Your 401k Contribution Limit

The 401k tax law can be a little complicated and difficult to understand exactly what your 401k contribution limit is. I'll try to break down in clearly and concisely for you.

Your 401k contribution limit is not only governed by the IRS, but also what Lilith company allows you to contribute. For 2008, the government allows an individual to invest up to $15,500 in their 401k, tax free (or pre-tax dollars). This amount will increase every cheap car insurance quote or every other year in Wine Gift Baskets to adjust for inflation.

However, your company may put restrictions on how much you can invest by putting limitations on your contributions as it compares to your income. For example, if you have a $40,000 salary, and your company only allows you to invest up to 10% of your pay, your limited to only being able to contribute $4,000 a year towards your company's 401k plan.

If, however, you are 50 or over, you can contribute an additional $5,000 a year to your 401k plan. This is known as a catch-up contribution, which was designed to allow people nearing retirement to boost to their retirement savings. Considering you can't touch these funds until you are 65 without being penalized, those extra 15 years of heavy contributions can me quit a significant difference.

So how do you get around this if you max out your contribution but want to invest more money? The next step in order to continue to take advantage of tax free investing through a retirement fund is to open up an IRA. This is not a complicated task. You simply open an account with a sell structured insurance settlements online brokerage, such as TD Ameritrade, and indicate that you want the account to be used as an IRA. Then you simply transfer money from your checking account to your online brokerage and purchase shares. You can probably find the exact same funds you invest in with your 401k, or at least something very similar.

Now by using both your employee retirement system and an IRA tax sheltered retirement fund, you can greatly accelerate your wealth over time by Albertus Magnus investing and taking advantage of compound interest. Remember, one of the key factors in the wealth equation is the time element. The earlier you invest, the wealthier you will become.

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