would get and so forth.
The idea behind 401k plan is that, it is a savings retirement plan that may be used for investments of mutual funds, stocks or just any other money making opportunities. That way, when the amount you’ve invested has grown and matured, you will generate more money in the future as your savings are compounded until the age or time you became eligible to claim it. Usually, this is when you reach 60 years old.
In some situations as a matter of fact, you can withdraw them earlier however, with the burden of incurring taxes and heavy penalties too. Unless you got valid reasons for doing so on the other hand, then you may get an exemption for the penalties. In case that the contributor passed away, the beneficiary can file a claim for early withdrawal.
Among the many benefits that you can reap from 401k plan includes:
Number 1. For the time being that the employee is making their contributions, it is their salary that will be taxable and not the amount they are contributing to their plan.
Number 2. Employees are going to benefit more because part of their benefits, the employer or company has to match the contribution with a percentage of the contribution.
Number 3. It is also possible for employees to apply for a loan from their 401k investment but of course, this comes with interest.
Number 4. Employees are able to roll over or transfer their contributions from their past employer to the next or even to other legible retirement account.
According to current info, 18000 dollars is the maximum. For those who are 50 years old and older on the other hand, they’re given a chance to catch up on the maximum 18,000 dollar contributor but may be limited to just 5000 dollars annually. There are also special rules that are governing contribution limits of employees who got high compensations where they are regulated from maximizing the contributions they make to their 401k plan.
It is necessary to have ideas of 401k contribution limits and at the same time, know that the catch up limits are changing and will depend on the inflation rate and to the cost of living adjustments.