401(k)s and Company Plans

How much should I put in my 401(k)?

There are annual limits to what you can put away in your 401(k) or other defined benefit plan. In 2014, if you are under 50 years old, you can contribute a maximum of $17,500. If you’re 50 or older, you can make an additional catch-up contribution of as much as $5,500, for a total of up to $23,000. Given the plans’ valuable tax breaks, it makes sense to invest the maximum if you can

Those contribution limits change annually to track inflation. The reason: Inflation will gradually reduce the value of a dollar, meaning you will need to contribute more dollars to have the same purchasing power.

If you can’t invest the max, try at least to contribute at least enough to qualify for your company’s maximum matching contribution. Research shows that about one-third of 401(k) participants don’t contribute enough to qualify for the maximum matching contribution from their employer – which means they’re forfeiting free money! Your Human Resources department can tell you how much you need to contribute in order to get the greatest match. Do it!

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser
Follow

Get every new post delivered to your Inbox.

Join 46,017 other followers