About 401k Plan and Maximum Contribution You Can Make
Nowadays, a lot of people are seeking for alternative ways on how they would be able to save enough cash for their future and thus, their retirement will be stress-free. 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 concept of 401k plan is that, it’s a savings retirement plan that could be used for smart investments of mutual funds, bonds, stocks and any other money market opportunities of your choice. 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. Well more often than not, this is when you reach 60.
As a matter of fact, in some situations, you are able to withdraw them earlier but with burden of incurring taxes as well as heavy penalties for it. Unless you got valid reasons for doing so on the other hand, then you may get an exemption for the penalties. The beneficiaries of the contributor can even claim the money for early withdrawal in case of unexpected demise of the holder.
Keep reading to discover other benefits of 401k plan.
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. As part of the benefits, employees will be able to get additional contribution from their plan as the employer or company is obliged to match their contributions.
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 can roll over or transfer the contributions they have made from their old employer to a new one or any legible retirement account.
Based on current info, maximum for this year is 18,000 dollars. On the other hand, those who are 50 years old and above, they’re given the chance to catch up on maximum 18,000 dollar contribution but could be limited to only 5000 dollars annually. There are special rules as well that govern contribution limit of employees who have high compensations where it is regulating them from maximizing the contributions they make in their 401k plan.
It is vitally important to have an idea of the 401k contribution limit however, catch-up limits are still subject to change based on cost of living adjustments as well as inflation rate.